Recently a peer broker posted his recent sale. A fix and flip in the suburbs of Denver. The images are lovely and the residence per his marketing went through a down to the studs renovation. Yet I was curious as I always am at the back story of the home. The following is an example of an obscene profit yet dig deeper a history of loss.
The address 8960 Big Canon Place. For those who know Metro Denver the residence is located in an affluent suburb of Greenwood Village which also encompasses sections of the Denver Tech Center a major office, retail and limited residential development.
The house was built in 1979 as Denver suburbs continued their expansion to the south and east along Interstate 25. With 5 bedrooms on a 2/3 acre lot and 3-car garage definitely a home oriented towards a more affluent buyer.
The most records I could easily find indicate the home sold as follows:
September 2003: $785,000
Almost 20 years ago the home sold for an impressive amount. The amount was and is impressive as in 2003 the average home in the Denver Metro area cost $224,000.
Thus the house sold for 3x the cost of the average residence at the time.
Fast forward to April 2015, 11.5 years later, the house sells for $755,000.
No this is not a typo, the house lost $30,000 over the 11.5 years. The early 2000’s in Denver were similar to today’s buoyant economy, influx of residents, booming employment sectors and other attributes to the point that Time Magazine in 2004 had Denver on the cover with the headline “Boom Time in the Rockies” and it was. The metro area had shaken off the recession of the late 1980’s and the dot.com bubble had burst, we were on an upward trajectory.
Yet in 11.5 years to lose $30,000? Actually closer to $300,000+ loss.
See in 2003, $785,000 would equate to $1,011,000 in 2015. Not to mention the cost of upkeep, insurance, real estate taxes, utilities. Point is when factoring inflation the 11.5 years of ownership constituted a loss of $2.400/month not including expenses. Ouch!
The next seller fared better as they sold the house $950,000 in March of 2021. Thus their profit over the 6 years approx. $200,000.
That buyer embarked on a fix and flip holding the residence for less than a year and proclaiming the house went through a to the studs renovation. The home just sold in February 2022 for $2.2M $1.1M+ over the prior sale less than one year prior more than double.
Granted the purchaser has secured a beautiful home and paid premium as the average home in the Denver Metro area is $612,000.
Looking back the purchaser in 2003 paid 3.5X the average cost of a home in Metro Denver. The newest purchased just paid you guessed it 3.5X the average cost of a home in Metro Denver.
It is just me or do you think someone is going to get stuck holding the bag.
Who made out the best? The buyer who paid $755,000 in April 2015. At the time the average home in Metro Denver was $315,000, thus he paid 2.4X the average home in Denver.
The buyer who bought in 2020 for $950,000 when the average home was $475,000 paid 2X, thus secured a good price and post renovation sold the house for 3.5X the average price in Metro Denver.
I believe in the old adage that “History tends to repeat itself” and that 3.5X would concern me.
Denver Real Estate Insights 