Opinion on STR and VR in Denver and surrounding areas
Rental Property Investor · Denver CO · Member since 2022 · 43 posts · 19 votes
Hello,
We are looking for our first house-hacking primary residence to buy and its been hard to try to find a property that cash flows based on BPR calculator. Does anyone has experience with short term rentals in Denver as of recently such as Airbnb, VRBO, Furnished Finder? How effective is it to SRT an ADU or a basement that's fully redone? We are having trouble to committing to one due to not being able to break even and not having 3-6 months of mortgage payment in case of vacancy which would wipe out most of our savings. I know there are laws around SRT in certain cities/counties, which ones would you recommend to look for SRT but also have it be your primary residence? We are planning on buying the property with FHA loan (850k) and using HELOC as down payment and keeping the residence which we are currently in and rent it out as LTR
Hey @Roman Puzey. Ok, well if you approval number is 850k but you can only afford 650k, what is the reason for that?
I don't disagree with @Ben Einspahr as he seems to know more about the region, but words like nuances make me nervous. I don't like to navigate nuances and peculiarities of a region unless the profit margin is pretty huge. 30%+ CoC for example.
And he isn't talking about Denver, but surrounding communities. Is that something you want to do? Everything Ben said makes sense. Get out there and meet some people and see what's what.
What I am most worried about is you getting in over your head and you can't make the mortgage on your primary home if your STR doesn't do as well as projections.
I am more conservative than a lot of investors. Many roll the dice and win. And lose.
So, make sure you have all your ducks in a row. Research everything and try to buy in an area that is more stable when it comes to regs.
Good luck man!
Hey @Roman Puzey, Denver is a tough market as the city and county has a lot of rules and they keep restricting STRs.
Here is the site with all the info - https://www.denvergov.org/Gove...
As far as performance, are you trying to get the STR part to pay for your primary as well? From what I have gathered from your post, you can't afford to buy the property based on your DTI and you need to rent the basement/ADU in order to make the payments.
If that is true, then I think you are not really in a position just yet to buy something like this. Especially in an area like Denver that could restrict your ability to rent it short term. I hate to be a downer, but that is what I think.
Will the LTR pay for itself? Are you taking a HELOC out on it for the down on the new place?
Hello @Roman Puzey you have reach out in the right place. I would have to disagree with the post above. House hacking in Denver Metro area (not Denver specific) is definitely as i have done it multiple times and helped many others do the same. You just have to be familiar with the nuances of STR rules and regulations.
Addition you need to have a solid plan A and Plan B after moving out to make a successful stabilized rental.
First plan of action would be to get familiar with surrounding city STR rules and regs. Next find yourself a meet up to start expanding your network and connect with others doing that same thing you are looking to!
Best of luck!
Hey @Roman Puzey, Denver is a tough market as the city and county has a lot of rules and they keep restricting STRs.
Here is the site with all the info - https://www.denvergov.org/Gove...
As far as performance, are you trying to get the STR part to pay for your primary as well? From what I have gathered from your post, you can't afford to buy the property based on your DTI and you need to rent the basement/ADU in order to make the payments.
If that is true, then I think you are not really in a position just yet to buy something like this. Especially in an area like Denver that could restrict your ability to rent it short term. I hate to be a downer, but that is what I think.
Will the LTR pay for itself? Are you taking a HELOC out on it for the down on the new place?
Hey @Roman Puzey. Ok, well if you approval number is 850k but you can only afford 650k, what is the reason for that?
I don't disagree with @Ben Einspahr as he seems to know more about the region, but words like nuances make me nervous. I don't like to navigate nuances and peculiarities of a region unless the profit margin is pretty huge. 30%+ CoC for example.
And he isn't talking about Denver, but surrounding communities. Is that something you want to do? Everything Ben said makes sense. Get out there and meet some people and see what's what.
What I am most worried about is you getting in over your head and you can't make the mortgage on your primary home if your STR doesn't do as well as projections.
I am more conservative than a lot of investors. Many roll the dice and win. And lose.
So, make sure you have all your ducks in a row. Research everything and try to buy in an area that is more stable when it comes to regs.
Good luck man!
@Roman Puzey, Wherever you invest and however you do it, keep in mind these things:
• Where is the market trending that you're looking? I'm just outside the Denver area and have watched the STR rules change, and change, and change. What direction are they headed? All towards restrictions. Be aware of that.
• Watch your margins. If your situation/ cashflow/ ability to rent is right on the edge and underwriting assumes that all will go well as long as all goes well … that's a dangerous place to be.
• Have a solid buffer or plan B.
• What goes wildly up (local appreciation) is likely to also come down. Denver has been a HOT market for the last few years. Real estate generally does well -- given enough time.
Hey, I love the Denver area. Long history there. But that is one market I'd strongly recommend watching, researching, meeting folks, and running various scenarios. Best of the hunt!
Hey @Roman Puzey. Ok, well if you approval number is 850k but you can only afford 650k, what is the reason for that?
I don't disagree with @Ben Einspahr as he seems to know more about the region, but words like nuances make me nervous. I don't like to navigate nuances and peculiarities of a region unless the profit margin is pretty huge. 30%+ CoC for example.
And he isn't talking about Denver, but surrounding communities. Is that something you want to do? Everything Ben said makes sense. Get out there and meet some people and see what's what.
What I am most worried about is you getting in over your head and you can't make the mortgage on your primary home if your STR doesn't do as well as projections.
I am more conservative than a lot of investors. Many roll the dice and win. And lose.
So, make sure you have all your ducks in a row. Research everything and try to buy in an area that is more stable when it comes to regs.
Good luck man!
Hey @Roman Puzey! You are already on the right track with house hacking here in Denver. Personally, and in my experience as a broker here in Denver, going above 650k for a house hack usually produces diminishing returns as they won't rent much better than the sub 650k category. Of course, it all depends on your own personal requirements as well. But the best bet would be looking in STR-friendly areas around Denver (Arvada, Wheat Ridge, Centennial, and unincorporated Adams county) and finding a single family that can operate as two units. That is the best way to get as close to covering your whole mortgage as possible. However, I also recommend approaching it from a standpoint of "how much are we comfortable covering each month" and working backward from there. Also, I tend to run numbers both on the STR and also as an LTR rental to make sure that if something changes, or it's not booking you can comfortably switch gears and still not break your financial position. You never want to have only one exit strategy for a property, as that is how you get into trouble and have to sell a property. I would also see about doing a conventional loan instead of the FHA if you can qualify, as it will be cheaper overall. The FHA is great is if you either can't qualify or you are going after Multifamily properties. This could be another way for you to go, however, most municipalities won't let you STR the other side of a duplex.