Top 5 House Flipping Questions in 2014

Flipping houses came back in a big way in 2013 as the housing market began to resurge. In 2014, savvy house flippers are continuing to make excellent profits on home flips around the nation, but the game has gotten more complicated. People who are trying to enter the house flipping market for the first time are often left with more questions than answers.

If you're interested in flipping houses, now is absolutely the right time to jump in, but make sure you have answers to some of the most important house flipping questions of 2014 before putting your savings on the line.

1. Is there still a market for house flipping?

Yes! But the house flipping market doesn't look like it used to. Rehab real estate used to be primarily about finding foreclosed homes that could be bought at a significant discount and flipped within a matter of weeks. Foreclosures are still an important part of the house flipping market, but the number of available foreclosures has dropped significantly in recent months.

But that has not kept house flippers from making major profit on other types of properties. In California markets in particular, many house flippers are investing in higher-end properties for greater ROIs. Such homes may not be substantially undervalued when these investors make their purchases, but the market so heavily favors sellers at the moment that high-end investors are able to make a significant ROI simply by making a large upfront investment and profiting from bidding wars on the back end.

2. Should I focus on foreclosures?

Though there are fewer foreclosures available this year, that doesn't mean that they should be overlooked entirely. Competition for foreclosures is extremely high amongst house flippers, but that high-level of competition is a direct reflection of the profits that stand to be made on foreclosed homes in 2014. Additionally, several large banks have begun processing old foreclosures, which may lead to a surge in newly available foreclosed properties in California sometime in the next several months.

3. What are the best places to flip homes?

In general, the best neighborhoods to flip homes and are those that are experiencing significant economic growth and population surges. Major metropolitan areas like San Francisco and Los Angeles are certainly a good bet and focusing in on growing, trendy neighborhoods within these areas is a great way to turn a profit.

According to Redfin, some of the areas with the most house flipping activity between 2013 and now are Washington DC, Atlanta, Philadelphia, Los Angeles, and Riverside. Areas where flippers are earning the highest gross returns are San Francisco, Long Island, San Jose, Boston, and Oakland.

4. Do I need to be able to pay cash in order to compete?

The short answer is, yes. Fix and flip real estate has become so competitive in 2014 that having your financing secured before you make an offer is essential to success. The vast majority of house flippers are buying investment properties in cash, which gives them the upper-hand when multiple offers are made. In a seller's market like this one in which most homes are selling for above asking price, the ability to pay cash up front is the best way to get a good deal on investment property and avoid a bidding war. Private money lenders help investors leverage their finances so that they can flip houses without completely emptying their bank accounts. A private money lender also helps ensure that you have enough cash flow in order to complete renovations in a timely and cost-effective manner.