5 Ways to Make More Money on a Colorado Rental

Five moves raise income on a Colorado rental without adding risk: price to the current Front Range comps instead of last year's lease, use the tax code the way an investor is meant to, collect the late fee the law already allows, add square footage or a legal unit where zoning permits it, and finance the property so cash flow, not just appreciation, does the work. None of these require a rent hike a tenant will fight.

Price to the current market, not last year's lease

Colorado landlords who auto-renew at the same number every year leave money on the table in a market that moves as fast as the Front Range does. Pull three to five comparable active or recently leased units within a mile before every renewal, not just at turnover, and price the increase against what a vacancy actually costs: one month of lost rent plus $1,500 to $3,000 in make-ready work and a new leasing fee, commonly $4,000 to $7,000 total on a single-family rental. A $75 to $125 monthly increase a tenant accepts beats a vacancy nearly every time the math is run honestly.

Collect the late fee the law allows, every time

Colorado's HB23-1095 caps a late fee at the greater of $50 or 5% of the unpaid rent, charged once per missed payment and only after the date set in the lease. Landlords who waive it informally are giving up real income and, worse, teaching a tenant that the due date is optional. Put the fee in writing in the lease, apply it consistently, and use a payment platform that assesses it automatically so it is never a judgment call.

Use depreciation and a 1031 exchange

A residential rental depreciates on a 27.5-year straight-line schedule under federal tax rules, which shelters a meaningful slice of rental income from tax each year even while the property gains value. When it is time to sell, a 1031 exchange lets an investor roll the gain into another investment property and defer the capital gains tax, as long as a replacement property is identified within 45 days of closing and the purchase closes within 180 days. Run both past a CPA who works with Colorado investors before you file, since the numbers depend on your basis and your income.

Add legal square footage where the zoning allows it

Denver expanded where an accessory dwelling unit is allowed, and a detached ADU built behind a single-family home adds a second rent check on one lot, commonly $1,200 to $1,800 a month for a studio or one-bedroom unit in the Denver metro. Rules differ city to city: Aurora, Lakewood, Boulder and the smaller Front Range cities each set their own ADU zoning, minimum lot size and owner-occupancy requirements, so confirm the specific rule for your address with the city's planning department before you design one. A finished basement conversion into a legal rental, where egress windows and a permit are in place, is the lower-cost version of the same idea.

Finance the property for cash flow, not just appreciation

Refinancing into a lower rate frees up monthly cash flow directly, and a cash-out refinance on a property that gained equity can fund the renovation that raises rent, such as central air, in-unit laundry or a garage, all features Front Range tenants pay a premium for. Run the new payment against the current rent roll before you refinance a Colorado rental: a lower rate that still raises the payment because of a larger loan balance does not help cash flow even if it lowers the rate on paper.

A furnished mid-term rental raises the rent

Furnishing a Denver metro unit and leasing it 30 days to a year to traveling healthcare workers, relocating employees and remote workers commonly brings a rent premium of 20% to 40% over a standard unfurnished lease, with lower turnover cost since mid-term tenants rarely need the unit repainted or re-carpeted between stays. It works best in submarkets near major employers or medical campuses, and it needs $3,000 to $10,000 in furniture and setup, so run the math against your specific unit before converting.

Short-term rentals: check the city's rule before you list

Denver requires a short-term rental license and limits licenses to a host's primary residence, so a straight investment-only short-term rental is not permitted inside city limits. Colorado Springs, Aurora, Boulder and the mountain-adjacent Front Range cities each set their own license, occupancy tax and primary-residence rules, and several have caps on the number of licenses issued per neighborhood. Confirm the current ordinance with the specific city before you build a business plan around nightly rates.

What Colorado property tax does to rental income

A non-owner-occupied rental is assessed differently than an owner-occupied home under Colorado's property tax structure, and that bill is one of the biggest swings in a rental's annual cash flow. Check your county assessor's current residential assessment rate and any exemptions before setting next year's rent, since a jump in the tax bill is the most common reason a landlord's cash flow shrinks even while rent stays flat.

Bill tenants back for utilities the right way

Colorado allows a landlord to bill a tenant back for water, sewer and trash through a ratio utility billing system (RUBS) or a submeter, as long as the method and the formula are spelled out in the lease before the tenant signs. On a multi-unit Front Range property where utilities were folded into the rent for years, switching to a documented billback commonly recovers $40 to $90 a month per unit that used to come straight out of the owner's cash flow. Give existing tenants written notice and a lease amendment rather than changing the bill mid-lease, since a surprise charge is the fastest way to generate a habitability complaint that has nothing to do with the actual utility cost.

Self-manage or hire a property manager?

A Denver metro property manager runs 8% to 10% of collected rent plus a leasing fee of 50% to 100% of one month's rent for a new tenant placement. For an owner with one or two units within driving distance and the time to answer a maintenance call, self-managing keeps that fee as income. For an out-of-state owner or a portfolio of five or more doors, a property manager's screening, compliance and maintenance network commonly pays for itself in fewer vacancy days and fewer costly repair mistakes.

Where to go next

• Colorado real estate investing guide
• Rental property checklist: how to buy a rental in Colorado
• Denver house hacking guide: buying a duplex or multi-unit home
• State of the Denver rental market
• Investment property loans in Denver
• Search every home for sale in Colorado

Talk to the Kenna Real Estate Group

The Kenna Real Estate Group helps Front Range investors run the numbers on a rental purchase, an ADU addition or a refinance before you commit. Call or text 303-955-4220. A live person answers. Not a robot, not a phone tree. Or search every home for sale in Colorado to compare investment properties across the metro.