While the house flipping craze has died down this year, rehab investors are still making excellent profits in certain areas of California. Markets like San Francisco, Los Angeles, San Jose, Oakland, and San Diego have been a treasure trove of undervalued homes in up and coming neighborhoods.
Though there are ever fewer foreclosed homes available – which is great news for the economy and home owners – house flippers have found that high-end house flips have exceptional profit margins. Of course, the up-front investments for high-end flips are much more substantial, but with appropriate house flipping loans, house flippers have made upwards of $100,000 per flip in certain areas of California this year, and the trend could certainly continue into 2015.
A Closer Look at the Los Angeles Real Estate Market
As of November 25, 2014, the median sales price of a home in Los Angeles is $585,000, according to Trulia. That figure is well above the national average, but the number is only expected to rise over the coming years. This price marks a $36,000 increase over the previous year, or +6.6%. Currently, there are nearly 4,000 homes for sale in Los Angeles, 8,460 have recently sold, and another 4,339 are currently in foreclosure. Some of the most popular neighborhoods to buy in LA are the Hollywood Hills, Bel Air, and Silver Lake, where average listings range from one million to over seven million dollars.
In the second quarter of 2014, house flippers in LA averaged a gross profit of $114,727 according to RealtyTrac. More homes were flipped in LA than anywhere else except Phoenix. Flippers in this area tended to focus on up and coming neighborhoods and put more time and money into renovations than flippers elsewhere in the country.
A Closer Look at the San Francisco Real Estate Market
The San Francisco market is much smaller than Los Angeles, meaning opportunities are more limited. But if you can find a property to flip in SF, chances are you will make a killing on your investment. According to Trulia, the median sales price in San Francisco is $970,000, which is up 14.8% from one year ago. The average listing price is nearly $1.7M. There are 610 homes currently for sale in the city and 529 foreclosures. Popular neighborhoods include Pacific Heights, the Mission, and Nob Hill, all of which have average listing prices well over one million dollars.
Looking Ahead
The California real estate market is expected to continue stabilizing in 2015. We expect that house flippers will continue to see excellent ROIs on luxury flips. As RealtyTrac reports, homes with a flipped sale price between $750,000 and $1 million saw the best returns this year at an average gross ROI of 41%. Similar rates are likely to continue well into 2015.
