In certain neighborhoods of Los Angeles, flipping homes can be very profitable. Flipping is generally defined as the purchase and sale of a home within a year. We are seeing large returns on multi-million dollar homes being flipped in Beverly Hills, Bel-Air, and the Hollywood Hills.
These luxury areas are attracting foreign nationals, Wall Street investors, and private equity entrepreneurs who have large sums of money to spend and want to be in the most sought after neighborhoods in Los Angeles. Demand is especially high in the desirable Trousdale Estates area of Beverly Hills and the Sunset Plaza neighborhood of the Hollywood Hills, known as the “Bird Streets,” both popular enclaves among the celebrity crowd.
The profit on home flipping in upscale areas can be well worth the wait even in instances where construction exceeds a year. For residential real estate investors across the United States the average gross return on investment reported was 43 percent for properties flipped for over $2 million.
Los Angeles showed an average gross profit return of 35 percent for homes flipped over all price ranges during the second quarter of 2015. Gross profit is defined as the difference between the purchase price and the flipped sales price. California accounts for the bulk of high-end flips in the United States.
Demand for luxury homes in these desirable L.A. areas is global which facilitates procuring buyers.
The Chinese are the top foreign buyers of U.S. properties, according to the National Association of Realtors. Almost half of them pay all cash. Recent instability in China’s economy and stock market has sent even more Chinese buyers to the U.S.
As of Spring 2015, Asian buyers accounted for about 35 percent of all international buyers of U.S. real estate for the preceding 12-month period. They are very active in the high-end markets, particularly in California and New York City.
Many homeowners in the most desired L.A. neighborhoods are baby boomers looking to downsize. Often few upgrades have been made to their homes typically built in the 1960’s.
These homes investors are looking for as flips, especially if the home sits on a large parcel of land allowing for expansion of the residence. This also affords a speculator a great opportunity to design and build a brand new mega-mansion in a prime location.
Experienced investors know how to remodel incorporating high quality finishes, smart technology, and luxurious amenities to get the best returns. Some developers are rumored to be seeing 20 percent to 35 percent net profits or even larger numbers.
More and more celebrities are also getting into the home flipping world. Ellen DeGeneres, Jennifer Aniston, and Jeremy Renner are among those who have been flipping homes in the Hollywood Hills and Beverly Hills.
While all you generally need to start flipping homes in luxury markets is cash, the risks are magnified. However, with good planning, including purchasing the right property at the right price, smart design and quality materials, it has proven it can be very profitable.
For a free courtesy consultation, contact Bess Hochman, a top Westside Real Estate Broker for over 20 years. Bess is also distinguished by holding a law degree. This article expresses the opinion of the author. You are advised to consult attorneys & others experts specializing in the issues referenced in this article.
Contact Bess by phone at 310.291.4111 or email Bess.CenturyCityNews@yahoo.com.
“Bess is a master negotiator!” says Michael Donaldson, attorney and author of “Negotiating For Dummies.”
