Flipping refers to making a profit by buying and selling a property within a short time frame. The time frame can range from a week to a few months. When you buy a property at a significant discount and/or rapid appreciation in housing market, typically there is a profit that comes from that. Common changes a flipper typically does are cosmetic changes to increase its value or some of the seasoned flippers may even undertake structural repairs or improvements before putting it back on the market to sell.
Although flipping can be extremely rewarding, there are plenty of opportunities to lose money as well. The home may not sell, it may not sell for as much as you hoped. The renovations may take longer or be more expensive than originally planned. Unforeseen factors such as a major nearby company closing its doors can cause an unexpected plunge in real estate values and therefore flipping cannot be considered a sure thing.
Real Estate Markets that are Fabulous for Flipping are the following:
1. San Diego
2. San Francisco
3. Los Angeles
Home prices in Los Angeles have been steadily increasing since May 2009 with only a small dip in March 2010. The LA Times reported that in April house flipping is back in South Los Angeles.
The following zip codes show high foreclosure rates:
90027 this includes parts of Hollywood and Los Feliz which show the highest discount potential of up to 57%
90026 this includes parts of Silverlake, Echo Park and downtown which shows the greatest difference between the average foreclosure price of $407,500 and the average sales price of $506,714 a difference of $99,214.00
The Los Angeles metro area is experiencing high unemployment (11.8% as of March) and has seen a 38% increase in new single-family housing permits since last year.
A Word of Caution
If you are interested in flipping you need to have plenty of cash to buy the house, remodel it, and pay carrying costs like taxes, insurance, mortgage interest and utilities.
The end of tax incentives to buy a home and continued foreclosures could reverse housing market recoveries in some areas. and investors should consider the impact of a declining market on the purchase price they can pay if they hope to earn a profit.
For more information on the Greater Los Angeles area market please visit my website at www.rhondascott.com
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