Denver is the ideal location to learn how to become an AirBNB host. Once a humble and often-overlooked city, The Mile High City has become a super popular destination for travelers in recent years. As tourism has grown, so has the ability for Denver locals to form a steady stream of passive income though AirBNB. AirBNB formed in 2008 and has been one of the fastest growing companies in the world since. Since it’s inception, homeowners have used the AirBNB platform to rent out extra rooms in their house or condo to allow vacationers and backpackers alike a place to rest their head for a night or two. More recently, savvy owners have opened their entire home to groups of travelers when they themselves are out of town.
Wondering how to become an AirBNB host? Today, the AirBNB model remains relatively unchanged, though real estate investors in and around Denver have caught wind of the financial possibilities that run parallel with a successful short-term rental, and with good reason. Warm weather, great music, proximity to the Rocky Mountains (and yes, weed) keeps the Mile-High City planted firmly on the tourist map.
Why Host an AirBNB in Denver?
The numbers don’t lie. Denver’s room rates — hotels, hostels, short term rentals, etc.— continue to reach record highs with 2016 and 2017 occupancy rates flourishing just above the 70% mark. Astute homeowners and investors can utilize AirBNB to show cap rates upwards of 10%. Combine this with the roughly 11% year-over-year appreciation in the Denver housing market since 2013, and you’re left with one helluva real estate investment.
Visit Denver has published data stating that 31.5 million tourists in 2016, and this number is sure to rise once the the 2017 statistics are made available. Now you might be thinking, “I love traveling and I know real estate. I’m going to buy a property of my own and rent it out. This will be easy money!”
How to Become an AirBNB Host
As the adage goes, if it was that easy everyone would do it. There are five key points to consider before purchasing a property to use as an AirBNB in Denver. The following are incredibly important — read them, study them, read them again and play them as a soothing recording as you go to sleep at night before you draw up your AirBNB money-making plan. Understanding the rules and regulations is the first step in learning how to become an AirBNB host:
- Denver requires that a home be a primary residence in order to list it as a short-term rental. Denver residents may not purchase a second home and/or investment property with the sole purpose being to use it as a short term rental. Some AirBNB owners have found loopholes in these regulations but generally speaking, listing a Denver property on AirBNB that is not a primary residence is illegal.
- Short term rental licenses (STRLs) are required. The city of Denver has built a website specifically for this purpose. Before entering a property into the AirBNB forum, homeowners should visit https://www.denvergov.org/content/denvergov/en/denver-business-licensing-center/business-licenses/short-term-rentals.html and follow the steps provided on the website. It is critical to note that in order to apply for a short term rental license, applicants will be required to set up a lodgers tax ID. Don’t be deterred — though this all may seem tedious, the aforementioned city of Denver STRL website is simple to navigate and greets its visitors with instructions that are clear and concise.
- Landlords must pay a 10.75% occupancy tax to Denver each year. It is the owners responsibility to keep record of all monies collected in order to pay the proper taxes each year (or quarterly, should the host prefer). Additionally, AirBNB collects a 4% sales tax from Denver hosts on each booking. Totaling 14.75%, these taxes are crucial to remember when considering ROIs (Return on Investment) and cap rates for any given AirBNB investment chart.
- Many HOAs do not allow short term rentals. If you live in a condo or townhouse, it is imperative that you check with the HOA’s bylaws to confirm that there are no limitations on rentals. Most condos around Denver have restrictions that prevent homeowners from renting out their homes for less than 30 days, and in many instances this rental minimum can be as high as six months.
- Managing an AirBNB in Denver is time-consuming and arduous. This may be the most intangible of the list, but in many ways it is the most important. Hosts should think of themselves as a hotel receptionist, concierge, maintenance, housekeeping, and IT technician all rolled into one. Sure, you may opt to hire an AirBNB property management company to handle all booking requests and guest issues, but these companies charge upwards of 40% of rental rates and will hugely eat in to your profits. Instead, be your own property manager and be prepared for any and all of the following:
- guests that request a late-night or early-morning check-in
- giving advice on what to see, where to eat, the best hiking near Denver, etc.
- any assortment of Internet and cable related issues
- broken furniture and lost keys
- as filthy and messy of a home as is possibly imaginable
(Note: These guidelines and rules also apply to operating a VRBO in Denver, another popular vacation-home rental company.)
Hotels are being built at an unprecedented rate in the Denver Metro area, with over 2,500 rooms set to be added to in 2018. Yet no matter how many rooms are made available, many travelers will opt to stay in an AirBNB in their search for a more authentic experience. Once utilized primarily by millennials, today short-term rentals are the accommodation choice for tourists of all ages.
For more information on AirBNB rules and regulations,
We’ll conclude part one with this: Don’t be dissuaded. Now is as good a time as any to operate an AirBNB in Denver, and despite the numerous rules and regulations surrounding it, hosting a short-term rental is a great way to not only make some extra cash, but also meet some intrepid and worldly people.
Derek Schimmel has been a real estate broker with Your Castle for five years and specializes helping investors identify profitable rental properties and fix-n-flips. Prior to entering the crazy, mixed up world of Denver real estate, Derek spent five years learning the ins-and-outs of content writing and SEO, becoming a self-proclaimed ‘digital marketing ninja.’ Reach out to him today at 720-443-2273 for any question you may have pertaining to all things Denver — not only merely real estate. Seriously, even if you want a restaurant recommendation, he’d be happy to help.