The Risks, The Rewards, The Rationale

You see it on late night TV – “Flipping Houses Made Easy!” “Flip Houses Using Other People’s Money!” “Invest in Real Estate Without a Dime!”

Late Night Home Flipping TV

Don’t believe everything you see on TV.

Okay people let’s turn off the TV and have a reality check. Yes, you can make a ton of money in Denver real estate and flipping a property for a nice profit is one way. But, like your mother always said, “If it’s sounds too good to be true…” Well, we should all listen to our mothers AND THEN do a little homework.

In the Denver area, there is a lack of distressed properties and it’s a hot seller’s market right now. So, before you jump into this game, do the research. Flipping homes does not always have to start with the bank-owned, beat up, fire risk, fixer upper in an up-and-coming neighborhood.

If you’re considering flipping properties, here are a few considerations. Not ALL the considerations, just a few to give you a reality check and a starting point. You could even flip a brand-new custom home built from the ground up. But first, ground yourself, do some homework on all the possibilities then and decide if this is a business you want to be in.

PLEASE NOTE: HomeWrights is not your fix and flip resource for remodels and upgrades but we have a lot of experience on the other end of the scale where building custom homes and flipping might make sense.


Here are some of the basic elements to consider when flipping properties for profit in Denver, Colorado:

Look Up – Then Down – Then All Around

Think twice before buying a property with major mechanical or foundation problems. Outdated electrical, bad roofs, serious plumbing problems may not be as visibly noticeable, but you’ll certainly notice them when you pay for the repair. Major mechanical problems equal major financial problems.

Respect the Inspection

That first walk through is always exciting and if you are a visionary person (which you need to be if you want to flip houses), you’ll be excited by the possibilities. But after the euphoria wears off take a second and a third look. Use your experience and knowledge to identify the obvious but bring in qualified inspection professionals for accurate and detailed assessments of potential problems.

Pay for a respected inspector with an unemotional set of eyes to give you another point of view. A good inspector can give you ballpark repair estimates to help you make the best offer. Many say, in real estate you make your money when you buy.

Prepare to Profit vs. Don’t Prepare and Don’t Profit

Simple math is critical here. How much do you have to spend compared to how much you can sell it for? That’s where the simplicity ends. You cannot predict everything the market or the consumer will do but you can predict what improvements and repairs you will limit yourself to. Make out a realistic budget but plan for a few surprises. There are three major categories of expenses to watch. Materials, labor, and time.

The first two are fairly predictable the last one is tougher. Be realistic about how long you will need for rehab and how long you will hold the property while it’s being marketed. And, the hidden cost of flipping homes – your time and stress.

How much is your time worth and what is the cost of stress on your wellbeing? You might find this cool resource helpful. This website offers a free spreadsheet to help you create your budget for flipping houses. Of course, he wants your email address in return, but it is a nice basic tool to get you started.

Front Door – Back Door Strategies

The front door of any nice property looks good. But you always need a back door or a plan B. If the plan is to buy/build/rehab in three months for a profit of 65k, that’s great. But when things go sideways, markets changes, deals fall through, construction issues arise, you need a plan B.

Where will you find additional funds for a few extra months? Could you switch quickly to a rental strategy? Could you move in if you had to? Would your bank cover you for another four months of marketing? No simple answers here but think about your exit strategies before you plop down your earnest money.

Don’t be Shocked When it Doesn’t Sell

Brace yourself. Everything, I mean everything sells for a price. The right price. Don’t spend months asking yourself why your Denver real estate investment hasn’t sold. There’s one reason. Your prospects don’t see the same value as you do for the price you are asking. Avoid this dilemma and get to know the market before you flip out on the flipping game.

Do NOT overbuild and add those bells and whistles that most people don’t want. Leave a little bit for the next owner to do. What are the features in this price range and this neighborhood that your clearly defined prospects really want? Kitchens and baths, and overall first impressions are always big factors but know the limits of your buyer.

Staging the property is just as important as the built-in details so if you’re good at that, do it right. If not, there are plenty of staging firms that will make your investment look amazing. The higher the listed price, the more important staging will be.

Know Thy Customer

Seems obvious but you have to spend some time studying the Denver market to really understand who your buyer is. Walking the neighborhood, talking with other home owners, and working with a skilled real estate agent are part of that research.

Does a 68-year old retiree, trying to downsize a bit want that big, green beautiful backyard to mow? Does that high-tech entrepreneur really care about saving that stained-glass eyebrow window over the front door? Know thy customer. Know thy profit.

Find Thy Customer

How visionary can you be? Make your money going in. In the competitive Denver real estate market, you’ll need to be creative, diligent, and aggressive to find a potential flip opportunity. If you can overlook some serious flaws in the structure or see beyond a run-down neighborhood and into the future a bit, you might find opportunity.

You’ll need to put as much energy into researching as you do into remodeling if you want to make a profit. You can go to the low end and find an 863 square foot 4-bed (4-bed, really? That’s what the listing says!), on Humboldt Street for $250,000. Great location, location, location and lots of work. Or, go to the other end and buy a 3485 square foot vacant lot on Santa Fe Drive in Denver for $375,000 and start from the ground up. What’s your strategy going to be?

Quicker Fixer Upper

If you’re ready to move, finding properties with cosmetic problems that can be addressed with speed and simplicity can make flipping faster. Good theory but here in the Denver area, those low-hanging fruits are getting harder and harder to find. And of course, you’re not the only one thinking about making a quick buck. The easier the rehab, the tougher the competition.

Multiple offers are just a way of life in the Denver real estate world. BUT! Being optimistic is a good thing. And, being prepared is even better. You CAN find opportunities every once in a while, even in this hot market but you have to be prepared to move fast. Hence, the next section on money.

Have Your Bucks in a Row

Get pre-approved, have your funds in hand, know your options. Talk with your lenders/investors to be prepared to make a decision and go. Waiting for financing approvals after you found your ideal investment property reduces your negotiating leverage.

You need to be able to move fast in this competitive Denver-area marketplace. At HomeWrights, we’ve often found that local banks know the marketplace better and are more receptive to investors. But, if you have a relationship with your current financial institution, go for it! Private investors and even, on occasion, the owner himself may be interested in participating in the profits from a successful flip.

Work With a Trusted Real Estate Agent

You may need the knowledge and resources of a market-wise real estate agent. Do your homework on this topic as well. Make sure he/she understands your mindset for the flipping game since it may require making lower priced offers to give you the margins you need. Not all agents will want to play in this arena.

No Good Deed of Trust Goes Unpunished

With any successful business transaction comes the punishment of taxes. Capital gains can be real pains. But, would you rather have no gains to complain about? It’s always wise to plan for success, be prepared for the worst, and be happy to pay your share when the time comes. Talk with your tax professional about implications.

Don’t Fix and Flip – Build and Flip

This is WAY outside the principles of the late night get-rich-in-real estate TV shows. Sometimes it’s much easier to build it right the first time than to spend time and money fixing other people’s problems. This is the core business of HomeWrights Custom Homes. We help coach you and guide you as you act as your own general contractor to build from the ground up.

Many of the preparation principles are the same when you intend to build and flip a custom home. You still need to find a location, build a budget, know the market, get funding in place, and have multiple exit strategies but building from scratch is quite different.

We’ve had numerous HomeWrights’ clients (with little or no construction experience) build lovely homes, earn a lot of sweat equity in the process and then realize they could turn that equity into a nice profit, so they sold it! That doesn’t happen in 90 days, but it does happen. And, with some careful planning, the margins could be significant.

Check out this video of one of our clients who has been quite successful building and selling custom homes. Learn more here. 

PLEASE NOTE: HomeWrights is not your fix and flip resource for remodels and upgrades but we have a lot of experience on the other end of the scale where building custom homes and flipping might make sense.


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