Written by Jason Kritzberg on June 8th, 2021
2020 has brought massive changes to almost every area of our lives, and the real estate market is no exception. We have seen record numbers and record sales during the pandemic and as we are easing out of it, nothing is changing. So the question is: Is the current market optimal for flipping homes here in Los Angeles? It’s important to look at the current state of the market before getting started.
Flipping Profits Are At a 20-Year High
You heard that right! If you’ve been wondering whether its time to push forward with that fix-and-flip investment strategy, the data suggests it now may be the best time to flip homes in Los Angeles. According to ATTOM Data Solutions, house flipping profits have soared to their highest level in 20 years. In the third quarter of 2020, the average gross profit on a flip was $73,766, up from $61,800 in the third quarter of 2019!
Note that this data does not include renovation prices, as it only includes the difference between an investor’s purchase price and the eventual sale price for the property. Make sure to budget accordingly and have a comprehensive plan before diving into any fix-and-flip project.
The Drawbacks…
Although jumping into a fix-and-flip project could end in a great profit, there are risks that come with it. First of all, you may have to offer more than you’d expect on that fixer. Since the pandemic, inventory levels were down a record-setting 23% since 2019. There are way more buyers than ever before and way less sellers than ever before, so when a listing gets put on the market nowadays, it goes fast – and sometimes, over the original listing price with multiple offers. Now, when you have a hot commodity like a fixer opportunity, there is much greater competition. So make sure to budget accordingly, in case this scenario occurs.
The bottom line is to have a strong budget in mind, a firm idea of the state of the market in Los Angeles, and if you need assistance, you should reach out to your local real estate agent, Stephen White, for help pulling up local market statistics, gathering comparables, and determining after-renovation values.
