So, you want to get into the fix and flip market? Join the club. There are approximately 1,000 people in the metro area who have been identified by the Colorado Association of Real Estate Investors as “fix and flip” investors, as the practice is called. Barbara Baker a former gang prevention coordinator at Jefferson County public schools is one of them. During the past six and a half years, Barbara has bought, sold and rented out more than 60 properties over the past two years. Most of them were in west Denver, and many required major remodeling, from new plumbing and heating to electrical wiring and roofs. She reports, she’s had success and some failures. It’s not an exact science. It can be a little like going to Las Vegas at times.
There is a formula that has allowed some to make money in the fix’n flip housing market in Denver. The key is to buy only properties that are listed at 70 percent or less of there retail market value ($140,000 for a $200,000 house, for example), and do not hold them for longer than four months. Try only to buy homes for under $250,000, because higher priced homes just aren’t selling well in Denver’s current market, according to Jeffery McClintock, Keller Williams Executives Realty. Two Denver neighborhoods’ that do seem to do well for this sort of thing are Observatory Park and Hilltop. Century-old Victorians that had been remodeled with exposed brick and industrial metal and concrete touches in the kitchens and bathrooms are quite popular these days. The mix between modern convenience and old world charm seems to do it for many, says McClintock. There are approximately 153 different styles of Victorian style homes in the Denver metro area alone. A great source to read about Denver’s neighborhoods is at http://www.realestatecolorado.net, look for the community section on the website. There you will find hundreds of articles about subdivisions, architectural designs, community information and more! Access to wholesale lending source is available as well as the ability to search homes listed for sale in Denver’s MLS and 19 other Colorado counties.
Things to Keep in Mind
1. Determine the after-repair value of the house you’re looking at. Get an appraiser’s help, or look at what similar houses have actually sold for (not asking prices). The price it’s likely to sell for is going to be your starting point.
2. Calculate costs: closing fees, loan fees, document prep, homeowner’s insurance, title policy, repair costs, interest on loans, property taxes, sales commission, fees, title policy, etc. You want projected costs of all four categories: buying, improving, carrying, and selling. Subtract all costs from the expected sales price.
3. Subtract a profit that makes it worth the effort. Now you have the highest price you can pay. You have to walk away if you can’t get it for this price or less. You’ll offer thousands less, of course, to give yourself negotiating room.
Remember when it comes to selling a home there is two reasons homes sell, Price & Exposure. Make sure you hire a realtor that has a website ranked in the top 5 organic search section results of Google, MSN or Yahoo. Pay per click sites come and go daily. 79% of the public now goes on line to find their next home according to a study conducted in 2005 by NAR (National Association of Realtors). Those who end up holding onto homes longer then anticipated or would like to promote their property to find tenants can do so at http://www.coloradorentalproperty.net
