You’ve probably heard this said many times before, but the Denver housing market looks like the real deal right now for real
estate investors. Post COVID-19, it remains the hottest market in the U.S., valued at 78% more than it was in 2008. The city-wide annual Denver real estate appreciation numbers are also impressive, standing at a spectacular 11.2%.
In a recent episode of our real estate podcast covering Colorado, with experienced real estate agent Joe Mivshek, we also discussed how Denver – similar to the general Colorado housing market – didn’t feel the effects of the Coronavirus to the same extent that many other U.S. markets did.
High level, we think the answer is a yes if you’re already thinking whether buying rental property in Denver in specific or investing in Colorado homes for rent, in general, is a good idea.
But what makes the Denver housing market such a great location for real estate investment? In this article, you will find out all the details that you need to in order to make a smart investment decision, as well as the best neighborhoods in terms of profitability for traditional and Airbnb Denver rental properties.
Why the Denver Real Estate Market Is Great for Investment
Denver is the capital and the largest city in Colorado, with over 700,000 people calling it home. The metropolitan area, meanwhile, caters to a larger population of 2.7 million people.
From buzzing tourist attractions to trendy neighborhoods, a growing restaurant scene, and a strong economy, Denver offers a special appeal to a new wave of American renters who want a mix of these things when looking for places to live.
Based on the Mashvisor real estate data, this is the current investment potential for both traditional and Airbnb properties in Denver:
- Median Property Price: $519,660
- Price per Square Foot: $350
- Average Traditional Rental Income: $1,872
- Average Traditional Cash on Cash Return: 2.38%
- Price to Rent Ratio: 23
- Average Airbnb Income: $3,176
- Average Airbnb Cash on Cash Return: 3.63%
- Average Airbnb Daily Rate: $160
- Average Airbnb Occupancy Rate: 70%
One important thing to note about the Denver housing market is that it is a hot seller’s market, and competition for homes for sale is tough. So, it is usually better to work with agents when looking for houses to buy.
From an investor’s perspective, here are some of the reasons why the Denver housing market should be your next destination for investment.
Fewer People Can Afford to Buy Houses Outrightly
Generally, the national average value of properties is going high, and Denver houses for sale have unsurprisingly joined in the trend. According to Mashvisor data, the average property price for the Denver housing market in 2020 was $499,198. As of May 2021, the median property price is $ 519,660. This is an increase in the average home price of about 4.1% in less than a year.
Considering that many people lost their jobs or took pay cuts as a result of the pandemic, this means that fewer people can afford to buy houses now that the prices are higher, including Denver residents. In response, rental demand is expected to rise for both the Denver housing market and the Colorado housing market at large. This gives real estate investors like you an opportunity to buy income property in Denver, if you have the cash, and make a profit from renting it out to tenants.
Read More: The Future of Real Estate Investing After the Pandemic
Add That to an Active Renting Population
When it comes to real estate investing, you want to be on the lookout for housing markets where most of the residents are renting homes rather than owning them. The Denver housing market is one of those places, despite the fact that it has always been known to have a strong buying culture. According to NeighborhoodScout, 51.2% of the Denver population rent homes, predominantly single-family homes and apartment complexes. You can also invest in condos for sale in Denver to rent out; you only need to be on the lookout for the best deals and conduct diligent investment property analysis before buying.
Importantly, as of 2019, Denver has ranked as the number one city in the U.S. for high-income renters. Generally speaking, wealthier individuals make for good tenants who take good care of rental properties and who pay rent on time. That is another bonus point for investors, especially when you consider the fact that high-income renters who earn over $100,000 are one of the most active segments in the rental market. And according to Westword, the majority of these people can be found in the Denver housing market. This is yet another reason why Denver is one of the darlings of the U.S. housing market and a top choice for investors.
Denver’s Job Market Is Among the Country’s Best
One of the driving factors for many migrations within the U.S. is the strength of the location’s job market. As a ripple effect, this has an impact on rental demand. Denver has a strong job market which is inspiring a population movement from other cities. It is America’s number 3 job market, only behind Austin and Nashville in first and second places, respectively.
According to a report by StorageCafe, Denver is the 9th best city for renters’ migration, which in turn makes it a top location for investing in long-term rentals. This is due to the number of people moving in from other locations like Aurora and Chicago, thus increasing the Denver population. No surprises there as Denver (South) alone has seven Fortune 500 companies while being a hot spot for healthcare and government agencies. Forbes has also been named the city one of the “Best Places for Business and Careers”.
Another good thing about moving to the city is the cost of living in Denver, which is bearable when you compare it to other metropolitan cities.
The Tourism Industry Is Driving Short-Term Rentals
Short-term rentals are also doing great in the Denver housing market, thanks to the many tourist attractions. Tourism is responsible for 64,000 jobs in the metro. In 2019 alone, the City of Denver welcomed more than 17 million overnight visitors, which represented a 2% increase from 2018. These visitors spent a record $7 billion during their stay.
While these numbers generally suffered some decline in 2020 due to the pandemic, as with many locations, tourism in Denver is expected to return to pre-pandemic levels now that vaccines are being rolled out in the U.S. and based on the general Denver housing market forecast. So, more people will be looking for Denver vacation rentals like Airbnb when they come to visit.
As an investor looking for the most lucrative Denver investment properties, you can prepare for this return to normalcy by investing in Airbnb Denver rentals, especially before property prices go even higher.
The Best Denver Neighborhoods for Traditional Rentals
We’ve established that this year the Denver housing market provides an opportunity for profitable real estate investment in traditional rentals. One thing to note though is the new law guiding traditional rental property owners in Denver. From 2024 onwards, landlords in Denver will be required to have a long-term license for their properties. However, we don’t expect this to affect general market activity when the time comes, especially if rental demand continues to grow in Denver, as forecast.
That being said, based on Denver real estate market analysis conducted by Mashvisor, here are some of the best neighborhoods to buy long-term Denver rental properties:
#1. Chaffee Park
- Median Property Price: $367,335
- Price per Square Foot: $277
- Traditional Rental Income: $1,644
- Traditional Cash on Cash Return: 4.55%
- Price to Rent Ratio: 19
#2. Windsor
- Median Property Price: $211,975
- Price per Square Foot: $201
- Traditional Rental Income: $1,570
- Traditional Cash on Cash Return: 4.19%
- Price to Rent Ratio: 11
#3. Highland
- Median Property Price: $484,967
- Price per Square Foot: $536
- Traditional Rental Income: $2,518
- Traditional Cash on Cash Return: 3.72%
- Price to Rent Ratio: 16
#4. Union Station
- Median Property Price: $587,500
- Price per Square Foot: $435
- Traditional Rental Income: $3,123
- Traditional Cash on Cash Return: 3.54%
- Price to Rent Ratio: 16
#5. Fort Logan
- Median Property Price: $420,250
- Price per Square Foot: $208
- Traditional Rental Income: $1,936
- Traditional Cash on Cash Return: 3.42%
- Price to Rent Ratio: 18
The Best Neighborhoods in Denver for Airbnb Rentals
Mashvisor’s Heatmap: Airbnb Cash on Cash Return by Neighborhood in the Denver market
If you prefer to invest in short-term rentals like Airbnb rather than traditional properties, the following are some of the best locations for this rental strategy investment in the Denver housing market. This list is based on real estate data from Mashvisor’s real estate software which gathers data from dozens of reliable, publicly available sources to provide you with important metrics such as Airbnb income, Airbnb nightly rate, Airbnb occupancy rate, Airbnb cash on cash return, and Airbnb cap rate.
Also Read: Airbnb Income Calculator: The Tool for Finding the Best Short-Term Rentals
#1. Hampden
- Median Property Price: $617,700
- Price per Square Foot: $279
- Airbnb Rental Income: $6,178
- Airbnb Cash on Cash Return: 6.44%
- Airbnb Daily Rate: $189
- Airbnb Occupancy Rate: 80%
#2. Goldsmith
- Median Property Price: $561,633
- Price per Square Foot: $229
- Airbnb Rental Income: $4,692
- Airbnb Daily Rate: $204
- Airbnb Cash on Cash Return: 5.36%
- Airbnb Occupancy Rate: 63%
#3. Speer
- Median Property Price: $435,950
- Price per Square Foot: $310
- Airbnb Rental Income: $3,585
- Airbnb Cash on Cash Return: 5.05%
- Airbnb Daily Rate: $124
- Airbnb Occupancy Rate: 77%
#4. Baker
- Median Property Price: $470,000
- Price per Square Foot: $322
- Airbnb Rental Income: $3,562
- Airbnb Cash on Cash Return: 5.02%
- Airbnb Daily Rate: $134
- Airbnb Occupancy Rate: 72%
#5. Stapleton
- Median Property Price: $689,000
- Price per Square Foot: $239
- Airbnb Rental Income: $5,407
- Airbnb Cash on Cash Return: 4.79%
- Airbnb Daily Rate: $162
- Airbnb Occupancy Rate: 75%
Overall, Airbnb is the more profitable rental strategy based on our analysis of rental comps from the Denver real estate market. The Airbnb apartments for rent in Denver see a lot of activity, with the Airbnb occupancy rate of most locations well above the 70%. Perhaps, this is your final cue to finally put your money in a Denver Airbnb rental.
Is Airbnb Legal in Denver, Colorado?
The simple answer is Yes. However, there are certain rules and regulations guiding Airbnb Denver owners. One of these is that the short-term rental must be the primary residence of the host. Failure to abide by this rule can result in getting the host’s license revoked.
Airbnb hosts in the Denver housing market are also expected to collect taxes such as state sales tax and city lodger’s tax from their guests. To do this, hosts must have registered for tax licenses with both the City Council and the State of Colorado.
As long as you are able to abide by these rules, owning an Airbnb rental property in Denver is pretty straightforward and offers the potential for massive gains.
How to Find the Best Investment Properties in the Denver Housing Market
We’ve crossed the first hurdle when it comes to buying rental properties in the Denver housing market — discovering the best neighborhoods for investment. The next part, which is finding the most profitable Denver homes for sale, is usually more difficult for investors. However, you can get the hang of it and save time with real estate analytics tools like Mashvisor. Our investment property calculator will help you get immediate access to all the numbers you need to choose the most suitable Denver, Colorado property for sale for your investment needs and expectations. Find out what rental expenses, rental income, occupancy rate, cash flow, cash on cash return, and cap rate to expect from hundreds of real estate listings in the Denver housing market.
To start looking for and analyzing the best investment properties in the Denver housing market, click here.