I see a lot of houses that are bought and resold in a short amount of time. Most recently, I came across a property with a spread larger than many I have seen recently – for homes under or around $700K
I assume it was an Investor/Flipper who bought this house in Denver for $325,000 – then a few months later, they resold it for $710,000.
The spread here is $385,000. Is this a good thing? Bad thing? Red Flag? What do you think? We know they didn't make 385, right?
I looked at the photos, and the house looks excellent. Of course, I can't comment on the quality of the work, but surely there are times when you all think that flipping a house is ok.
Flipped Home – Original Sale $325,000. Renovated. Resold for $710,000.
byu/Windsurfer-NZ inrealestateinvesting
Posted by Windsurfer-NZ
11 Comments
It’s part of the market.
A buyer can choose to buy a fixer or decide to buy a turn key freshly remodeled flip.
Knowing what I know, I’d get a very good inspector and a trusted contractor to try to minimize surprises if I were buying such a house.
Chances are probably the house of similar traits are already selling 700K at the time of purchase.
So this only begs of question what sort of problem there could be to have it half off
Wondering do the upgrades support price difference.
No they certainly didn’t make $385k on it, but if they made $50-100k that was a good profit from one transaction. Just depends how much the costs were for reno/holding, agent fees, etc. Without knowing the condition of the house it’s hard to say, but ideally most investors look for about 15-30% net profit on the deal on avg. Real estate investing is far from easy b/c sellers usually want an unrealistic figure which is usually over-valued and buyers want the same which is usually undervalued.
That’s why people go distressed which gets a bad rap, but those are the only ways to find a good deal. Pre-foreclosure, probates, tired landlords. Basically people that need/want to act fast. Some view this as predatory and maybe it is a bit, but the seller is offloading a property they are tired of dealing with, buyers get a good deal and make a decent profit. It’s not a perfect system by any means.
$325k for a property that just needs new flooring, cabinets and paint selling for $710k is a great opportunity. Even adding kitchen/bath rehabs with no roof/foundation issues depending on the sqft may still yield a decent profit. But again without knowing the condition the home was in before flipping it it’s hard to say if it was a good or bad deal.
Houses are renovated all the time. What’s the question? If you’re a buyer, have it inspected.
That’s sounds like a great yet rare opportunity just based off the buy and sell numbers. My est is about $150k – 200k profit depending on work done.
This is why flippers flip.
In the Tampa area, specifically South Tampa, you can buy a very old house for $300k-$400k, redo it and sell for around $1M
It’s normal. I invest with a real estate guy in Oregon that flips & wholesales houses and he’s had similar properties. What can vary quite a lot though is the quality of the flip. He does good quality materials, fixtures, appliances, etc with good workmanship (he’s a GC + real estate agent) but still makes a decent profit.
Some however do not and just make the place look really good but do low quality work. Those are the properties you have to watch out for as things will just start falling apart after a few years.
Do know what their rehab budget/money spent is?
Spread looks huge, but profit rarely is. On a $710K resale, the flipper probably spent $150K–$200K on reno, $20K+ in agent fees, $10K+ in holding costs, and another 5% in closing/financing friction. That $385K spread quickly turns into maybe $80K net if everything went right, and one overrun or slow sale can erase that. It’s not a red flag, just the math behind the headline.