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Q&A: Not So Fast
Although the days of widespread fix-and-flips are over, they aren’t quite dead for those who know how to play the market just right. Patrick Finney of 8z Real Estate explains how to figure out whether you should dive in or steer clear of this still-volatile space.
5280: Where do fix-and-flip opportunities currently exist in Denver?
Finney: Because there has been little or no new construction going on in Denver proper since the real estate fallout, many general contractors are scrambling to find work in the fix-and-flip arena. This is causing an extra supply of contractors competing for flips. The flips that are selling are in the lower price points, especially under $300,000. From $300,000 to $400,000 is decent, and from $400,000 to $500,000 is a bit tougher. At $500,000 on up, it takes a lot longer for homes to sell—those homes are much riskier for flippers. If you can’t buy, renovate, and resell a home within six to nine months, you’re taking too long.
5280: What else besides price should potential “flippers” be aware of?
PF: Any flipped home done with quality workmanship at a competitive price will stand out, and will most likely blow away a similarly priced nonrenovated home because of amenities and improvements such as open layouts, new kitchens, nice landscaping, or wiring a sound system throughout the home. These improvements come at a slight premium, but most people are willing to pay it while interest rates are so low. An extensive remodel on a nonrenovated property could end up being well over $100,000. Most buyers simply don’t have that kind of cash, the expertise, the time, or the patience to do this work.
5280: If the fix-and-flip market improves, would that open it back up to everyone?
PF: No. A few years ago, anyone could flip a home and get away with inefficiencies and lower-quality work. A seasoned flipper who buys low, puts in the upgrades, and prices it appropriately will sell a flip faster than a regular home is likely to sell. But because buyers have more selection at lower prices, only the best flippers will make it. As will the ones who have deep pockets, in the event a home takes longer to sell.
5280: So what’s the long-term fix-and-flip outlook?
PF: With lower home prices and interest rates, many buyers will pick a completely overhauled home with all the bells and whistles to avoid repair work in the future and the so-called “Home Depot” second mortgage. As long as interest rates stay low, things should remain good for seasoned flippers and the buyers who want flips.