Starting Airbnb Business in Denver CO

18 Replies

I'm trying to start an Airbnb in my hometown of Denver, CO. My plan is to rent from a landlord rather than save money to buy a place myself. This is because, due to my research, I should be able to start making income off of this method much faster.

My problem right now is finding a landlord who is willing to rent to me under the agreement that I will be using the place for Airbnb. I've stepped up my aggressiveness, with a certain number of places to view every week and a stronger and more confident speech for the landlords. However, I still have had no luck getting someone to agree. I have no history with Airbnb, and my credit is still in recovery (I have fixed all former debts, but my credit score has yet to catch up).

Does anyone have any advice? More importantly, is there anyone (especially in the Denver area) with experience doing this sort of thing that can offer advice?

I applaud your courage and confidence.

Where are you living now and can you start there, with a shared private 1 BR on airbnb? I would hesitate to rent an annual to you based on what you've shared (previous credit, and score), and add running an airbnb on top of that with no experience, doesn't help.  BUT you can proceed by gaining experience, and saving money. Faster is always better for everyone.

Good luck.

Hi @Alex Bockey ! Sorry to hear about your struggles!  I keep hearing bootcamps and guru's on this particular method and it always come back in my mind to this particular problem.  Just like finding a Lease Option Agreement for a standard rental, they simply are just not that easy to find. You have to find somebody that is usually desperate to sell or lease or an off market type situation where the situation is going to benefit the seller as much, if not more then you. 

After all, if you were the person on the other end of the table, would you choose the guy that wants to rent my place just to rent it out to a bunch of strangers coming in and out all the time that probably will not treat it well, or the guy that just wants to rent it as his own home?  Unless there is some major monetary benefit for the landlord I'm guessing you will continue to face this challenge.  

I too had credit in 'recovery' after the crash which only just recently fell off.  I used family to fill the credit gap until I was able to convert over to my own note.  If you find you cannot achieve a path to success with this particular method you are trying, I would think about pooling together some other friend's and family to create the down payment, somebody with credit and you would actively manage the property and share any dividends, tax benefits and allowable personal use across the pool.  Once you build some equity you will be off and running to the next property once your credit recovers. 

Best of luck to you on your STR adventures!

Cheers!

Will the city even allow you to do it since it technically is a rental? That is the first question. @James Carlson is the Airbnb resource for Denver. 

Do you think a car rental company would rent you a car for a week, while you drive it 12 hours a day on Uber and your friend drives it another 12 hours a night on Uber?

There is the implied use of a residential rental, which is to be renter occupied.  But you are using it in an unimplied manner. 

My advice would be to change your approach.  Instead of approaching the landlords to rent from to do your Airbnb, approach them as a business partner is doing Airbnb.  Maybe you manage it and get 2/3 of the profit, the landlord gets 1/3 of the profit for providing the property.

Thanks much for the replies!
@Nancy Bachety , What you say is true. I would definitely consider using my current place for Airbnb, but I'm splitting a studio with my boyfriend and dog, so we don't have much room for guests.
@Matt M. Denver does allow this, they just want it to be your "primary residence" which doesn't actually mean much. They also require a business license, tax, and written permission from the owner of the property.

@Paul Sandhu and @Jon Crosby , it's looking more like offering a share of profits or higher rent is the way to go. This is the advice I am getting from sources outside of Bigger Pockets as well.

Thanks again!

Primary residence means you must be living there full time. That does mean much. 

If you have not been offering to pay a much higher rent than the landlord is asking or offering a profit share with the landlord above the agreed to rent it is very obvious why you have not found any takers.

If you want to be in business with someone (a landlord) there has to be a incentive for them to want to be involved. Start flashing the cash incentives and you will have landlords jumping to get in line. Plenty of landlords only see dollar signs when making decisions. 

Try throwing out advance rent payments, 6 months to a year advance, and that may be all it takes to bribe some to get on board. You will be amazed what flashing a little cash or potential cash to some landlords can achieve.  

@Thomas S. My previous response indicated that I'm on board to give out extra cash, though my initial post did not.

I haven't been offering money right away, out of a desire to get a better deal. So even though I've always had this as an idea I kept allowing landlords to say no without me offering that extra money. 

So yeah, I think I need to "flash the cash" right away to get them interested.

Thanks!

Yep, most landlords just need to see the cash.

Start by offering higher rent than they are asking and see if they bite, advance rent payment even at their ask rate will make many salivate and as a last resort possibly a portion of your profits.

Paying a higher rent is a risk if you are uncertain of your business plan although you can always walk away if it doesn't work out. Try to get them to agree to a M2M lease if the higher rent offer is your first approach. 

Cash in advance will usually entice many as they see cash as a guarantee of payment however you can demand the advance back if you decide to leave before the lease is up. Watch out for lease language that imposes a stiff penalty for breaking the lease.

Your best approach is to go in with full honesty, lay out your full business plan, and show the potential additional profits a landlord can make. Think of them as a partner and show them the money. Guarantee you will maintain the property better than they are maintaining it. Do it right and you can grow the business. 

Money talks. 

...and I can see this happening 6 months down the road.

You and the landlord are both making good money.  Profit sharing or you paying a higher monthly rent or something else.

The landlord thinks "Hey, this guy isn't doing that much.  I can see what he is doing and I can have my nephew, adopted son, step son, retired father, wife, girlfriends son, or whomever do what @Alex Bockey is doing and cut him out of the equation.  Or I might let him do it for a year, then cut him out of the equation while keeping return/referral renters.  Either way it would keep the money in the family."

What @Paul Sandhu said.

Also.... this is just a bad idea all around that I’m quite sick of hearing about. Yet another person giving “airbnb” a stereotype when there are those of us out there that follow the rules and play ball with actual “vacation rentals” or in Paula case “short term rentals” for legitimate purposes; not pukers.

If If has to be to primary residence in your market then will get caught. And if you don’t get caught you should have trouble sleeping at night.

I suggest you get a job and save up to buy a property and rent it out instead of trying to take the easy way out and make a buck. And don’t do it on “airbnb” if it’s illegal in your market.

A bit too brutal perhaps. But people like you are trying to ruin it for the rest of us. Call city hall and tell them your plan and see what they think then get back to us.

@Paul Sandhu @Alex Bockey That exact scenario happened to me in Venice Beach.  Leased three units from the same owner for a year.  The landlord saw how we turned his underutilized rental into a money machine and illegally evicted us, renovated the house with our security deposit, and handed the keys to his basket weaving daughter.  Now it's back to being an underutilized rental (now with driftwood laminate floors).  

@Lucas Carl
I am paying attention to the local rules here. There are a lot of different people in my area doing exactly what I am. I find it hard to believe someone in Denver is able to run a blog with podcasts for the last 3 years about their 6 different airbnbs if what they are doing is illegal. I am only interested in running my business completely legally and ethically. I am being completely upfront with everyone I talk to, and I have already contacted my city hall to obtain my business license and pay all applicable fees. I'm quite familiar with Denver's laws regarding this, which I believe I've mentioned.
Also, I have a job, thanks. I've been saving money to start a business for about 8 years now, and I'm only 26.

How exactly is your comment helpful here? It seems more like an emotional, gut reaction to other experiences you've had, and not an attempt to build this forum.

@Shray Goel
Good to know. Were you still able to make a profit and build your Airbnb profile?
I feel like if those goals were accomplished, then you still came out on top, right? That would still make running a second Airbnb easier. Or do you disagree? I'm interested in learning more about your experience.

@Alex Bockey You mentioned it had to be owner occupied that’s all. If you’re saying that’s not the case then I wish you the best of luck! Buy the nice sheets the guests can tell the difference. And get a giant TV they love that.

I would not be overly concerned about a landlord seeing the dollars and pushing you out. First most landlords are too lazy to bother doing the work to airbnb since that is not their business plan. If it were they would already be doing it. If they did push you out you would simply find another landlord to partner with.

I see no problem with your plan as long as you find the right landlords, flash the dollars and obviously show them how much management is required on your end.

You might also consider a lease option on the property. Under the right agreement you could get in for a very small option, guarantee the landlords rent for up to 3 years and either buy, walk away or sell the option to someone else at  the end. Personally I think this may be the best path for airbnb if you can find burned out landlords to buy in.

@Alex Bockey The profit was not substantial and a Superhost Airbnb profile is not as heavily weighted as the company would like you to believe.  

For fear of sounding like a war veteran, I'll skip the dramatic details.  However, in 2015, Venice Beach was the epicenter of the lease/sub-lease model for airbnb hosts.  Airbnb had not yet rolled out the "Price Tips" model they recently developed to control the markets.  The city of LA was not imposing a tax on rentals.  Landlords generally had no aversion to removing the "No Sublease" clause from their rental contracts, as long as you had strong credit and references.  It was the wild wild west and we were able to turn a tidy profit on our small portfolio of leased beach houses.  

Now as legislators, neighbors and even Airbnb has gotten involved in nearly every city in the US, everything has changed.  The profit margin has been reduced tremendously by both taxes and airbnb pricing constraints.  Neighbors don't think twice about reporting offending airbnbs to the city for things like noise complaints or parking infractions.  It's simply not worth the hassle or negative energy.  

The only way I'll ever enter into a lease-sublease model again is if the property has some boutique feature (think panoramic views, proximity to an amazing location, lots of space for hosting events) and the monthly rent can be at least tripled by airbnb rentals.  Generally, the only way to achieve those kind of returns is by owning the property outright, not leasing and giving the lions share of the profits to a passive investor.  

@Matt M. Thanks for the mention. Sorry for the delay. I've been hanging with family and am about to board a plan to Bogota. 

@Alex Bockey  Let me preface all of this by saying that what you can get away with right now and what is actually allowed under the law are not the same. 

Most definitely what you describe is not allowed with Airbnb in Denver, at least according to conversations with the excise and license department worker who oversees short-term rentals in Denver. Also, just reading through the 10 complaints the city attorney's office has filed shows that it doesn't allow what you're talking about 

I know a lot of people are doing what you're doing, and while I don't disagree with @Lucas Carl  that its better for the image of other hosts if you do it right, I'm not judging at all. My wife and I did the same thing years ago in Denver. My understanding of  what you want to do is get landlord's permission, obtain a license, and pay the taxes, right? That's all good. 

The problem is it's still not your primary residence. The city is not actively enforcing the PR rule, but rather relying on neighbor complaints. If a neighbor reports you to the city, saying that you do not actually live there as your primary residence, then the fact that you have a note from your landlord giving you permission will not matter to the city attorney. All the Denver city attorney cares about is what the law says, and a primary residence under the law is "a usual place of return for housing as documented by ..." and then they list a bunch of documents such as drivers license, voter registration, vehicle registration, etc. The city has made clear that they can ask for any further documents they want to satisfy the requirement. In some cases, they're asking for tax returns. They've also made clear you can only have 1 primary residence.

There have been 10 cases so far about the primary residence rule. Nearly all of the hosts have agreed to pay a fine and relinquish their STR license. In these instances, the city attorney relied on the neighbors' affidavit statement and then pushed the hosts for documentation. 

I applaud the creative thinking and don't mean to discourage you one way or the other. Just know what you're getting into. 

@jamescarlson, thanks for the detailed reply! I'm a bit surprised at what you said, mostly because I'd been assured by others who had more experience that the pr requirement was something where you could show the city a bill to the address with your ID and it wouldn't ever come up again. I suppose that is still mostly in line with what you said, but your detail is a little different than my previous understanding.

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