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Arvada legalizes Airbnb investments

Looks like Arvada's about to be a good spot to buy an Airbnb investment property.

On Aug. 3, Arvada city council voted to allow short-term rentals in both primary residences and non-owner-occupied rental properties. This is huge news for those who like the short-term rental model. Neither Denver's Airbnb law nor Colorado's Springs' STR law go this far.

Arvada's new Airbnb law will be the one of the very few along the Front Range to allow you to buy homes purely for an Airbnb rental property. Now, of course, there are some caveats.

Here's what the Arvada Airbnb law allows:

  • You can own up to three short-term rentals in Arvada

  • There is no primary residence rule

  • You can only rent each Airbnb for up to 240 nights a year as an STR.

  • If you own an entire duplex or other multi-unit, you can only rent one side of it.

  • You can only operate one Airbnb per property, so that means no running a boarding house by renting out all bedrooms to separate parties.

  • This goes into effect Oct. 31

  • No word yet on the license fee.

  • Fines for non-compliance start at $150 for the first offense and go to $1,000 for the third and subsequent offenses.

240 nights? What about the other 85?

So obviously, there are some limits on what you can do in Arvada. Basically, you can short-term rent a property (or your three properties) two-thirds of the year. That leaves another three months. I'd Airbnb the property from spring through late fall, and then always plan to plug a medium-term renter in for the slower months.

An example, please?

Here's some high-level numbers. (And please, do your own due diligence and run your own numbers.) If you bought a 4-bedroom, 2-bath house in Arvada for $450,000 with 20% down and at current rates (as of today, Aug. 17, 2020), your monthly payment of principal, interest, taxes and insurance (or PITI for those investors), would be approximately $1950.

Using AirDNA's Rentalizer tool, you'd pull in about $50,000 per year on Airbnb for that house. Two-thirds of that income (since you're only allowed to short-term rent it two-thirds of the year) is about $33,000. Add $2,500/mo for three months as a furnished rental (or $7,500) and you have yearly revenue of $40,833 or $3,400/mo.

What about Denver and Colorado Springs?

Why this is interesting to us is that the big cities (and heck, the small ones) along the Front Range of Colorado limit how you can Airbnb.

In Denver, for instance, you can only operate an STR in your primary residence. In Colorado Springs, you can Airbnb your primary residence anywhere and can Airbnb an investment property as long as it meets certain criteria, but those criteria leave an increasingly small number of homes that qualify.

Now, here comes Arvada allowing for STRs anywhere. For the creative investor, this could be an interesting move.


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