Struggling to find deals in Denver

10 Replies

I have been searching for fix and flips in the Denver market for 3 months now while working with a realtor who specializes in investments, with no results.  I have also been driving for dollars and get property notifications from a local wholesaler (which are complete dumps).  I bumped my 70% rule to a 80% rule and still cannot find anything that meets my criteria.  One aspect that is hurting me is using hard money, the cost of the hard money is definitely hurting my evaluations.  However as a self employed electrical contractor as of a few months ago, I cannot go the conventional 20% down route for another year.  

I have almost been thinking of purchasing buy and holds in out of state markets but keep reverting back to the "there is a strategy for every market" mentality, but cannot obviously get one to work.  

Does anyone have advice that has worked in markets similar to Denver?  Any recommendations for a realtor who can help with off-market deals?

I have experience in the Portland, OR market but it is definitely difficult to find deals that meet the 70-80% rule while using hard money. The fees that go with it are insanely high and would only work for a very short term deal. Will this be your first flip? 

If you research more about buy and holds I think it is an option worth exploring. I really like investing in the midwest (Iowa, Nebraska, Kansas, etc.). Getting a duplex that cashflows 200+ per door for 100K may be more doable especially at this stage of your new career. 

I have one flip under my belt but from a few years ago when the market was not as hot.  I would love to have buy and holds in the future, but with the capital and time I have on my hands at the moment I can devote the majority of my efforts to fix and flips.  How long did it take you to find your buy and holds in the midwest?

@Jason H.

I'm by no means an expert fix and flipper. I've done one and realized my time was better spent creating businesses to create more cash to purchase long term rentals. I think what you're experiencing is very common around Denver.

Someone told me that a lot of investors are in the 83% range now for fix and flips. So tight margins! 

I'm on a few wholesale lists and haven't seen anything great come through. My thoughts are that by the time a wholesaler emails it out to his list (the little players like me!), their "go to" cash buyers have already passed. It's not exactly the cream if the crop. If they have a good deal, wholesalers have no problem with cash buyers buying immediately, sometimes sight unseen. 

Many investors have shifted their focus to popping tops and scraping lots to build duplexes. 

If you're free this Saturday (10/28) come to the  Investor Success Summit. If you can make it, let me know and we shake hands. 

There's one presentation that will be up your alley:

Lon Welsh & Greg Parham: This presentation will provide data analysis on the current investment market with several real life case studies to give you a better understanding of how to find deals, analyze them, and get them under contract and closed. We'll cover the following topics and more. Bring your questions!

Profit margins for Fix & Flips and scrapes, how they have changed over the last 10 years, and what neighborhoods have the highest gross margin.

CAP rates for rentals, and how neighborhood and property type might change your cash flow, maintenance, etc.

Are you setting yourself apart from the competition to get more deals under contact? We’ll explore best strategies and techniques for getting your offers accepted when you find the right deal. 

@Chris Lopez

Thanks for the reply!  I actually signed up for the meet earlier today and will see you there!  I am excited to hear what others have had success with in our market.

Originally posted by @Jacob Wathen :

I have experience in the Portland, OR market but it is definitely difficult to find deals that meet the 70-80% rule while using hard money. The fees that go with it are insanely high and would only work for a very short term deal. Will this be your first flip? 

If you research more about buy and holds I think it is an option worth exploring. I really like investing in the midwest (Iowa, Nebraska, Kansas, etc.). Getting a duplex that cashflows 200+ per door for 100K may be more doable especially at this stage of your new career. 

Nothing to see in Iowa.. just corn...dont bother looking ;)

I'm finding off market stuff, but I've been keeping them for myself. I've only passed one on this year to a client. The margins were too slim for me, but he did all the work. He's going to make $50k. 

Have you told your sphere that you are looking to buy? My best deals come from friends and family. If you want a deal, you are going to have to go out there and get it. When you drove for dollars, how did you contact the owners? Have you been following up monthly on your leads. It's a numbers game, and maybe you need to up your numbers.

Yikes, 80% rule. I would never do a flip with that unless I had absolutely no financing costs. I still find things that are 75% in my market once in a while, but I reject 98% of the deals I see. Always leave room for yourself to make a mistake, and you will; even seasoned flippers rarely get it perfectly right. The rehab ends up taking longer or costing more than expected, or they didn't estimate ARV right. You have to leave room for error, and 80% doesn't leave much room for that.

Have you considered markets that are maybe an hour away?  That's what I've started doing.  Things are cheaper and less competitively.

I also wouldn't use agents to find off-market deals; you have to network with wholesalers in your area.

I'm also curious to know what your hard money terms are.  Perhaps I can find you something better.

Don't know if this will help but I have been finding deals by simply "asking".....perfect example is a property I found last week. Seller was asking 235 and it had been on the market for way too long. I called the listing agent and told them I would bring them offers but my investors probably would be in the 170 range. Listing agent told me that if I brought a cash offer at 190 they would sign. I called my investors and said "check out this property for 235 I know they will take 190...let's offer 185.

@Jason H. It didn't take long for me to find deals. I connected with a couple local investors and found deals that way. Lately I have been working with a couple agents who send me deals on a daily basis. That has been a longer process because I am looking for a larger apartment building. 

When it comes to the flips, there are tons of financing options out there so I would just be cautious when it comes to hard money. Do research, read the fine print, and establish a realistic timeline for the flip and stick to it as closely as you possibly can. 

The numbers are so tight in the Denver market right now. I would go off on foot. Find a neighborhood that is turning around and knock on doors. And keep knocking. Or, find an agent that will do it for you. Also, keep meeting people and make sure they know what you are looking for and planning to do. It take a lot of time so don't get discouraged. I have a deal right now that I have been working on for three years. Keep moving forward and something will happen. 

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