Starting a house-flipping business or even just trying to flip one house can be tough. This is especially true in California, where the buyers are as diverse as the markets.
If you’re new to the game, then this guide will be an invaluable resource for you. But, even if you consider yourself a pro, we guarantee you’ll learn a thing or two.
- Why Should You Consider Flipping Houses in California?
- Is Flipping Houses in California Profitable?
- Best 5 Cities to Flip Houses in California
- How to Start Flipping Houses in California: 7 Steps
- How Much Does It Cost to Flip Houses in California?
- Is the Current Housing Market Good in California?
- Do You Need a License to Flip Houses in California?
- Other States to Look At for Profitable House Flipping
- Wrapping Up
Why Should You Consider Flipping Houses in California?
While the real estate market in the Golden State is one of the priciest in the US, it remains healthy across its many regions – which makes it a great place for flipping houses. Here are the top reasons why:
Stable Real Estate Demand
In several other states, house flippers may find themselves reducing their asking prices, which may lead to longer periods on the market. Despite this, buyer demand is expected to stay at a high level, indicating that real estate demand will stabilize.
The average housing supply in California is two months, which indicates the theoretical amount of time it would take for all the homes on the market to sell. The lower this number, the fewer houses there are to sell, and the more favorable demand is for the seller.
Houses Sell at High Prices
This is both a pro and a con when it comes to house flipping. You want to sell the house you’ve flipped for a high amount of money, but you’d also like to buy the house to flip for a low price.
In the US, the average selling price for 2023 is currently $416,100, but in the state of California, the average selling price is $741,789. Although that number may have decreased over the past year, it’s still nearly double the country-wide average.
If you buy a new home, there aren’t going to be many improvements to add to it. And improving a house is where you can make your money.
It’s much more profitable if you buy an old home, renovate it, upgrade it, and then flip it for more money than you put into it because you’ve added value to it. On average, the houses in California are 17 years older than most of those throughout the US.
Plenty of Foreclosures
Foreclosures are when someone has to sell their house because they have defaulted on a loan. These houses are usually sold at a much cheaper rate so that they sell as quickly as possible – perfect for flipping.
In 2022, California was one of the states with the greatest number of REOs (Real estate owned houses), capped at over 2,223. Already in April 2023, the number of REOs in California that have been sold was 171, so it’s worth trying to buy one.
Is Flipping Houses in California Profitable?
If you can manage to get flipping houses right, then you can make a profit. Selling houses is a great way to make money.
Across the US, the average profit margin for flipping houses in 2022 was the lowest it has been since 2009. However, the average profit made from flipping a house was $67,000, and buyers reported a 27% return on their investment.
Best 5 Cities to Flip Houses in California
San Diego is a great place to live. It has a good economy, plenty of job opportunities, a bright weather, and its own beaches. This makes it easy for residents to have a good work-life balance.
Thanks to all of this, San Diego is also great for flipping houses. In fact, the number of homes on the market has increased by over 50% since last year, so there is plenty of opportunity to find a suitable house to flip.
- Median property price: $939,059
- Year-over-year property value growth: + 7.6%
- Year-over-year population growth: + 0.7%
Coastal towns are often favored by people when deciding where to live, and Ventura is a major hotspot. While it is smaller than some Californian cities, it has a growing economy thanks to its picture-perfect coastline, which people can’t seem to stay away from.
On average, flippers made profits of $180,000 per flip, which is just less than triple the regional average.
- Median property price: $827,536
- Year-over-year property value growth: +6.2%
- Year-over-year population growth: + 0.24%
The City of Angels is one of the largest cities in California, and it just keeps on growing. It spans an impressive area of nearly 1300 km².
This growing population means that people are constantly looking for houses, and the profits of selling said houses aren’t looking too bad either. This city averages out at $161,500 per flip.
- Median property price: $907,874
- Year-over-year property value growth: + 2.4%
- Year-over-year population growth: + 0.23%
When it comes to planned cities, Irvine stands out in Orange County. It comes complete with safe neighborhoods, high employment rates, family-friendly activities, outdoor recreation, and cultural opportunities around every corner.
This makes Irvine a great place to live, and therefore, there is a steady demand for houses. A demand flippers can and should capitalize on.
- Median property price: $1,299,703
- Year-over-year property value growth: + 12.4%
- Year-over-year population growth: +3.5%
You’ll notice that the price of buying a property in Fresno isn’t as high as some of the other best cities we have mentioned. If you’re strapped for cash, Fresno is a good city to start your flipping journey in.
It’s also predicted that the median home value for homes in Fresno will only increase. This means that when it comes to selling, you’ll make a better profit than you may be expecting.
- Median property price: $365,712
- Year-over-year property value growth: +7.6%
- Year-over-year population growth: +1.16%
How to Start Flipping Houses in California: 7 Steps
Step 1: Decide on Your Budget
You need to have a clear budget for house flipping and stick to it as best you can.
Your budget needs to cover the actual purchasing of the property, all renovations that need to be done, and enough money in case of any unforeseen expenses that may pop up.
Step 2: Assemble Your Team
You may think you can do it alone, but trust us, having a team of qualified professionals supporting you will make the process of flipping a house much smoother. This is especially true for first-time house flippers.
The type of people you may need includes:
- Real estate agents
- Building contractors
Having these experts on your side is beneficial because they will guide you through the process and provide you with actions and insights that lead to a more profitable deal.
Step 3: Do Your Research
Don’t go in blind into this. It’s a lot of money to risk without doing the proper research first. We suggest looking at real estate trends, property values, and neighborhood statistics to identify areas of potential.
Before you pick a house, you should also look into any local regulations, zoning laws, and permit requirements. The last thing you want is for your project to be shut down before it even starts.
Step 4: Get Your Finances Sorted
You probably won’t have the money you need to flip a house just lying around unused in your bank account, so you’ll need to ask a bank for a loan, get the support of private lenders, or look for real estate investors who share your vision.
Sorting out your finances in advance means that when you do find the house you want to flip, you can quickly make an offer. This shows the seller that you’re serious, and it will help you compete with any other offers.
Step 5: Find Your Perfect House
Finding a house to flip isn’t easy. The home you’re looking for needs to be cheap enough that you can afford it but have enough potential to resell at a profitable price.
Look for rundown properties, old properties, properties below the average market value, properties in foreclosure, or properties that could use a little TLC. You should only focus on houses within the areas that your research highlighted for potential growth.
Step 6: Time for a Home Makeover
Next, you need to start planning your renovation project.
You should focus on cost-effective improvements that increase the property’s value, such as kitchen & bathroom upgrades, a fresh coat of paint, or add a modern touch to the fixtures and finishes.
Step 7: Get selling (or renting)
Once your renovations are complete, the property will go on the market. It’s up to you whether you want to rent it or sell it – but we suggest getting a real estate agent to help you with this step of the California house flipping process.
Real estate agents will likely attract buyers and sell your house faster than you could because of their wide network of connections and marketing knowledge.
How Much Does It Cost to Flip Houses in California?
Flipping houses in California costs money – as does house flipping wherever you are. Here are the factors that you have to take into account when calculating the cost:
- The price of buying the house: There are diverse housing markets in California. Because of this, the cost of buying a home can range anywhere from $50,000 to $295,000,000.
- Renovation costs: On average, the highest price you can expect to pay for renovating a three-bedroom home is $50,000. However, it depends on the extent of the work you need to do.
- Any carrying costs: These costs are any costs you have to pay to keep the house in tip-top shape before it sells. They include utility bills, insurance, property taxes, and maintenance.
- Expenses for closure, promotion, & sale: These are small administrative costs that you may overlook in your initial budget, such as title transfer fees and marketing costs.
Is the Current Housing Market Good in California?
Home prices may vary, with some areas moving from a seller-friendly to a more balanced market.
Buying a house may be better in 2023 due to lower prices after the pandemic and an increase in available homes, so the suggestion is to sell your flipped house as soon as possible before the rising loan interest rates make it even harder.
Do You Need a License to Flip Houses in California?
House flippers do not need a license to flip houses in California. However, that doesn’t mean that having a license wouldn’t come in handy.
If you want to make house flipping your full-time job, then acquiring a contractor or real-estate license will make things a lot easier since they both cut out the middleman.
Having a real estate license means you don’t need agents to do the selling for you. Whereas a contractor license means you can manage your own projects and hopefully save yourself some money in the process.
Other States to Look At for Profitable House Flipping
Flipping houses in California isn’t your only option for property flipping and real estate investments – other states can be profitable.
- Flipping Houses in Texas: Texan flippers can expect to make upwards of $60,000 per property.
- Flipping Houses in Michigan: The average return on investment for anyone flipping homes in Michigan is around 52%.
- Flipping Houses in North Carolina: Most homes in North Carolina sell for their asking price – that’s good news for house flippers.
What makes a successful flip depends a lot on the house you buy, the area the house is in, the investment property market, and the time and money you put into it.
If you want to get into the house flipping industry in California, then look for properties in cities such as Ventura, Fresno, or Los Angeles. If you do enough research and wait for the right house, you can purchase for a fair market value and increase your profitability.
With house flipping, you get out what you put in. If you don’t have the resources to get started, then wait until you do, and we promise the wait will be well worth it.