Where are the House Flipping Hot Spots in California?
House flipping remains hot throughout the state of California. As Curbed Los Angeles recently pointed out, while house flipping of years past was dominated by amateurs, professional residential rehabbers are currently ruling the day. These investors are taking advantage of soaring prices in areas like San Francisco, Los Angeles, and San Diego and using residential rehab financing to secure purchases in all cash. It’s true that foreclosed and bank-owned properties have all but dried up throughout California, which has slowed some investors (primarily amateur investors) down. But for others, the decline in cheap properties has triggered a turn to high-end residential rehab investing.
Luxury house flipping is dominating the wealthiest markets throughout California, where fix and flip investors have been making a killing since early last year. Redfin shared data on the markets where residential rehabbers made the most money per flip in 2013, and seven of the top ten markets were in California. (For their data, Redfin consider any home that was bought and sold again in less than twelve months to be a flip.) Keep in mind that these numbers reflect gross profits, not ROI, but even so, they’re quite staggering:
In San Francisco, residential rehabbing netted an average of $194,600 per flip, more than any other metropolitan area. Nearby San Jose and Oakland were the next highest California markets on the list at $152,000 and $134,500, respectively.
Moving down south, Los Angeles homes flipped for an average of $126,100 net profit, followed by Orange County homes at $123,200, Ventura homes at $122,200, and San Diego homes at $113,800.
Redfin also noted that while fewer homes were flipped last year than in the previous three years, success rates have gone up. In 2005, over 100,000 homes were flipped. In 2014, 58,500 homes are expected to be flipped. This decline is a good thing for two reasons: first, it shows that the housing market is much more stable than it was back in bubbly 2005, and second, the houses being flipped now are being flipped for much higher profits.
Getting more specific, Redfin broke down the hottest spots for home flipping around the country, all the way down to the neighborhood level. Surprisingly, the two hottest California neighborhoods are both in Los Angeles, Mid-City and Mount Washington. These are up and coming areas that haven’t been on home buyer’s radars in years past, which is why prices have had room to grow. But don’t expect to be able to buy into these areas easily. The average pre-flip price of a home in Mid-City Los Angeles was $426,500. That’s a hefty price tag, but the profits on the other end certainly make up for the costly upfront investment. On average, these homes flipped and sold for $666,400. Not bad.
Other California neighborhoods high on Redfin’s list of residential rehab investing hotspots are Sherman Oaks, Highland Park, Altadena, and Encino in the Los Angeles area and the Sunset District, Bayview District, and Visitacion Valley in San Francisco.