Denver, dubbed the Mile High City, is the largest city and capital of the state of Colorado. It is located in the South Platte River Valley, east of the Front Range of the Rocky Mountains. With a population of over 716,500 people, Denver is the 19th most populous city in the U.S. Denver is part of the Denver-Aurora-Lakewood Metropolitan Statistical Area, the country’s 19th largest, with over 2.9 million residents.
The city is expected to experience population growth that is well above the national average thanks to a strong net migration. This, along with the fact that a large percentage of the population is between the ages of 25 and 44, help boost the economic activity in Denver. And with more than half (51% according to NeighborhoodScout) of the city’s residents living in rental properties rather than owning their own homes, investing in a Denver rental property is a great option.
The Mile High City is the financial, commercial, and transportation capital of the Rocky Mountains region. It ranked #4 on Forbes’ list of “Best Places for Business and Careers” last year. Due to its relatively central geographic position within the U.S., Denver has become a hub for storage and distribution of goods and services to the American West, as well as some large cities of the Midwest. Its location just east of the mineral-rich Rocky Mountains has also drawn mining and energy companies to the area, making the energy industry a major contributor to the economy. The Newmont Mining Corporation, the 2nd largest gold producer in North America and one of the largest in the world, has its headquarters in Denver. Denver’s geographic location also benefits the telecommunications industry; it is located within the Mountain Time Zone, which allows communication with other continents on the same business day.
The U.S. government has a strong presence in the city and is in fact the largest employer in the Denver metro area. Many federal agencies and companies related to U.S. aerospace and defense are based in Denver, attracting a particularly young workforce seeking employment in the city. Denver is home to other large corporations employing workers in a range of fields such as technology, manufacturing, air transportation, construction, finance, education, retail, healthcare, food service, and brewing. The multiple economic sectors and the strong economic growth make the city a good location for those considering to invest in the Denver real estate market, especially when it comes to long-term rental properties.
The Denver housing market was named the 8th most important U.S. Market to Watch by PWC in its annual Emerging Trends in Real Estate: United States and Canada 2019 report. According to the report, real estate investment and development activity is robust in nearly all property types in the Denver market.
|Facts and Market Trends in Denver|
|Homes For Sale158|
|Traditional Vacancy rate3.80%|
|Airbnb Occupancy Rate69.92%|
|Median Rent Price$2,012|
|Median Days on Market42|
|Price to Rent Ratio18.8|
|Average Cap Rate|
|Average Rental Income|
|Median Household Income$76,643|
|RENTAL STRATEGY||STUDIOS||1 ROOM||2 ROOMS||3 ROOMS||4 ROOMS|
The Denver real estate market has witnessed a strong real estate appreciation in recent years. Since Q1 of 2000, Denver properties have experienced a total appreciation of 122.59% according to NeighborhoodScout, which is an average annual home appreciation rate of 4.24%.
Zillow reports that Denver property values have gone up 2% over the past year but are predicted to fall 0.1% within the next year. Denver housing prices are starting to cool down due to a growing supply of residential listings on the market.
The Denver housing market is currently a buyer’s market. The last couple of months saw more homes up for sale in the Denver area than any other month in the past five years, which is good news for prospective investors who now have more options to choose from when buying an investment property.
The Denver Airbnb business has experienced major growth in recent years. In 2018, nearly 477,100 Airbnb guests stayed at Denver short-term rentals, bringing a total revenue of $74.6 million to the local Airbnb hosts. This represents about 25% of Colorado’s total Airbnb income.
Denver, however, has strict regulations governing short-term rentals. The use of a non-owner occupied Airbnb investment property is illegal. Only the host’s primary residence can be used as a short-term rental, i.e. the owner of the property must be on site during the guests’ stay.
All homeowners planning on renting their primary residence to guests for a period of less than 30 consecutive days must obtain a Short-Term Rental business licence that will need to be renewed annually for a fee of $25. But first, a Lodger’s Tax ID must be obtained in order to be eligible for the business licence; it costs $50 and must be renewed every two years at that same fee.
There are also a number of other Airbnb regulations set in place by the city of Denver, including many operational requirements. Hosts must hold a minimum of $1 million worth of liability insurance for the property and notify both their insurer and homeowner associations that they are using their home as a short-term rental; the Airbnb platform, however, provides insurance for its operators, offering at least $1 million worth of coverage. It is important for Airbnb Denver investors to know that it is the city’s right to revoke, sanction or deny a Short-Term Rental licence or application if its requirements are not maintained, or if a rental property negatively affects the public health, safety or welfare of a neighborhood.