Los Angeles: You either love it or hate it. When I first moved here, I hated it; it was loud, busy, and it took forever to get anywhere. I complained to my boss, I complained to my coworkers, and I complained to my wife.
Then finally one day, exhausted by all the arguing, she asked: “Why don’t we just move?”
And suddenly I realized I didn’t want to. Lose my favorite restaurants? Games? Breweries? Was she crazy?
Los Angeles is home to nearly four million people across over 500 square miles. We usually just think about the heart of the city, yet some of the most incredible, diverse, and unique neighborhoods reside elsewhere in the sprawling metropolis. And that’s even more true if you’re willing to expand into the surrounding territories.
Over the last decade, I’ve fallen in love with LA and its real estate market. The longer I live here, the more I find to love. But getting to that point took a lot of work, especially when I started flipping houses in Los Angeles in earnest.
Flipping Houses in Los Angeles: What’s Different?
Los Angeles is a city of million-dollar homes, so how do you flip one? Very carefully or not at all. For me, it became pretty obvious that I had to start in the city’s fringes and work my way toward the center. In that time, I learned a few important things about the City of Angels.
Los Angeles presents a few significant challenges:
- The market is hot. In Los Angeles, people will enter into a bidding war over an empty lot. That makes it hard to scoop up affordable properties.
- There’s a lot of competition. You and everyone else are thinking about flipping houses in Los Angeles.
- Houses are expensive. You need a lot of capital and a very firm financial foundation to start investing in this market.
Los Angeles presents a lot of significant opportunities:
- The market moves fast. You’re less likely to have houses lingering on the market forever; they’ll probably sell to someone.
- The neighborhoods are diverse. There are entire communities of renters who may have houses that are more flippable. It’s not all mansions, all the time.
- There are a lot of houses on the market. Los Angeles has a lot of churn; people are moving in and out while investors are buying and selling. This gives you a lot of opportunities to invest, even if the competition is generally fierce.
- The competition works both ways. Many houses are going on the market, but many buyers are snatching them up. There’s a huge market for small, affordable starter homes if you can provide them—and they don’t have to be over-built.
To flip houses in LA, you need to have a thorough understanding of the market and its neighborhoods. The more you know about Los Angeles, the better. You need to reliably value your properties and avoid overextending yourself. Doing so will help you overcome many of the challenges facing investors today, including the 3 below.
Challenge #1: Buying Houses in a Hot Market
In hot markets like LA, you need to be creative to find the right houses to flip. To avoid over-investing, consider going after distressed properties. Distressed properties have a few advantages:
- Owners are motivated. You can help them by selling their homes fast. Oftentimes, they owe money on the property, they’re in debt on property taxes, or they have liens. The deal is unlikely to fall through.
- They need work. You aren’t unfairly bidding low on the property. Distressed properties usually do need some work. But the work may be purely cosmetic or in the fashion of updates.
- The property will probably sell fast. Because the owner is motivated to sell (and you presumably have financing already locked down), you can close quickly. It isn’t a 45 to 60 day wait for escrow.
It’s also important to note that there are still some dangers associated with distressed properties. For example, a distressed property might require a lot of work; it’s up to you to complete a thorough inspection. You don’t want to deal with flooding, major electrical issues, or structural problems. But slapping on a new roof? That’s usually easy.
Challenge #2: Avoiding the Competition
There are a lot of house flippers in the market. But many of them started because they watched too many TV shows and thought it’d be a great idea to gamble with their retirement funds. You know better than that, right?
By engaging with mentors, investing in training, taking seminars, and continuously learning, you can edge out the competition. And there’s a lot to be said about being cautious. I didn’t start out selling 100 houses. I looked for one house that was just right and that I could sell for a reasonable amount.
The truth is a good portion of your competition will flip one or two houses without any guidance, get bored, and move on. If you’re in it, you’re in it for the long haul. That means not just investing in real estate, but really building a business from the ground up.
Challenge #3: Getting Financing
There are many options for home financing in LA: a HELOC, crowdfunding, private investors, hard money loans, gap loans, and conventional financing. Each comes with its own costs, risks, and benefits.
You’ll need to compare your options first. Don’t take out more financing than you can bear. Run through the absolute worst-case scenarios and always have an exit strategy. What happens if you can’t pay back your loan? Or if the house burns down? Will you be able to pay back your financing and your own mortgage?
Reduce Your Risk by Doing Your Research
Flipping real estate in Los Angeles is a high-stakes game of opportunity and initiative. But with proper research, you can reduce your risk and start building a healthy business that works for you.When I first started investing in LA, I had no idea what I was doing. I was buying properties that looked good to me with no idea of their true market value. I even grossly overpriced a few neighborhoods. I just didn’t know enough.
Today, that’s a little less likely to happen because every neighborhood in LA is booming. But I’ve also significantly reduced my risk by using convenient tools like ValueChek™.
As an independently owned and operated HomeVestors® franchisee, I have access to proprietary tools like ValueChek™, which helps me quickly check the projected value of a property. I can gauge whether that property will be a good flip based on large volumes of data and surrounding comps.
For me, becoming a HomeVestors franchisee made a world of difference. I was no longer just guessing; I had solid research to back up my offers and sales prices. And that also built up my confidence.
If you want to flip houses in Los Angeles, having the right tools matters. Request more information about HomeVestors today.
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