Vacation Rentals are Making a Comeback in Colorado

Blame cabin fever. Coloradans are back in force booking vacation stays.

Glamping Hub, an Airbnb-like startup with U.S. operations based in Denver, and which lists 1,300 teepees, yurts and other atypical rentals in Colorado, has had a surge in customers this month.

“People aren’t going to be ready for cruise ships; hotels are going to be too eerily similar to self-isolation; international travel is unpredictable and complicated,” said co-founder Ruben Martinez.

“We’re seeing this shift toward hyperlocal travel or people driving two to three hours,” Martinez said.

Property owners can list cabins, treehouses, safari tents or other unusual rental housing for guests to book on GlampingHub.com, which has a wide variety of listings throughout Colorado, including a ski-in, ski-out yurt near Telluride and a teepee near Gunnison.

Martinez said Glamping Hub received 14 percent more bookings in Colorado this month than it did in May 2019. And the site received four times more bookings in the state month-over-month. He also added that the average price per booking in Colorado has increased by 20 percent in May, which means people are spending more per booking and staying longer.

“Over the last three or four weeks we’ve really seen consumer confidence bounce back,” Martinez said.

“In May, we’ve had 10 of our best days, not only pre-COVID but in the history of the company,” Martinez said.

The booking company, which has an office in Denver near I-25 at 990 S. Broadway, was hit hard in February through mid-April as travel ground to a halt. The site received only 8,000 visits a day in March, compared to the 40,000 it receives now. Cancellations were abundant, Martinez said, and the company cut 20 employees, about half of the staff.

Despite a few slow months, Martinez said demand is consistently outpacing the supply of listings. Some property owners are booked for June and July, and he said one of the most popular listings in Colorado is the large safari tents in Canon City, Sedalia or Colorado Springs.

“This is what the global trend is right now. People need to do something and need to get out of their house and honestly, there are not a million options out there,” Martinez said. “The outdoor space is just really well-positioned right now to take on the first wave of travelers.”

The company, which Martinez co-founded in 2012 in Spain, is hiring back its employees and hopes to return to a full staff by month’s end.

He also said property owners are taking notice of this shift and are starting to develop more destination projects across the state.

“I would have honestly guessed as the pandemic was underway that a lot of these big projects would have stopped or stalled, but we’re seeing the opposite,” Martinez said.

To read more, go to Business Den.

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Finding a House Hack That Works for You

By now, most of us have heard of the term that Brandon Turner infamously coined called “house hacking.”

For those of you who have not heard, it is when you purchase a property, live in part of it, and rent out the rest. That way, your roommates and/or tenants are paying a significant portion (or all) of your mortgage.

There is no question that house hacking is the single best way to generate wealth for those of you who are in the beginning stages of your journey towards financial independence. Here is why:

1. It either dramatically reduces or eliminates one of your largest expenses—your living expense.

2. You build equity for free as your tenants pay down your mortgage while the property (in many cases) appreciates.

3. You save in taxes, as you are able to deduct a portion of your house expenses as well as account for depreciation.

4. You can get into a house hack for very little down if you’re a first-time home buyer. With such little money down, it will be tough to find cash-on-cash returns higher on any other type of investment.

Now that you can see how powerful house hacking is—and before you start making excuses as to why you can’t do it—read this article.

We are going to outline the different types of house hacking that I have seen. I hope that a variation of one of these house hacking strategies can work for you.

1. The Traditional House Hack

Definitely the most popular and the one that almost everyone has heard of is the traditional house hack. This is when you purchase a two- to four-unit property with a low down payment residential loan. The 3.5% down FHA is popular here, but there are others, especially if you are a first-time home buyer.

You live in one unit (perhaps with a roommate) and rent out the other unit(s). The rent from your roommate plus your other units should either cover the mortgage or come darn close to covering the mortgage. That way, when you move out, the property cash flows nicely.

This strategy works in most lower-priced markets, but it is almost impossible to find a deal that works in the higher-priced markets, where rents will usually not be enough to cover the mortgage.

2. Calling the Living Room Home & Renting Out the Rest (Seriously)

They call it a “living” room for a reason, right?

With this strategy, you rent out the upstairs unit like a traditional rental. Since you are not occupying my bedroom, you can now rent it out on Airbnb. This works extremely nicely, allowing for some extra cash flow every month, depending on the seasonality of Airbnb.

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3. Renting by the Room

The idea is to purchase a large single family home that has at least four beds and two baths and live in one bedroom while renting out the others. You can typically get significantly more in rent when you rent by the room.

Purchasing a single family home (especially as a first-time home buyer) opens up a lot of potential financing options. With a low down payment, increased rent really boosts your cash-on-cash returns.

We haven’t even gotten to appreciation yet. Single family homes are known to appreciate more quickly than multifamily ones. This is the case because both investors and non-investors are interested. With more demand comes higher prices, not to mention that non-investors will typically pay a premium given they are looking for a home—not a deal.

4. Living in a Trailer/RV & Renting Out Your Primary Residence

This strategy is for the hustler who is clearly willing to do what it takes to achieve early financial independence.

In Denver, where the price point is relatively high, this makes a lot of sense for the young, single folks looking to eliminate their housing expense.

5. Renting Out an Additional Dwelling Unit

Ben Leybovich, an active user on BiggerPockets and a good friend of Brandon Turner, calls this “luxury house hacking.” This is on the opposite end of the spectrum as the trailer and works well if you have a family.

You either purchase a property with an additional dwelling unit or build one yourself. It’s helpful if the unit can have at least a small kitchenette, an operative bathroom, and a comfortable bed to sleep in.

Then, you guessed it—rent it out! You could rent it full-time or on Airbnb.

This way, you and your family can have your own personal space in the main house while your guests enjoy their own space in the guest house.

6. The Live-in Flip

This is where you purchase a property that needs some TLC, ideally with a low percentage down loan. You live in the property for at least two years, and while living there, you fix it up. Once it is all fixed up and after the two-year timeline, you sell it and pay no capital gains on the first $250K of net proceeds ($500K if you're married).

You may be wondering, why two years?! For every other strategy, it is just one. Well, to avoid paying a significant amount of capital gains tax, you are required to live there for two years.

The live-in flip strategy is nice because it could be combined with the other strategies (with exception to the trailer/RV) to create a compounding effect. When combined, you will significantly increase the value of the property while also garnering more rental income.

In a traditional house hack and the living room strategy, you can live in one unit and fix it up while renting the other. Then switch!

If you choose to rent by the room in a large single family home, maybe you add a couple extra bedrooms, redo the basement, etc. This is obviously easiest because you have access to the entire property all the time.

On the ADU, you can build your own ADU or turn the shed in the back into one. Either way, you’ll be able to rent it out, and this will increase the value of your property.

Conclusion

There are a lot of different investing strategies out there. House hacking can be a strategy if you are looking to have the greatest odds at earning the highest possible return on your investment.

The question then becomes not whether you should house hack but what strategy you should deploy. Well, it obviously depends on your situation, what you can afford, and how you are willing to live. There’s typically a tradeoff with luxury and returns.

For more information, go to BiggerPockets.com

Short-term Rentals in Denver: 5 Things to Know

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

According to an op-ed recently published by Westword, the City of Denver and other Colorado municipalities are cracking down on short-term rentals to limit the impact STRs have on neighborhoods, despite the rise in popularity of online platforms that facilitate such rentals.

Even as the city issues more rules to curtail this popular practice, there are still opportunities to operate STRs while staying in compliance.

Here are five things you should know if you are interested in operating STR properties 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 percent. 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.

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.

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.

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.

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.”

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.

Author Euan Graham is the chairman of the Board of the Denver Metro Association of REALTORS.

Related Links:
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