STR in Denver - Regulations Too Tough?

7 Replies

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? 

I'm actually sitting in Rino as I type this! I don't have any STR's here but make sure you calculate ALL expenses before talking about cashflow. STR's have mortgage, prop mgmt, ins, vacancies, repairs, water, electric, wifi, licensing, furniture, toiletries, snacks, cleaning fees, hotel tax, sales tax, etc. At least in TN this is all stuff I look at for my STR there.

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.

@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!

@Mark Cermak

Just to clarify, is your Denver place an actual duplex? Or is it a home with a basement apartment? The difference matters in the eyes of Denver's Airbnb law. In a home with a mother-in-law suite, you can live in one and rent the other. If it's an actual duplex, the law says you can only rent the space you actually live but that the other side is someone else's primary residence. 

Like @Steve K. said, Denver Airbnb laws are considered strict because they only allow it in your primary residence. But they also are strict in that they are better than other cities at enforcement. Their compliance rate fluctuates between 60-75%, which is higher than just about any city in the country.

Assuming it's a house with a basement apartment, then you're good to go. You're especially good to go if you're house-hacking in RiNo. It's one of the best-performing areas for short-term rentals in Denver. When you say RiNo, do you mean Five Points? Cole? Curtis Park? 

@Brian Ellwood @James Carlson  @Erik Stenbakken @Steve K.   

Thanks for the valuable input guys! I currently own an STR in the Smoky Mtns that does very well.  Was evaluating a property in RiNo that was an upper/lower.  I'd ideally like to pick up a distressed property in the area, split it into an upper/lower unit and also build an ADR in the back, with the option to live in one of the units and STR the others or just LTR all 3 units.  I've never had to deal with permitting for an STR, hence why I asked.  Appreciate what you guys had to offer! 

@James Carlson I did not end up buying it. Even though it would cash flow well, it was just listed for wayyyyy too much for what it was ($$/SF wise). I think I'd rather be the guy that BRRRR's something like that into existence than the guy that buys the finished product. Waiting for the right opportunity - the market is HOT!