Flipping houses in Colorado is a great investment strategy this year, as the state continues to grow faster than the national average.
According to the Colorado 2021 census data, the country’s population grew almost 15% during the past decade. The reason behind such explosive growth lies in Colorado’s excellent quality of life, progressive policies, stunning natural beauty, and abundance of outdoor activities. All this makes the Centennial State attractive to both people who want to live a peaceful life and adventure-seekers.
But what about the real estate market? And not just the Denver real estate market, but the entire state? Can flipping houses in Colorado be a lucrative business? If you are a house flipper, you’re probably wondering where you should invest. In this article, we present you with a detailed overview of the Colorado housing market and a few great ways how to successfully flip a house there.
About House Flipping
House flippers are people who buy properties, fix them up, and then resell them to make a profit. They often find properties to buy via Internet listings, property auctions, bank short sales, and foreclosures.
Learning how to invest in the right property and spend money wisely is a prerequisite for being successful in flipping houses. To increase the property’s resale value and grab the attention of potential buyers, you will need to invest in renovations as well. Once that’s done, you will need to put the property on the market.
Flipping houses in Colorado doesn’t just include paying the initial cost of the house and spending on renovations. You should remember to include expenses such as:
- Real estate agent fees
- Down payment
- Insurance payments
- Property taxes
- Closing costs
- Utility costs
- Marketing costs
A proper real estate investment strategy is mostly all about doing research and math. There is also the possibility of doing a fix and flip with limited renovations on your part. This process is known as micro flipping and is a good solution for people who are not interested in renovating and are looking to make faster sales. In order to do that, you need to analyze relevant data and identify opportunities to purchase a real estate property below market value. Typically, these are houses that don’t require any major repairs.
Besides financial investments, the significant investment of your time is an essential part of the fix and flip process. Flipping houses in Colorado takes around 6 to 12 weeks—if everything goes according to plan. If the renovation process gets delayed, everything else could be pushed back by a few months.
2022 Colorado Housing Market Analysis
Here are some quick statistics on the Colorado real estate market taken from Mashvisor’s January 2022 analytics:
- Listings for Sale: 2,768
- Median Property Price: $782,826
- Average Price per Square Foot: $486
- Days on Market: 99
In the Colorado housing market, prices are rising fast in every county. Last year in the Denver metro area, home prices averaged at around $612,274, which is a 16.68% rise from 2020. And according to Mashvisor’s data as of January 2022, the real estate scene in Denver is becoming hotter by the day, with the median price for a detached home topping at above $700,000. This doesn’t make flipping houses in Denver an impossible mission; it’s just that the window of opportunity might be smaller than in other cities.
The huge spike in real estate demand started in 2020. As in the rest of the world, the COVID-19 outbreak led people back to their homes and opened doors to remote work. Many Colorado residents started buying bigger properties so they could accommodate their new lifestyle, which led to decreased inventory. The month-end housing inventory in Denver alone dropped by 33% from October to November 2021.
According to Realtor.com, Colorado Springs will have the 14th best real estate market in 2022 (out of the 100 most populous U.S. metro areas). They are projected to see a 10% increase in housing sales compared to last year and have more inventory to offer when compared to other areas like the Denver real estate market.
House flippers in Colorado still have ways for making money in real estate. According to Mashvior’s January real estate data, the counties with the most listings for sale in Colorado are El Paso (282), Summit (299), and Larimer (414). Despite the rise in housing prices in the most populous cities, home values vary greatly depending on the county and region. Sterling, which is part of Logan County, boasts the lowest median price of $197,592, traditional cash on cash return of 4.17%, and 53% occupancy rate. But if you decide to buy property in the Denver housing market, the median price there is $477,566, while the occupancy rate is 71% and rental income is $2,136 for traditional and $3,236 for Airbnb.
If you’re thinking of flipping houses in Colorado, investing sooner rather than later is how you should guide your real estate investment strategy. The prices are expected to go up, which means that the interest rate is probably going up as well.
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How to Know If a Colorado Property is a Good Investment
Location almost always comes as the first and most important factor to consider. Since the projections tell us that home values in Colorado will steadily continue to rise, that’s great news for investors such as yourself. Buying property in the right location is the first sign of a good investment.
- You shouldn’t buy a property just anywhere in Colorado; you need to take your time to research the place. Using Mashvisor’s Property Finder tool, you can check the prices of homes in different areas of Colorado and compare them to see where you can penetrate the market. Most investors limit their search to the El Paso or Denver housing market, but those aren’t the only solutions.
- The best places for flipping houses in Colorado are likely Colorado Springs and Greeley. These cities have seen a remarkable rise in population and employment during the past decade. Their residents have access to a vibrant downtown, countless outdoor activities, and quality healthcare. Also, flipping homes in Denver, Fort Collins, Longmont, and Aurora are always the right move to do.
- Once you’ve narrowed your focus down to a few areas, it’s time to scan for the right property. Try finding a place with a unique character and solid foundation. Nowadays, services and goods are a product of mass marketing. With a unique home that has well-proportioned rooms, enough natural light, and distinctive craftsmanship, your potential buyers will be delighted because you won’t be offering them a cookie-cutter home.
- If the house needs much renovating, be sure to consult with an experienced contractor or local home inspector. A house that needs much fixing will have you writing a big check right away. Make sure to inspect the house thoroughly before making an investment.
- Be on the lookout for houses that are below market value. If a house is below average, you’ll have an easier time selling it for more. You don’t want to buy a property that’s already valued appropriately, invest in fixing it, and then sell it for more. Such a strategy probably won’t help you with making money in real estate.
- Lot size and square footage should also affect your investment decision. A property is more likely to produce a larger profit if it has a larger-than-average lot size. Furthermore, having a driveway that faces south means that the snow will melt faster during winter, which is what homebuyers pay attention to.
How to Flip a Colorado House and Make a Profit
Inexperienced house flippers make some common mistakes, which is why we would like to mention them before proceeding to a more detailed explanation on how to make a profit.
The most important things you would want to do is:
- Have enough money. Do you have the money required to do a job with your project? If you don’t, we recommend that you save up some more and not rush into anything yet.
- Leave enough time. If you’re a micro flipper, then your finances will have a quicker turnaround. However, you won’t be making large profits. Take your time with fixing and renovating and own it long enough to secure a higher market value.
- Fix everything you can. On one hand, you need to improve the home to increase its value. But on the other hand, you don’t want to spend too much time and money on making it too expensive to sell.
- Focus on the sale. Without some good selling skills, you won’t manage to get the most out of your flipping investment. Otherwise, doing a great job on renovation won’t help you that much.
- Price correctly. Do your best to strike the right balance between pricing your house fairly and getting a good deal on the property. When it comes to house flipping, there’s a 70% rule to follow when setting the price. It says that real estate investors should not pay more than 70% of the after-repair value of the house minus the cost of renovation.
The minimum profit you will need to break even on the cost of repairs and loan is 20%. But when it comes to making a profit and even flipping houses in Colorado for a living, things are different. For example, the median price for a home in Colorado Springs is $512,928. When compared to Silverthorne, Ridgeway, or Beaver Creek (Colorado’s most expensive listing), a house in Colorado Springs is pretty affordable, being that it’s on the high end in a fast-growing city.
Let’s say a two-bedroom house in a neighborhood that has shops, restaurants, public schools, and public transportation sells for around $420,000. Your renovation budget is about $20,000 on renovations, which includes remodeling the bathrooms, kitchen, curb appeal, and other aspects that can notably raise the value of the home. To profit from your flip, you should offer no more than $274,000, which is 70% of $420,000 then minus your $20,000 reno budget.
There are a few financing options out there for house flippers. Which one you’ll go with depends on the scale of your project.
- Out-of-pocket financing. Flipping houses in Colorado by paying in cash is the most secure and straightforward solution. When funding a house flip, it’s best to avoid getting into debt or tapping into resources such as your retirement fund.
- Hard money loans. Not all banks will offer a mortgage for a house flip. In that case, you’ll have to resort to a hard money loan as a less traditional form of lending. Their interest rate can go up to 15%, so you should be careful. The longer it takes you to flip a house, the more you’ll have to pay back. Make sure that the lender you decide to work with is reputable.
- Home equity. You can always consider getting a HELOC (Home Equity Line of Credit) if you already own a home. But because you use your residence as collateral on the loan, it can be even riskier.
- Cash-out refinance. We don’t recommend getting a traditional mortgage for financing a house flip, but it is possible. However, it’s a lengthy mortgage process that will make you miss great investment opportunities while waiting for the lender to approve the loan. Cash-out refinancing, on the other hand, allows you to tap into your equity while lowering your mortgage monthly payment, leaving more funds for flipping houses in Denver, Montezuma, or Manitou Springs.
If you have enough cash for the project, then go for it. But if you decide to get a loan for that, then remember to include all the fees and costs for the loan. That will definitely cut your profits from the flip, so you would want to know how much the additional expense would cost you.
Best Cities for Flipping Houses in Colorado in 2022
These are the best cities for house flippers, according to Mashvisor’s latest data analytics.
- Listings for Sale: 45
- Median Price: $920,482
- Average Price per Square Foot: $365
- Average Days on Market: 47
- Walk Score: 52
Located in the southern resort area of Colorado, the place is known for its hot springs. And it’s a great option for flipping houses in Colorado because it is still an undiscovered gem. Only a 5-minute ride separates you from the city and 3 million acres of a National Forest.
Pagosa Springs has a fairly good rental occupancy rate of 51%. With a traditional rental income of $1,629 and an Airbnb rental income of $3,002, you can consider making money in real estate through rentals before reselling the property.
- Listings for Sale: 44
- Median Price: $477,566
- Average Price per Square Foot: $2,863
- Average Days on Market: 66
- Walk Score: 57
In Denver, there’s a notable rise in the number of tech companies. And as they grow in this area, there’s an increased demand for homes. People always look for a well-remodeled house, while house flippers get more opportunities to see a great return of investment from their projects.
The average number of days on market is slightly more than two months, which means you could make a fast profit as an investor.
- Listings for Sale: 77
- Median Price: $360018
- Average Price per Square Foot: $219.46
- Average Days on Market: 42
- Walk Score: 25
The iconic town of Pueblo is located about 2 hours south of Denver and is one of the largest cities in Colorado. Pueblo has a great downtown where you could enjoy a river walk and a flourishing art scene. There has been a steady and quick rise in their real estate value recently simply because people want to purchase affordable real estate properties.
The Bottom Line
Flipping homes in Denver, Florissant, Colorado Springs, or anywhere else in Colorado is an excellent way to invest your money and bring home some profits after a few months. More people are trying to get in the business of flipping houses in Colorado because, as investors, they can get a relatively quick profit. But that takes some experience and skill.
If you’re thinking of doing your first deal, Mashvisor has a line of online tools that can help you close a successful deal. The tools include Mashvisor Property Marketplace, Rental Property Calculator, and access to complete information on any real estate market in the U.S. We offer you software based on predictive analytics and Big Data that helps investors get an overview of potential expenses and make the right decision.
To get access to our real estate investment tools, click here to sign up for a 7-day free trial of Mashvisor today, followed by 15% off for life.