The strength of mature neighborhood real estate (built 50 years ago) is many homes are ripe for turnover. Someone will fix those old places – and make money.
No one needs to overemphasize the strength of the Los Angeles real estate market in 2016-2017. Median sales prices for all properties since 2011 have climbed from around $370,000 to $675,000, according to Trulia.com. The average prices now hit around $549 per square foot.
The rise in home values in Northeast Los Angeles (NELA) reaches into long-time, traditionally fancy neighborhoods as well as those in the process of revitlization. Homes for sale in Pasadena has seen dramatic elevation in value and price, just the same as homes for sale in Highland Park, an up-and-coming region whose home values are surging.
The effects of the market mean that home flipping in places such as NELA is tempting once again. The median sale price for detached homes is around $1.3 million and $675,000 for condominiums, as of early 2016. As older owners depart – think someone’s grandmother’s house in Glassell Park – they often leave behind some gems that need some repairs or full-out renovations.
Flipper wannabes ask the questions: Is this something I can do? Do I have the skills, the financing, the aesthetic sense and the guts to take on this challenge? The following points might help you find the answers:
Know the market – Since you’re planning to sell something in a particular market, you need to know what the comparables are. This means if you’re considering a bungalow in Mt. Washington or Highland Park, look at what the other similar-sized and -situated bungalows are selling for there. Also, study closely the features that create their value, such as original woodwork, larger kitchens, built-out basements and landscaped gardens – or the lack of these things. Then see what the offering and ultimate sale prices are.
Stick close to the 70% post-renovation value – This is a rule that in some competitive markets might be 80% or 90%, or lower in less desirable neighborhoods. Sometimes called the “after repair value” or ARV, where you have a good idea of what the finished house or condo will be worth, then offer no more than 70% of that on your purchase. The 30% margin on the sale price necessarily includes your renovation costs, transactional costs (fees to Realtors, banks and municipalities, and maybe income tax on capital gains) and carrying costs (interest on a loan for the period that you own it). If you can’t get the numbers to work, that’s likely a sign to walk away.
Be adequately financed – It’s not a bad idea to find a community bank in the city where you are working to finance the loan. There are several in Eagle Rock, Garvanza and Hermon. But whether you work with a local or national lender, be sure the terms are reasonable and you are prepared for a sales-to-closing period of a few months (longer if you are aggressive in your pricing).
Understand aesthetics – A lot is sold based on how a person feels walking into a space. Cool neutral colors generally work for that, as does a good view and touches of nature (your own landscaping, or a view of someone else’s landscaping). You might have a good natural or professional sense of this, but it never hurts to consult your Realtor or a professional stager who can assess a space and provide advice.
Divide your labor – Are you the carpenter, or will that be done by a contractor? Perhaps you do demolition and painting, with the work in between done by professionals. The more you can do yourself – on a timely basis – the better your profit margin.
Just remember to consult with a Realtor. The Northeast LA market is exciting and special. Tracy King not only knows the current market but also the historical trends. That kind of background can yield important, useful and profitable guidance.
With over 30 years experience in helping clients buy and sell homes in Northeast Los Angeles, Tracy King has a depth of real estate knowledge that makes her the go-to for both the first-time home buyer and the seasoned real estate investor. When she's not holding open houses or negotiating offers, Tracy enjoys wine tasting, cooking, and planning her next trip to Paris. If you are looking to buy or sell a home in Northeast Los Angeles, contact the Tracy King Team at 323.274.2148 or firstname.lastname@example.org.