DSCR Loans in Denver: Real Estate Investing in the Mile High City

Denver's real estate market has matured. The city that saw double-digit appreciation year after year in the 2010s has settled into more predictable patterns. For investors, this creates opportunity—especially if you're using DSCR loans to bypass traditional income verification.

Denver combines strong job growth, limited housing supply due to geographic constraints, and a population that values quality of life over homeownership. That translates to steady rental demand and cash flow opportunities for investors who know where to look.

What Makes DSCR Loans Different

DSCR (Debt Service Coverage Ratio) loans qualify you based on the property's income, not yours. The lender calculates a simple ratio:

Monthly Rental Income ÷ Monthly Debt Payment = DSCR

If rent is $2,800 and the total monthly payment (mortgage, taxes, insurance, HOA) is $2,400, your DSCR is 1.17. Most lenders require 1.0 minimum, with 1.25 opening up better rates.

You don't submit W-2s, pay stubs, or tax returns. The property's ability to generate rent is what matters. For self-employed investors, business owners, or anyone with non-traditional income, this is a game-changer.

Denver's Rental Market in 2026

Denver's rental market has stabilized after a few turbulent years:

• Median Home Price: $575,000 (down from $650,000 peak in 2022)
• Median Rent (3BR): $2,700-$3,400 depending on location
• Vacancy Rate: 4.8%, close to balanced market levels
• Rent Growth: Averaging 3-4% annually, down from 8-12% during the pandemic

The days of easy appreciation are gone, but rental fundamentals remain solid. Denver's geographic constraints (mountains to the west, plains to the east) limit sprawl, keeping housing supply tight.

Why Denver Works for DSCR Investors

Several factors make Denver attractive for investment property loans:

Strong Job Market: Tech, aerospace, healthcare, and outdoor recreation industries anchor the economy. Companies like Google, Amazon, and Lockheed Martin have major operations here.

Transplant-Heavy Population: About 50% of Denver metro residents weren't born in Colorado. These newcomers often rent for a year or two while they figure out where to buy.

Outdoor Lifestyle: People move here for skiing, hiking, and mountain access. They prioritize lifestyle over rushing into homeownership, creating consistent rental demand.

Limited New Construction: Building costs are high, and mountain geography limits expansion. This keeps housing supply constrained.

Young Demographics: Denver's median age is 34. Younger populations rent more than buy, especially with home prices above $500K.

Best Denver-Area Neighborhoods for DSCR Loans

Not all Denver neighborhoods make sense for rental investors. Here's where the numbers work:

Aurora:

• East of Denver, homes $380K-$520K, rents $2,300-$3,000
• Diverse, growing, near Denver International Airport jobs
• Good for entry-level investors; DSCR numbers work better than Denver proper

Lakewood:

• West of Denver, homes $450K-$600K, rents $2,600-$3,400
• Established suburbs, good schools, family-oriented
• Near Federal Center and downtown Denver

Thornton/Northglenn:

• North metro, homes $420K-$560K, rents $2,500-$3,200
• Younger families, new development
• Easy commute to Boulder or downtown

Arvada:

• Northwest, homes $480K-$640K, rents $2,700-$3,500
• Olde Town Arvada has charm; attracts quality tenants

Littleton/Highlands Ranch:

• South metro, homes $500K-$700K, rents $2,900-$3,800
• Higher-end, excellent schools, low crime
• DSCR numbers can be tight due to higher prices

Commerce City:

• Northeast, homes $360K-$480K, rents $2,200-$2,800
• Industrial jobs, lower-income tenants, higher turnover risk
• Numbers work but requires active management

Denver Proper (Select Areas):

• Most Denver neighborhoods are too expensive for DSCR math to work
• Exception: parts of Montbello, Green Valley Ranch ($400K-$550K, rents $2,500-$3,200)

A Realistic DSCR Example: Aurora Property

Let's run numbers on a 3-bedroom, 2-bath home in Aurora listed at $420,000.

• Purchase Price: $420,000
• Down Payment (25%): $105,000
• Loan Amount: $315,000
• Interest Rate: 7.625% (typical DSCR rate early 2026)
• Monthly P&I: $2,215
• Property Taxes: $263/month ($3,150/year at 0.75% rate)
• Insurance: $140/month
• HOA: $0
• Total Monthly Payment: $2,618

Comparable 3BR homes in Aurora's Southlands or Saddle Rock areas rent for $2,600-$2,900. You estimate $2,750.

DSCR Calculation: $2,750 ÷ $2,618 = 1.05

You qualify, though barely. Better rent ($2,800+) or a lower price ($410K) would improve your DSCR and potentially get you a better rate.

Colorado Property Taxes: Lower Than Neighbors

Colorado's property tax rates are relatively low compared to other markets:

• Statewide Average: 0.5-0.75% of assessed value
• Denver County: Around 0.65%
• Aurora: Around 0.75%
• Lakewood/Jefferson County: Around 0.60%

This is far lower than Texas (1.8-2.2%) or Illinois (2%+). Lower taxes mean more cash flow and easier DSCR qualification.

However, Colorado has complex tax assessment rules. Residential properties are assessed at a lower rate than commercial, and there's a Gallagher Amendment history that affects calculations. Work with a local agent or CPA to get accurate tax estimates.

DSCR Loan Requirements in Denver

Denver-area lenders typically require:

• Minimum DSCR: 1.0 to 1.25
• Down Payment: 20-25% (some accept 15% for strong credit/DSCR)
• Credit Score: 640 minimum, 680+ for better rates, 720+ for best terms
• Reserves: 6-12 months of PITI in liquid assets
• Property Condition: Must be rentable; major renovations disqualify you until complete

Colorado is a judicial foreclosure state, meaning foreclosures take longer than in states like Texas. This makes lenders slightly more conservative, but DSCR products are still widely available.

Interest Rates and Costs

DSCR loans cost more than conventional mortgages but offer flexibility:

• Conventional Investment Loan: 6.5-7.25%
• DSCR Loan: 7.5-8.75%

The 1-2 point premium reflects the no-doc nature of the loan. You're paying for convenience and accessibility.

Closing costs in Colorado run 2-3% of purchase price. Title insurance, appraisal ($500-$700), and lender fees are typical. Denver metro doesn't have transfer taxes in most areas, unlike some East Coast cities.

Denver's Landlord-Tenant Laws

Colorado is relatively balanced between landlord and tenant rights:

• Security Deposits: Capped at 2 months' rent; must be returned within 30 days (or 60 if deductions are itemized)
• Evictions: Typically take 4-6 weeks if you follow proper notice procedures
• Rent Control: None at the state level; some municipalities have discussed it but nothing passed as of 2026
• Habitability Standards: Standard stuff—heat, hot water, working plumbing

Denver is tenant-friendlier than Colorado Springs or suburban counties, but it's not Berkeley or Seattle. Follow the rules and you'll be fine.

Who Should Use DSCR Loans in Denver?

This loan type works well for:

• California Transplants: Many arrive with equity from selling expensive coastal homes. They have cash but maybe non-traditional income.
• Outdoor Industry Workers: Guides, ski instructors, seasonal workers—income fluctuates, but they understand the market.
• Self-Employed Professionals: Consultants, contractors, small business owners whose tax returns don't reflect actual cash flow.
• Portfolio Builders: Once you own 4-5 conventional mortgages, banks get hesitant. DSCR loans don't count against those limits.

Common Mistakes to Avoid

Ignoring Altitude/Climate Issues: Denver's dry climate and temperature swings stress HVAC systems and roofs. Budget for maintenance.

Overpaying in Bidding Wars: Denver isn't as hot as 2021, but good properties still get multiple offers. Don't let FOMO override your DSCR math.

Underestimating Vacancy: Denver's a transient city. People move for jobs, ski seasons, lifestyle changes. Budget 1-2 months vacancy annually.

Skipping Property Management: If you're out of state, managing a Denver rental yourself is tough. PMs charge 8-10% but handle turnover, maintenance, and legal compliance.

Buying Too Far Out: Castle Rock, Parker, and Elizabeth offer cheaper prices, but long commutes limit tenant pools.

Finding DSCR Lenders

Colorado banks and credit unions rarely offer DSCR loans. Look for:

• National DSCR Lenders: Visio Lending, Kiavi, LendingOne, and similar platforms
• Mortgage Brokers: Denver has many who work with investor-focused lenders
• Local Hard Money Lenders: Some offer DSCR-style products, though rates may be higher

Shop at least three lenders. A 0.5% rate difference on a $300K loan costs $900+ annually.

Market Outlook for 2026-2027

Denver's fundamentals remain strong:

• Job Growth: Tech and aerospace sectors continue hiring
• Population Growth: Still adding 20,000-30,000 residents annually
• Housing Shortage: Denver needs 10,000+ units annually to keep up with demand
• Infrastructure: RTD light rail expansion continues, improving transit access

Rent growth will likely stay in the 3-5% range. Home appreciation may be 2-4% annually—not the 15% days of the 2010s, but steady. This creates a predictable environment for cash flow investors.

Tax Considerations

Colorado has state income tax (4.4% flat rate), but rental property offers federal deductions:

• Depreciation: 27.5 years on residential property
• Mortgage Interest: Fully deductible against rental income
• Operating Expenses: Management, repairs, utilities, insurance all deductible
• 1031 Exchange: DSCR properties qualify for tax-deferred exchanges

Work with a Colorado CPA who understands real estate. Entity structuring (LLC vs. personal ownership) and cost segregation studies can optimize your tax situation.

Environmental Considerations

Denver's location creates unique factors:

• Water Rights: Not usually an issue for SFR investors, but good to understand
• Wildfire Risk: Properties near foothills (Arvada, Morrison, Littleton west) may have higher insurance costs
• Hail: Denver gets more hail than most cities. Roof damage is common; insurance premiums reflect this.

Getting Started

Here's how to buy a Denver-area rental with a DSCR loan:

1. Pick Your Submarkets: Focus on 2-3 areas that fit your budget and risk tolerance.
2. Get Pre-Qualified: Talk to DSCR lenders to understand loan amounts and rates.
3. Analyze Properties: Use actual rental comps (Zillow, Rentometer, local PMs). Be conservative.
4. Assemble Your Team: Buyer's agent familiar with investors, responsive lender, local property manager.
5. Make Data-Driven Offers: Emotion loses money. Stick to your DSCR numbers.
6. Close and Lease: Get the property rent-ready, market it well, screen tenants carefully.

Final Thoughts

Denver isn't the wild appreciation market it was a decade ago. But for investors focused on cash flow and long-term wealth building, it still works.

DSCR loans open the door for self-employed professionals, business owners, and anyone who doesn't fit the W-2 mold. Denver's geography limits housing supply, creating sustained rental demand. The job market is diversified, and the quality-of-life factor keeps people moving here.

Property taxes are reasonable, landlord-tenant laws are balanced, and the state's business climate is friendlier than coastal alternatives.

Run conservative numbers, budget for maintenance and vacancy, and focus on neighborhoods where rent covers debt service with room to spare. If the DSCR math works today, you'll profit over time.

Let the property pay for itself. That's the whole point of DSCR lending—and the foundation of successful real estate investing.