Flipping in Los Angeles. Do you know something that I don't know?

3 Replies

Hi; i am located in the San Fernando Valley. I started this business about a year and a half ago and I am working on my #3 project.

I'm having hard time finding my next property. First of all there is not much deals on the market and when they come out they sell for much higher than what I think is worth to an investor. It looks to me that investors are over speculating on the exit price and paying much more than what is worth. Leaving little room for profit and basically no room if a loan is needed. (Prices are going up on the purchase but not as much on the selling) Basically working for a 7 to 10 percent margins. Which seem to be a bit risky and not enough for the length of the projects. I'm talking about large additions and teardown projects. On the other hand I see some developers doing 5 projects at the same time.
I would appreciate if you can share your thought or any tips on how others are finding good deals in my area that I might not be aware of it. Btw Cash is not king anymore most buyers are cash buyers now a days.

You're right cash isn't King. It's just one necessity for most deals. A lot of flippers are moving volume due to low returns as you mentioned. I shoot for 20% net return on investment by there are about 100 variables in flipping a house. Construction, holding costs, unknowns, market shifts, and just finding a willing end buyer

Mauricio margins have been compressing steadily since 2012.  

Many of the SoCal investors I know that are doing volume are willing to work on tight margins, make it up in volume and have probably been rewarded for having that business model over the last couple of years.

Just be creative, cast a wide net and you should be able to get a couple deals with a bigger margin through harder work.  

@Mauricio Hernández

Long gone are the days of the low hanging fruit. Good deals are hard to come by... But there are and always will be deals to be had in SoCal. 

Unless you want to market directly to homeowners, I'd suggest network, network and more networking. Attend meetup events, talk to some local agents/brokers in the area you are looking to buy, post an ad in the marketplace here on BP, Craigslist etc.

Not sure I agree that profit margins have been compressing since 2012. I've noticed the margins have gotten better compared to this time last year. 

Here's an article written about a month and a half ago that looks at flipping activity on a national level.