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- August 9, 2011 at 8:14 pm #228910
I get asked fairly often, “is it still possible to flip in LA”, and my answer is:* It depends.*
From an agent’s standpoint we see a lot of flips.* There is no shortage of all cash offers coming from investors to do this very thing.** Are they profitable?* It depends.** The successful flips at this point in the market are formula flips, done by licensed contractors, or investors who are connected with contractors.* The profit margins are lower, and the risk higher than we’ve seen in other markets previously, but it can still be done, if you know what you’re doing, what to improve and what to leave alone.*** There is a particular opportunity in homes that are not FHA compliant, and need to be brought up to standards before they can be mortgaged.*** The thing that is most unique about Los Angeles is that the disparity between what it actually costs a contractor/investor to do the*remodeling*(IF they know what they’re doing)…and the retail price of construction is a vast difference.***
*Watching my clients try to get bids on construction improvements in LA, I’m almost embarrased at the amount of retail mark up they are being charged.** I recently had a client get 3 bids for a tiny*kitchenette remodel in a guest house – something that I, as a former general contractor know for a fact I could do with top quality for under $4,000 – and the bids ranged from $12,000 to $18,000.** Really.** Not to slam contractors – they’re trying to make it in a tough economy – but the reality is, with a good eye for design, knowing where to source your materials, and finding good craftsmen who do quality work for the labor, and truly need the work, you CAN remodel a home in LA and make a profit, if you’re bent on flipping.* Or, you can remodel, with these same factors, and a little footwork, and still stay within your budget.** It takes being connected to a good wholesale network, and footwork – but there is no reason construction needs to be priced as if it were made out of gold.**
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