If you know you're interested in going the STR route, I would definitely start there—it will take you through identifying markets, analyzing properties, and operations, all through the lens of STRs.

If you pass that hurdle then you going to battle labor and material costs if you can even find a builder that will take on the project.I have seen how much of a disaster a local project was locally as a resident of the town but also from the lens of an investor.

I care more about total return, which leads me to look at assets through a different lens. 

Remember that the investor has a much different lens from which to view deals.

Think of it from the tenants lens: "What are they going to do? 

When looking through this lens I really like places like Salt Lake City, Broken Bow, OK, and Lake Eufala, OK  

You just have to be aware that from the lens of the sponsor these are two very different businesses.

I worked in property insurance claims for 4 years, and one thing is for certain -- once you've worked in insurance, you look at everything else through an insurance lens lol.

here's why:- you'll have a way higher-priced asset appreciating for you from day one- you'll have way more debt paydown happening for you, by your tenants, monthly, from day 1- this is an easily-repeatable process every year, to househack a new multi- you said you're investing for appreciation --> buy the $most$ real estate, for the least amount of money.i would only go for option #2 if you're totally resistant to moving and living in a multi in denver area. but keep in mind, short term discomfort vs long term wealth...don't be afraid of a tenant-friendly state. standup landlords usually do just fine in them. i live and invest in one and run my business through a 'customer service' lens. so long as you screen tenants properly and/or have a great PM company, and have access to a great RE attorney, you are fine!

If you are viewing risk solely through the lens of the invested capital then yes residential would be less risky.