You might think that California offers a myriad of different types of properties that you can fix and flip. While there are homes of every size, shape, style and price range imaginable, they all have certain commonalities. Likewise, it doesn't matter whether the home is a single family home or a rental unit, they are very similar in terms of structure and investment potential. For most real estate investors, there are only two common types of fix and flip houses you will see a lot of in California; foreclosure auctions and short sales.
When a borrower falls irreparably behind in their mortgage payments, foreclosure may be the only option for them, and the lender. When this happens, the home is auctioned off at a price that covers the mortgage and expenses so the bank can recoup its investment. These are the types of sales that occur at the local courthouse, and it is common to have bidding competition. In many cases, you won't have the opportunity to inspect the home, so you are going in blind. It's better to be outbid than to be stuck with an underwater investment; however, you don't want to be too conservative. When the right combination of price, location and potential to make profit present themselves, take full advantage of the situation. Foreclosure auctions are a favorite haunt for real estate investors because the process is so straightforward. The highest bidder wins the home, fixes it up, sells or rents it and moves on.
Similar to a foreclosure, short sales are invoked when the debtor is unable to make payments or secure refinancing. In addition, the amount owed may exceed the home's market value, depending upon its location and condition. In these cases, the lender agrees to a sum that satisfies the lien and writes off the remaining balance as a loss, thus, avoiding foreclosure proceedings. Do not be fooled by the name of this type of deal, however, 'short sale' does not mean that things will be finalized quickly. In other words, you have to have a great deal of patience, or the financial means to wait it out. Homes sold in a short sale might take longer to close on, however, they're readily available, and often quite profitable for a patient, and flexible investor.
Fixing and flipping real estate is all about finding the best properties for the lowest price, renovating them, and finding a buyer in the shortest time possible. Choosing the type of property, single family or multi-family unit, is important, but how you obtain the property factors in as well. If you're hoping for a return on your investment in a few months, a foreclosure property has the best chance. If you aren't concerned with immediate gratification, a short sale will fit the bill. Over time, as you add more properties and gain experience, you'll undoubtedly invest in both investment types simultaneously. Want to learn more about fixing and flipping homes, foreclosure auctions, or short sales, please contact us and we'll be happy to assist you.