Reality television shows such as Flip or Flop, First-Time Flippers, Flipping Vegas, and more have inspired many individuals to look at real estate investing in a new light. The idea of being able to purchase a property for dirt cheap, fix it up, and resell or rent it to turn a profit, seems like a great way to earn some extra cash (or even turn it into a full-time business). Wanting to get ahead and in on the money train individuals far and wide have started investing in real estate in large areas like California, hoping to turn a decent profit.
While investing in real estate in California can lead to a huge payday, it is not without risks. As you’ve likely seen on the shows there is no telling what could go wrong from the time you make an offer on the property until you place it back on the market for sale. The best way to reduce those risks is to have a clear understanding of these factors ahead of time.
What Can You Afford?
One of the first things you probably want to know is what you can afford to pay on a property and even how you plan to fund it. If you have some cash saved up, obviously, this is the best way to decrease your out of pocket expenses while also increasing your profit. If you do not, however, have the cash upfront to pay for a home you can look into options like personal loans, mortgages, or bridge loans.
If you’re going to borrow the money, make sure you have done your due diligence. For example, if you’re thinking of going with a bridge loan you should know exactly what it is, what is required to qualify, the bridge loan approval process, your responsibilities as a borrower, and more. If you are going to get a mortgage make sure you have a second lien position in case you do not qualify for the mortgage by yourself.
The Housing Market
Before you invest a penny into California real estate you must understand the local housing market. Is it a buyer or a seller’s market right now? Are houses in high demand? What is the median going rate for homes sold in a particular Calfornia city?
The reason questions like these are essential is to determine first, whether properties in the state are worth investing in. Secondly, you want to know what properties go for so you can compare it to your budget and get an idea of what your potential profit will be. Lastly, you want to know that after buying the property and investing in it, that it won’t sit too long on the market as this wastes money.
Location, Location, Location
When investing in real estate in California or any other state you must narrow down your options by location. As you review the various properties for sale within the state, which neighborhoods are going to help increase your profit and get your property sold the fastest?
Areas with the highest number of tourists each year, job availabilities, best schools, and plenty of things to do are likely to sell faster and be in higher demand than areas where there isn’t much going on. So, before making a real estate investment, do some research to find out what the area has presently or what will be developing in the next few months/years to boost your potential profit.
The condition of the property is something you also want to know prior to making an investment. While you’re well aware that you’ll have to make some repairs and upgrades to get the property to match others in the neighborhood, you don’t want to purchase a money pit. That is, a property with so many problems that it will eat into your potential profit.
While some sales are final and don’t allow you to see inside the properties, do the best you can to get it inspected or looked at by a professional to see how much you’ll need to invest. A house with roofing, electrical, heating, and plumbing issues, for instance, may not be worth investing in if you can’t get those things done affordably and timely.
Flipping properties in California is a possibility for anyone with a basic understanding of the real estate industry, enough capital or financial resources, and the willingness to take a risk. To reduce the risks of investing in real estate, one should utilize the advice provided above while also working with the right real estate and home improvement professionals to help turn fixer-uppers or rundown properties into a home buyer’s dream come true.