If you’re flipping houses, California is the place to be. Redfin recently released data on the average gain from a flipped house in 2013. The data was broken down by metropolitan area, and of the ten areas with the highest per-flip gain, seven were in California.
San Francisco topped the list with an average gross gain of $194,600 per flip. Nearby San Jose came in third at $152,000. Also in the Bay Area, Oakland was fifth at $134,500 per flip. The next four California cities to round out the top ten were all in Southern California. In order from highest to lowest, they were Los Angeles, Orange County, Ventura, and San Diego.
One major insight that people rehabbing real estate in California can take away from the Redfin data is that the areas that are doing the best are not low-income areas. They are high-income areas where wealthy people are looking to expand into up-and-coming neighborhoods.
For example, when Redfin broke down the data by neighborhood, one of the highest neighborhoods on the list was Mid City Los Angeles. In the past, this area has been seen as somewhat seedy, but with cultural hubs like the LA County Museum of Art, the Natural History Museum, and nearby hotspots like Melrose and the Miracle Mile, Mid City has become the new hot place to buy. As a result, house flipping in this neighborhood netted flippers an average of $239,900 per flip in 2013.
But those big gains came with big up-front investments. On average, a fix and flip property purchased here cost $426,500 pre-flip — hardly an affordable price for the average American.
Current housing data also suggests that rehabbing real estate isn’t the only option in California. Southern California in particular is going through an affordability crisis. Current rents in Southern California are the least affordable that they have ever been. People have to pay a larger portion of their income to rent in So Cal than they do anywhere else in the country. And with home prices so high, many people have no other choice.
That said, an investor with the means to buy and hold a rental property in Southern California can make exceptional monthly profits on the rent collected from tenants and also expect to see a sizeable ROI when they re-sell the property in a few years.