Investing in Denver real estate can be a great way to supplement your current annual income. There are different way to invest in real estate that I will be blogging about in the upcoming few weeks. For this article, let me outline the proper procedure for evaluating a Denver Fix and Flip opportunity. It's all in the numbers and must begin with the end in mind. Here are some important steps:
Determine the the After Repair Value (ARV) of the property you are looking at. Ask me to review what similar houses have sold for in the neighborhood, or have an ARV appraisal done to determine future value. the price it is likely to sell for becomes the starting point for your evaluation.
Add up the reapir expense. This includes: closing fees, loan fees, document preparation, homeowner's insurance, reapir costs, property taxes, sales commission, title policy, etc. Don't make the common mistake of just calculating the cost of pain, carpet, and new windows as repairs is only one of four cost categories associated with flipping a house. Budgets should be broken down in the following four categories: Purchase, Improving, Carrying, and Selling.
How much is your time worth? Now it's time to calculate your profit. This number is up to you, but to set a realistic expectation the large flip companies investing in Denver real estate tend to try and make $10,000 for every $100,000 worth of real estate they own. Personally, I think if you make $20,000 for a property with an ARV of less than $200,000 you are doing alright.
Here is an example of a flip that is going to hit the market in the next couple of weeks. We purchases the property for $106,185. Adding up all of our costs, we expect to have about $28,000 after paying selling expense. The property will be marketed at $165,000. The potential profit is a little more than $30,000. Some Denver Fix and Flips will be more lucrative than other, so know your market and use me as a partner to help you find the right deal.
Robert (The Agent)