Flipping houses in California remains a lucrative venture. You can generate$78,270in revenue per flip.
The median resale price for flipped homes in California is$578,060. However, this price varies based on the location, initial purchase expenses, and the after-repair value. In 2023, the resale price increased by1.7%. You can earn even more if you list your home on the MLS.
Houzeo’s flat fee packages let you sell your flipped home in the Golden State without a listing agent. Consequently, you can save thousands of dollars in agent commissions.
What Does Flipping Houses Mean?
House flipping is an investment strategy where you purchase a low-cost property, renovate it, and sell it for a profit. It is up to you to decide whether you want to make minor touch-ups or major repairs to the house.
Successful home flippers in California have two things in common:
- Buy Properties at a Discount: Most home flippers go for distressed properties such as probate homes and foreclosures. You will find these homes for sale at a lower cost than the local market value.
- Save on Commissions When Selling: House flippers list on MLS for a small flat fee and save thousands of dollars in realtor commissions.
How to Flip a House in 5 Steps
We have invested thousands of hours working with home flippers. Here’s how you can start flipping houses in California in 5 steps:
1. Buy an Investment Property to Flip
Buy a house in California to repair and sell. If you purchase an inexpensive house in a bad locality, you may suffer a loss. But a house in a desirable location or neighborhood will maximize your flipping profits.
Look for investment properties that are accessible to you, or find homes listed on the MLS in your area. You can also try online marketplaces like HouseCashin and Roofstock, which specifically sell investment properties.
2. Stick to the Home Flipper’s 70% Rule
The 70% rule suggests you should not purchase a house for more than 70% of a home’s after-repair value (ARV). Also, you must deduct the renovation costs from the final amount.
ARV is the worth of the home after you’ve completed the renovation.
- ✍️ The Home Flipper’s 70% Rule
70% Rule Formula: Your Purchase Price = After Repair Value x 0.70 – Rehab Costs
For e.g., let’s assume the rehab cost estimate is $30,000. So, how much should you pay for a home that you expect to sell for $500,000?
Your Purchase Price = $500,000 x 0.70 – $30,000 = $320,000
3. Choose the Best Location
A good location can boost the sale price of your renovated home. However, a neighborhood with a high crime rate will discourage buyers.
Look for houses to flip in a neighborhood close to grocery stores, hospitals, schools, etc. Also, make sure the house is within the proximity of your residence. That way, you’ll be able to oversee the progress of your flip.
4. Inspect Before Purchase
Neglecting a home inspection can lead to costly hidden problems and renovations. A whopping 86% of buyers found at least one issue during a home inspection.
Avoid doing DIY home inspections. Seek the services of a certified home inspector in California. They can help you identify issues with the foundation, electrical systems, plumbing, roofing, HVAC, etc.
Based on the home inspection report, get a new repair estimate and consider that cost in your flipping budget. Should the estimates exceed your planned budget, negotiate the sale price with the seller or find another home to flip.
» Find out How Much Does a Home Inspection Costs in California.
5. Invest in High-Quality Renovation
Basic repairs may not fetch you a good sale price. But well-executed renovations will increase the chances of selling your house for a higher price.
Hire professional contractors to improve the curb appeal of the house. You can choose to upgrade the bathrooms, remodel the kitchen, and refurnish the flooring to make the house more appealing.
Pros and Cons of Flipping Houses
✅ Pros of Flipping Houses
- You Earn Significant Profits: In 2023, investors made a 27.5% profit on the houses they flipped. For instance, if you invest $300,000 into a flip, you may earn up to $82,500 in profits.
- You Help Boost Home Sales: When you rehab a distressed property, you help improve the area. If you play your cards right, you may even help increase the home sale prices of the region.
- You Learn Real Estate Know-How: You get actual experience of the real estate market when flipping houses. You learn about budget allocation, property renovations, and more.
❌ Cons of Flipping Houses
- Your Flip Could Turn into a Money-Pit: Unidentified structural issues, water damage, and HVAC problems could significantly increase renovation costs.
- You Pay Pricey Labor Costs: The average labor costs are between $20 and $150. However, structural jobs, plumbing tasks & roofing repairs can go beyond $1000.
- You Cannot Escape the Holding Costs: The longer you hold the flip, the more expensive it will become. Property taxes, utilities, maintenance, and HOA can add up quickly. It will kill your profitability.
» Pros and Cons of Flipping Houses: Find out why the benefits of flipping out weight cons!
How Much Does It Cost to Flip a House?
The main cost of house flipping is acquiring the property. You also incur renovation costs, which can go up to$49,987. And because you want to get top dollar for your property, you cannot avoid necessary repairs.
Sweat equityis one way to maximize your profits if you do repair work yourself. However, if you hire plumbers or electricians, you will have to pay for their services.
Other expenses include:
- Holding Costs: Holding costs are expenses you pay for maintaining the property. These expenses include property taxes, property management & maintenance fees, HOA, and utility bills.
- Rehab Costs: These include labor & material expenses, home inspection costs, and necessary permit expenses.
- Marketing Costs:You will have to pay for marketing the house, listing it on the MLS, making flyers, and more.
- Home Selling Costs: Typically, closing costs are 5% to 8% of your sale price. They include realtor commissions, title fees, etc.
Can I Flip Houses With No Money?
Yes, you can flip houses with no money.
Some mortgage lenders in California provide loans for real estate investing. If you wish to fund your first flip without money, consider these options:
Private Money Lenders: These lenders loan money to potential flippers at an interest rate of 8% to 10%. Companies like WeLendLLC have packages for first-time borrowers.
Hard Money Lenders: These lenders provide hard money loans for a high interest of 7% – 15%. This loan is available for a short period. Most lenders prefer experienced flippers, but companies like Lima One Capital allow first-time flippers too.
How Long Does It Take to Flip a House?
The average time to flip a house is 178 days. Typically, it depends on the extent of renovations required, market conditions, and the type of property you’re flipping.
However, unforeseen instances could delay the selling process. For instance, if there are extensive amount of repairs, you may spend more time than expected on your flip.
But, you can sell your house quickly if you list via Flat Fee MLS California companies. Other advantages include:
- Your flip gets the maximum exposure.
- You save thousands on the seller’s agent commission by paying a small amount.
- You can negotiate the sale price to ensure you earn a profit.
- You could get a cash offer for your flip.
House Flipping Mistakes to Avoid
- Not Planning Thoroughly:If you are a first-time house flipper, then you may fail to anticipate risks. To avoid this, create a detailed plan that includes everything from a budget to the project timeline.
- Not Having Enough Money:Unexpected expenses are inevitable during the renovation process. So, ensure you have sufficient funds to cover these unforeseen costs.
- Not Inspecting the House Before Purchase:A distressed property with severe issues will burn a hole in your pocket. Professional evaluation before the purchase will help identify and address potential issues.
BestPlacesto Flip Housesin California
- Flipping Houses in Bakersfield: Tips for home flippers in Bakersfield, CA to buy and flip a house successfully.
- Flipping Houses inChico:Chico is one of California’s best places to flip homes. Click to know how you can pull off a flip in this city.
- Flipping Houses inFresno:House flippers in Fresno sold their flips at a profit using these 5 fool-proof steps. Click to know what they are.
- Flipping Houses inPalm Springs:Only licensed real estate professionals can flip houses — True or False? Click to find out.
- Flipping Houses inParadise:Californians can use this detailed guide to flip houses without any hassle.
- Flipping Houses inRiverside:Flip a house in one of the best cities in Riverside to maximize your profits. Click to access the 5-step guide to do the flip the right way.
- Flipping Houses inSan Bernardino:Click to learn how you can pull off a flip in San Bernardino.
- Flipping Houses inSan Diego:House flippers in San Diego sold their flips at a profit using these 5 fool-proof steps.
- Flipping Houses inSan Jose:Sell a flip for a profit in San Jose with the help of these tips.
- Flipping Houses in Los Angeles: Tips for home flippers in Los Angeles, CA to buy and flip a house successfully.
Is Flipping Houses Worth It?
Yes.1 in 13 homeswas flipped in the second quarter of 2023. The profit margin increased by nearlyfive percentage pointsfrom Q1 to Q2 of 2023. Moreover, raw profits on typical flips increased by18%quarterly. This indicates that current market conditions make flipping a great investment opportunity.
In fact, flipping can be a profitable side hustle for passive income and valuable career skills. With proper preparation and a good strategy, you can learn how to flip a house without risks. You’ll do well even in the current California real estate market.
Is 2024 a Good Market for Investors?
Redfin’s new report sheds light on the future of housing and investment market.
Houzeo is the Most Popular Selling Platform for Home Flippers
Wanna save thousands when selling your flip in California? We’ve got you covered. See how for sale by owner list on MLS in California works. Learn why Houzeo is one of the best FSBO sites in California.
Frequently Asked Questions
How to flip houses with no money in California?
An individual need not invest their own money in the flipping business. You can flip without money through other sources such as hard money lenders, private investors, wholesalers, flipping investors, home equity, and crowdfunding.
What type of loan is best for flipping a house in California?
Since house flipping is a short-term project, it is recommended not to apply for long-term loans. Some forms of short-term loans include private lenders, cash-out refinances, and home equity lines of credit.
What is the 70% rule in house flipping?
The 70% rule is for home flippers to determine the maximum price they should pay for a property. The purpose of the rule is that they should spend no more than 70% of the home's after-repair value minus the costs of repairing the property.
California Flipping Houses
