DENVER Current Flipping Trends

16 Replies

Calling my Denver flippers!

I have a few questions about flipping in the Denver metro ONLY. Let me know your knowledge on this as you see the situation right now:

1. Where are the profit margins the highest?

2. Are there homes that have value add situations? Example:

  • Are you adding bedrooms to meet demands in a certain area?
  • Are you converting multi family to condos?
  • New construction? What type of homes?

3. IF YES, Where are these projects happening?

I know the general consensus in Denver is "everything is happening in pockets and it's hard to compare," but I would love to hear some specific examples of what you've worked on in the past 1-2 years and what you're seeing other flippers doing right now given our market.

Profit margins are highest anywhere you can find someone who doesn't know what is happening in our market. It is on FIRE! Flippers are getting squeezed out and frustrated.

I haven't seen many condo conversions as the rent here in Denver is SKY HIGH!!! Why would someone walk away from that money? New construction in Denver will be infill mcmansions, duplexes like in Sloans lake, etc. Figure $130sqft + land. 

If you want to find a home to flip, you will need to hit up your sphere and do some walking. I have shifted my focus from going after flips to finding retail listings and buyers. 

Where profits are highest, so are the amount of money you need to play with AND experience.  

If you are updating a 70s suburban home in Aurora or Thornton, thats not too hard for borrowing costs, repair costs, experience level (though this is certainly not zero experience proposition).  Profits are $10-40kish

If you are doing a pop top in a hot neighborhood (wash park, highlands, lohi, etc), that takes a large degree more capital, borrowing, rehab, experience etc.  Profits are up to $100kish

If you are doing a knock down new build, this will take the most of each of those categories, but can make $100-200k.

Are there value add propositions?  Absolutely, most of ours are adding square footage and bed/bath to unfinished or poorly finished basements.  Some areas you can get away with an addition in the back of a home to add a bed/bath or expand a master and make a master suite bathroom, etc.  Some areas, it makes sense to pop the top or try and double the square footage of the property, and still others the highest and best use for the property is to tear down and build new.

Where are these projects happening?  All over freaking town.  You are asking about the entire broad spectrum of rehab/new build opportunities, so pick a neighborhood and one of the 3-4 things are going on in there for sure.

Condo conversions...  I havnt seen any in a long time.  I know of a ton of old apartment buildings getting completely rehabbed so the landlord can charge 1.5-2x the current rents he is getting.

I will second @Anson Young Projects all over the place, Castle Rock to Thornton and beyond. I am seeing very profitable deals right now - some in the lower price range and a lot in the higher price range. Most experienced investors have shifted focus to new construction where the deals are very profitable, of course some would measure as more risky and cash on hand is the price of entry.

Costs are rising, Values are rising, Rents are rising, hold on to your hat cowboy!

Originally posted by @Travis Sperr :

Costs are rising, Values are rising, Rents are rising, hold on to your hat cowboy!

 This will be interesting for sure.  I dont know how sustainable this amount of insanity is however...

http://www.denverpost.com/business/ci_27567647/metro-denver-rent-gains-racing-at-triple-u

http://www.denverpost.com/business/ci_27603953/rising-rents-and-food-costs-push-up-denver?source=infinite

All VERY great information, thank you everyone! Keep the great information coming :)

It's funny that one of the reasons we moved out of Chicago was because Denver is more affordable... 

With all of this increase in rental rates and home prices, are there any areas where homes are NOT appreciating, even with a complete gut or rehab?

Originally posted by @Anson Young :

Not really, I'm seeing commerce city deals, and 80219 deal that sold for $244k which is nearly impossible if you asked me 4-5 years ago...

 I'm glad you mentioned Commerce City... close to the city, low home prices, but not an A+ area. Is this an up and coming place or worth investing in either rentals or flips here?

Originally posted by @Jennifer A. :
Originally posted by @Anson Young:

Not really, I'm seeing commerce city deals, and 80219 deal that sold for $244k which is nearly impossible if you asked me 4-5 years ago...

 I'm glad you mentioned Commerce City... close to the city, low home prices, but not an A+ area. Is this an up and coming place or worth investing in either rentals or flips here?

 Yes, for sure.

@Jennifer A.  the flip market has become very challenging because people (owner occupants) are willing to buy pretty much anything that they can get a loan on.

If the property can't get conventional financing there are many flippers and want to be flippers that will bid up the price. Remember you are competing with people like @Anson Young  who are willing to take $10K profit on a $200K rehab. With those margins you had better nail every aspect of the project. Keep costs down on the fix, not miss anything on the fix, do it quick and nail the resale value. Lots of moving parts for a newbie to monitor and not get hurt. Keep in mind you are also competing with newbies that have no idea what they are doing and some of them are not very conservative so they may overpay and lose money. It weans out the competition but it also uses up inventory and drives up the prices.

@Jennifer A.  

Right off the bat let me say I know nothing about Denver. That said - I just read an article out of Builder Magazine Five Hottest Cities For Housing Growth for the next five tears. Be aware, this is for new construction - but it all causes ripples. As are being attested to by previous threads. The article stated that Denver is #2 behind Austin, TX for growth. This is based on 3 factors - population, employment, and land. So I do believe you and your REI comrades are sitting on a gold mine if you get out there and hustle. Best of luck you are at a choice location at the right time.

Great discussion by all.  @Bill S.  and @Anson Young  , great points made by you both per usual.  I can definitely see how newbies are driving up prices and potentially losing money by trying to get in on a "deal".  No doubt about that.  As Bill said, that just drives up prices for everyone else. 

$10k margins are thin indeed.  But I suppose if you want to keep making money, sometimes you've got to roll with that and keep costs in check as much as possible.  Crazy times here in Denver for sure!

Originally posted by @Bill S. :

@Jennifer A.  the flip market has become very challenging because people (owner occupants) are willing to buy pretty much anything that they can get a loan on.

If the property can't get conventional financing there are many flippers and want to be flippers that will bid up the price. Remember you are competing with people like @Anson Young who are willing to take $10K profit on a $200K rehab. With those margins you had better nail every aspect of the project. Keep costs down on the fix, not miss anything on the fix, do it quick and nail the resale value. Lots of moving parts for a newbie to monitor and not get hurt. Keep in mind you are also competing with newbies that have no idea what they are doing and some of them are not very conservative so they may overpay and lose money. It weans out the competition but it also uses up inventory and drives up the prices.

10k is thin, we wouldnt do that deal if we knew we were projecting $10k upfront.  20k is the bottom limit for sure, but things do happen and we have had a couple $10k deals in the last 6 months...  

Originally posted by @Matt M. :

Profit margins are highest anywhere you can find someone who doesn't know what is happening in our market. It is on FIRE! Flippers are getting squeezed out and frustrated.

I haven't seen many condo conversions as the rent here in Denver is SKY HIGH!!! Why would someone walk away from that money? New construction in Denver will be infill mcmansions, duplexes like in Sloans lake, etc. Figure $130sqft + land. 

If you want to find a home to flip, you will need to hit up your sphere and do some walking. I have shifted my focus from going after flips to finding retail listings and buyers. 

 Matt,

Does your $130/sf cost for new construction include soft costs (design, permit, ect)? Trying to get a general idea of costs for a new single family or duplex build in Denver. Thanks!

@Conor McCahill   I am building 7 units in Sloans right now, Pricing was about $160 per ft including everything (engineering, Architect, construction, tap fees, permits, etc.) except the land. Often times people use a price per square ft, but oddly enough everyone uses a different approach, including hard costs vs soft costs.

I am seeing our clients build single family from as low as $100 a ft - own GC to $150 a ft hiring it out.

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