Denver: long term rentals or Airbnb?

Question

I'm looking at small condos downtown Denver and was wondering what everyone's opinions are on long term tenants VS the Airbnb model?

Jon Q. · Answer

Yes, I don’t run hotels either.  They are more of a service than a long term rental.  I like being able to spend my time on the beach in the Bahamas and still have income coming in without having to deal with operational issues.

AirBnb model is a short term strategy, until your city catches up and strictly regulates it.  I don’t know about you, but I would hate if all my neighbors were operating AirBnb hotels.

Bill S. · Answer

@Adam Ferro you should attend one of @James Carlson's meetups where he covers the ins and outs of STR here in Denver. I think if you are in Denver proper, you can only Airbnb your primary residence or ADU (if you live at the property). That may throw some cold water on your plans. You can target what I call a medium term tenant which is 30 days plus. Traveling nurses come to mind but there are numerous other professions that do the same.

Antoine Martel · Answer

I like the long term model. It's more passive and hands off.

Airbnb model is very hands on and you have to also furnish these places and make sure they look good every day.

Account Closed · Answer

Hi, Adam!

Yes, as Tyler and others shared, you can often make more money with Airbnb than with long-term renting, but the strict regulations in Denver are a concern.

I would recommend doing a projection initially to compare profits from long-term vs. short-term renters for your condo.

If you are able to manage the place yourself, that's great, but you can also hire a property manager or decorator to help you (I have both managed and decorated properties; there are a lot of services that can help you with this in Denver.)

I will send you a message re: primary res rule.

Let me know if you have any more questions!

Bill S. · Answer

@Adam Ferro all my properties are conventional rentals with most leases being 12 months or more. Occasionally I'll do a 6 month lease to get out of the winter months. Not really a problem renting but I haven't seen a rent increase on a re-lease in about 6 months. The market is definitely softening. We'll see how the spring goes.

James Carlson · Answer

Thanks for the mention, @Bill S.

@Adam Ferro

I'm assuming that you mean buying a condo for an investment not a personal residence? If so, and if you want to play by the law, it has to be a long-term rental.

There are two issues: 1. You cannot rent a place in Denver that's not your primary residence. 2. Nearly every HOA in the city is going to have a restriction on rentals of anything less than 30 days (if not 90 or 180 days).Okay ... so that's if you want to play by the law.

Now, if you're open to pushing a bit, a small space in downtown can definitely outperform a long-term rental two or three fold. When my wife and I were doing a lot of Airbnb in Cap Hill (just outside of downtown), we were getting between $3,000 and $3,500 for our studios and 1br units at a time when we would have gotten about $1,000 to $1,400 for those same units as long-term rentals.

There's a decent chance you'll get caught, though, doing that. As Bill said, if you get caught, then you can pretty easily switch to the traveling nurse model. That's what my wife and I now do in our two rental condos, and it's done well for us.

One more thing ... If you're going to buy, make sure either you or your agent know what to look for in condos. There are issues with owner-occupancy ratios to be aware of for your lending. Also, you'll want to check out the reserves. (I'm thinking of Brooks Tower downtown where prices are pretty good because the HOA has some serious financial issues.)

Good luck!

Grant Rothenburger · Answer

@Adam Ferro Yes sir. Some people didn't ever see that coming and were burned when that happened. I think now more investors have that in mind when they purchase, vs. when they weren't cracking down on it as much.

Grant Rothenburger · Answer

@Adam Ferro I think what scares a lot of investors is that a lot of cities/towns/hoa's have started heavily regulating short term rentals. It would suck if your income was dependent on being able to rent higher using airbnb, then that was taken away by your HOA.

Antoine Martel · Answer

Exactly Jon. Me too.

Adam Ferro · Answer

@Bill S. I was trying to make James Carlson's meetup last night unfortunately I has late meetings and was unable to make it. I do plan on making the next meet up happening. So if the tenants stay 30 days or more it doesn't raise the primary residence rule? Something I will definitely consider with my partner. Do you have any trouble keeping occupancy up?

Denver: long term rentals or Airbnb?

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