5 Things to Know for Short-Term Rental Investment Properties in Denver

  • Megan Douglas
  • 01/21/20
The City of Denver and other metro areas are tightening their control over short term rentals (STR). So, I want to make sure you’re ready for the changes so you can have the most success operating an STR or looking for a property that has one for income potential. The overall goal is to limit the impact STRs have on neighborhoods and allow facilitation with regulation for such rentals and their accompanies platforms. So, here’s how you can stay in compliance:
5 Things to pay particular attention to if you are operating an STR in Denver:
1. Only short-term lease your primary property, not your secondary property. The City of Denver’s enforcement of the primary residence requirement is effective: Denver’s compliance is the highest in the nation, at 75%. STR hosts are asked to sign sworn affidavits upfront that the host is using their primary residence as an STR, not a secondary residence. Violating affidavits can carry heavy fines and felony charges. Make sure to read the online document and make sure you can play by its rules before signing.
2. Register with the city for an STR license. You will need your tax ID and short-term lease licenses to operate an STR in Denver. Apply for an STR license at the City of Denver’s Excise & Licenses Office. STR license applicants must certify and provide verification that the home they are registering is their primary residence, or they can provide written permission to operate an STR from the home’s owner. The applicant must also provide their tax ID to register for a Lodger’s Tax, Occupational Privilege Tax, and a Business Personal Property Tax. An STR license expires one year from the date of issuance, and the application costs $25. I just renewed mine and it was quick and painless! If I remember the disclosures right I believe this has to be on display in the STR too.
3. Check your HOA or lease rules. Denver’s STR rules require applicants to notify homeowners’ associations (HOAs) of their intent to use their personal residence as an STR. All condo, townhouse and apartment tenants should make sure to review their HOA rules or rental lease agreements to see if they are allowed to operate STRs. Even if there are no STR rules present today, landlords and HOAs can change those rules with limited notice. What we’re seeing common in Denver is that properties with HOA’s will set a minimum lease term to 30 days, 1-3 months, or can even state a 12 month requirement.
4. Check your homeowners’ insurance to see if it covers short-term rentals. The new rules require you to notify your property’s insurance company of your intent to use the property as an STR, and you will be asked to submit proof of notifying the company in the STR application — whether or not you obtain liability insurance with it for the STR. Applicants should read their property insurance coverage and see if their coverage specifically includes STRs, because many insurance companies do not yet offer coverage. Airbnb offers a $1 million coverage plan for all homeowner hosts; however, this plan does not cover personal property damages or loss of income, and is only applicable from check-in to check-out; it does not cover early check-ins or late check-outs. If you have additional questions please reach out to me and I can put you in touch with an insurance agent who is familiar with STR insurance.
5. Vet your tenants well to avoid issues with neighbors. Noisy house parties, people coming and going through the neighborhood and parked car issues at short-term lease investment homes are major reasons why the City of Denver decided to tackle this issue in 2016. In fact, large and open-invite parties at Airbnbs have forced the company to recently issue its own Party House Ban, in an attempt to restrict disruptions in neighborhoods. The Denver Department of Excise and Licenses has a policy where the department can revoke an STR licenses “…if a rental is found to be adversely affecting the public health, safety, or welfare of the immediate neighborhood in which the property is located.” My neighbors love my STR and they utilize it often for their own family to stay there!
STRs can be a great additional revenue stream for residents if they are considerate of their neighbors by vetting who they allow to stay at their homes. Many mountain rental properties operate STRs without neighborly problems because they prioritize and enforce quiet hours, as well as impose limits on how many people can stay in one home.
STRs disrupted the traditional lodging business model that out-of-town guests experience in Denver and the surrounding areas, and residents should be aware of the new rules before listing their properties online. The city has shown that it is taking enforcement of STR rules and regulations seriously. Residents can also take advantage of alternatives to STRs, such as long-term leasing and thirty-day plus furnished executive rentals.
For me Short Term Rentals have been an immense opportunity not to be missed by a homeowner, as long as they feel they can play by the rules. My short term rental has allowed me and my clients to invest more into improving properties, deposit more towards loan principal, and have a freedom to switch between short term renters and out of town guests. So, please don’t be intimidated by them, just be smart and don’t try to work the system.
Note: If you’re running an STR outside Denver please check to verify if there are more strict or less strict rules on short term rentals in that community.
Author Euan Graham is the chairman of the Board of the Denver Metro Association of REALTORS. With additional information added by Megan Douglas, Realtor at West + Main Homes.

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