STR in Denver - Regulations Too Tough?

Question

Hi there! I'm looking at buying an existing home in Denver (RiNo) that's currently set up as an AirBnB (upper/lower unit). I'd live in the lower unit and rent the upper unit on AirBnB. I've done some reading about the regulations / licensing requirements in Denver and I'm curious to hear others talk about any challenges they've had with licensing. What are some of the challenges you've faced with the regulations? Can the regulations be navigated if the cash flow is there? Is it worth it?

James Carlson · Answer

@Mark CermakYou may have already read in some of my other posts on this thread, but if the investment model you want to pursue is short-term rentals, what about Arvada or Littleton, both just on the outskirts of Denver, both with charming little downtowns with coffee shops and bars and restaurants and both with light rail running through them. Arvada actively allow Airbnb investments, and Littleton is set to vote on allowing them.

James Carlson · Answer

@Tom WagnerIt's a mixed bag when it comes to the Airbnb laws in Denver-area cities, though mostly leaning toward a "primary residence" rule.Allowing it?These are the cities most interesting for my investor clients.Arvada just passed a law allowing non-owner occupied (or Airbnb investments), as you alluded to.Littleton city council will vote in a few weeks on a proposal to allow for Airbnb investment properties.Centennial allows it but oddly enough only if it's NOT in your primary. It's like they only want STR investment properties.Primary residence rule?Denver only allows it in the primary residenceAurora only allows it in the primraryEnglewood passed a law in early 2020 to allow short-term rentals but only in your primary residence. See here for more info.Lakewood had a proposal earlier this year, but I don't know whether it passed or not to only allow it in the primary.Others?Then there are the other cities. Some "allow" it but only because it's not explicitly outlawed in current ordinances. I would always be leery of investing money in a city like this because that could always change. With a city like Arvada or Littleton, they have actively said they allow it. That's different in my mind that passively allowing it. And if Colorado Springs is any indication, even if they change the law back, those who got in while the law allowed it, will be grandfathered in, and I have heard similar sentiments from city planners in Arvada.

Tommy Lorden · Answer

I concur: if it's your primary residence, it's easy enough to get permitted. One overlooked thing with Denver STR's, when dealing with attached properties anyway, is not only the current HOA regulations, but the HOA climate that might result in future changes to those HOA restrictions. I own a fabulous STR condo in downtown Denver where an effort to change the by-laws to restrict STR just failed big. (So I think it's fair to surmise there is a long runway here.) Anyway, I cannot qualify for primary residence and a permit. It's not on the market, but PM me if a $580K price point for a modern 2/2 condo is of interest.

Tom Wagner · Answer

Thanks for the detail James, really appreciate it. I saw your post in another thread about Arvada legalizing Airbnb's. Do you have any insight on other inner-ring suburbs? Englewood, Lakewood, Wheat Ridge, etc.

Erik Stenbakken · Answer

@Brian Ellwood is 100% right. Work the numbers HARD. There are lots and lots of expenses you'll face that either seem insignificant or invisible when facing the excitement of buying a property for STR. Add to that the wild variability of occupancy rates and you really need to have margins and or deep pockets and a strong stomach. Yes. It can work. I own several STRs (although they are destination based, not urban) and they can be great. But they can be a bit wild too. I'd add this: have an exit strategy if your plan A doesn't work. Maybe long-term rent that unit, or resale, or other. Double check that the regs have stabilized. Nothing sucks like finding out the rules have changed and only your plan A works. Best of luck!

Steve K. · Answer

Last time I checked there was a $50 application fee and a $100 license fee for STR's in Denver. People just talk about Denver being strict due to only allowing owner-occupied STR's, but as long as it's your primary, you're good.

Brittany Sheppard · Answer

@James CarlsonHi James! Do you know if there’s been any update to STRs in Centennial? Any new regulations? Greatly appreciate it

James Carlson · Answer

Super interesting! I learn something new every day. I'm DMing you now.

Tommy Lorden · Answer

@James CarlsonPromenade Lofts. 2100 16th Street Mall, right on the Millenium Bridge. GREAT building one block from Whole Foods and Union Station. One block the other way to Riverfront Park and bridge to LoHi. The HOA just put STR's up for a vote and it was well short...so there'd appear to be a long runway for further opportunity.

James Carlson · Answer

@Tommy LordenThat's totally right. Current allowance of Airbnb does not guarantee future allowance. We follow the Denver and Colorado Springs Airbnb laws pretty closely, and have over the years collected a list of condo buildings that allow for short-term rentals. It's a small list, to say the least, and I counsel our clients looking for STR-friendly condos that you never know when a new cadre of owners will get enough power to change things.Are you in the Windsor? That's the biggest building I know of down there that is always having fights over STRs. I wish you luck.