Should I buy the house next door for a long or short term rental?

[Michael Anderson]

I have the chance to buy my neighbors house in Arvada off market. It is a single family 3/2.5. I am a little concerned about having a long term rental right next door, but wanted to get some advice from others. I can get the house for a slight discount and not go into a bidding war like everything else. Obviously still more than I want to pay for an investment property because It will probably cash flow only $100 month. Long term plan is to move out of my current residence and rent it out, so it would be great to have 2 rentals next to each other.

I also am think about short term rentals. Does anyone in Arvada have experience with STR's?

Thanks for any input!

[Brad Hammond]

Hi @Michael Anderson, I would always purchase the property next door when given the opportunity.  I understand that this might not be a slam dunk deal but cash flowing $100 in Arvada sounds great to me considering the appreciation you will be getting every year.  

I had a short-term rental off Sheridan and 72nd that did ok.  That was in 2009 before Airbnb though.  I'm sure it will do well once travel becomes more common.  

[James Carlson]

@Michael Anderson

Interesting. Where in Arvada? If I could pick up a home in Arvada right now for a little under market, I'd be super happy. I've got a lot of buyers looking for those STRs in the Denver metro area. I'm steering them to Littleton, Wheat Ridge and Arvada because they're the only Denver-area cities that allow Airbnb investments. 

Arvada's not Denver in terms of demand for short-term rentals, but it's a solid play (and more importantly, a legal play). A 3br house in Arvada at the 50th percentile in 2019 pulled in $3,200 averaged out over the year. (Hell, it still pulled in $2,800 average monthly revenue during the 2020 pandemic.) If your house is better than the average (great outdoor space, awesome design, etc.), then you'll outperform that average.

I have a buyer who is under contract on a new build a mile from Olde Town. I estimate around $5,000/mo in revenue once he's up and running. 

All the above said, if you really think you can cash flow $100 on anywhere in Denver, then I'd scoop that thing up, take your $100/month and watch that value grow. 

Good luck!

[Dan Maciejewski]

I would prefer a short term rental to cash flow a little better than 100/month!  That's kind of low even for a long term rental.  

Although if you're planning on appreciation for your area (and I think there is a ton of room there), you should probably have a property worth a ton in a few years!

[Michael Anderson]

Thank you for the input! Great advice. Long term appreciation should be great, but trying to decide if I want to tie up all my capital in a property that does not cash flow much for a long term rental. Out of state is the other option.

I guess I need to factor in debt reduction here vs cash flow in other markets.

[Nakota Crow]

I recently purchased a home in Arvada and rent out the walkout basement (720 square feet) on Airbnb and it is doing really well so far! I listed it in May and am completely booked for June and July, and should bring in a little over $3,000 per month. I'm sure a full sized house could do really well if you stage it properly.