There once was a time when there were so many properties on the market that buying a fix and flip was a piece of cake. Just make an offer, even a low-ball offer, and chances are that you had a deal. It’s a different story today. As you have been reading in this column and hearing on the news, housing inventory is low in Denver. It’s really low when you are trying to buy a home to fix up between $100,000 and $200,000. Don’t get me wrong, there are homes to buy in this price range, but remember that they need to be able to fit into the fix and flip model. Here are the criteria:
a. Good location
b. Need rehab
c. Need to buy it low and sell it high so you can make a profit after fix up costs.
Not every 100-200K home fits that profile, so Realtors like me have been working double time to help our clients find properties to buy. This is the first year in many that I have resorted to knocking on doors of properties that are not even for sale. If I see a nice duplex in a good location or emerging neighborhood, I’ll knock on the door and ask who owns the property. If the owner lives on premises, I’ll ask him or her if they are willing to sell it, and at what price. Most of the time, it doesn’t work that easy. I’ll have to find out who owns the property from public record and then see if I can track down the contact information for the owner.
Once we have made it that far, then the fun begins. What will the owner sell it for? Does that price fit the business model? Will the owner pay a commission to me, the Realtor? The percentages of this working out are not great and you may have to speak to 10 or 20 to get a real good one, but sometimes, that one good one can make everyone a fair amount of money.
This is what it takes to play in the fix and flip market these days. So if you own a good income property, now may be the time to sell it. There are plenty of contractors out there that need good homes to flip.
Next week, I’ll talk about fixing & flipping versus fixing and renting.