The average rent in Denver is $1,910. This figure, compiled by RentCafe as of August 2026, is a 1.99 percent decrease from the previous year. For a one-bedroom, the average is $1,717, while a two-bedroom averages $2,224. At first glance, these numbers suggest that rent is decreasing, which might lead one to think that the investment appeal is diminishing. However, when calculating rental yields, it's essential to consider the rent-to-purchase price ratio along with local property taxes and insurance to get the full picture.

The simplest tool for gauging rental yield is the 1 percent rule. This industry rule of thumb suggests that if the monthly rent is more than 1 percent of the purchase price, the cash flow is likely to be decent. However, in high-purchase-price areas like Denver, it can be challenging to find properties that meet this criterion. Conversely, calculating the cap rate, which is the net operating income divided by the purchase price, takes vacancy rates and operating expenses into account, making it a more realistic basis for judgment than the 1 percent rule.

The structure of loans also impacts yield calculations. Investment property loans typically require a down payment of 15 to 25 percent, which is higher than for owner-occupied homes. While applications can be made with a credit score of 620 or higher, a score above 740 is needed to secure favorable interest rates. Interest rates for these loans are generally set 0.5 to 0.75 percentage points higher than those for owner-occupied properties. Additionally, lenders only recognize up to 75 percent of expected rental income as qualifying income, which means the loan limit may come in lower than initially calculated, a factor that should be considered alongside its advantages.

Property taxes in Denver are relatively favorable. The effective property tax rate in Denver for 2026 is 0.44 percent, lower than the Colorado state average of 0.49 percent, and the median annual property tax for a home valued at $586,700 is $2,596. However, it's worth noting that with the end of temporary tax relief measures in 2026, the structure has changed to impose taxes on the entire assessed value, increasing the perceived tax burden.

From a tenant law perspective, like the rest of Colorado, Denver has no rent control. State law limits local governments from setting their own rent caps, meaning there are no legal limits on rent increases, which is favorable for investors. However, for month-to-month leases, a minimum of 21 days' notice is required before a rent increase, and under HB24-1098, landlords cannot evict or refuse to renew a lease without just cause, which should also be taken into account.

Areas with good school districts tend to have steady rental demand, resulting in relatively short vacancy periods. However, while school district ratings can be referenced through metrics like GreatSchools or Niche, it's advisable to verify the assigned school for a specific address before purchasing, as district boundaries can frequently change.

Denver's rental prices are 0.2 percent higher than the national median of $1,925, with 38 percent of all rental listings falling between $1,501 and $2,000. Using this range as a benchmark can provide a favorable starting point for assessing target rental prices.

Landlord insurance differs from standard homeowners insurance. It can cover not only physical damages like fire or destruction but also rental loss and tenant-related liability, which results in higher premiums. In a market like Denver, where purchase prices are high, this difference in insurance costs becomes a significant variable in yield calculations.

As you move into the operational phase, you need to factor in landlord insurance, management fees that can range from 8 to 12 percent of rent, and maintenance costs that typically amount to about 1 percent of property value to arrive at the actual net yield. If you plan to switch to another property in the long term, a 1031 exchange can defer capital gains taxes. This article is not investment or legal advice, and it is recommended to consult with an accountant and real estate professional before finalizing any contracts.