California is a great environment for real estate rehabbers. Few statistics are available, but real estate specialists have made billions of dollars by buying homes in need of repair, sprucing them up, and reselling them.

However, not every area of California is appropriate for fix and flip activity. Here are two areas in California to avoid when looking for your next fix and flip opportunity.

San Francisco

San Francisco has one of the most expensive real estate markets in California. According to Zillow, the average San Francisco home sold for more than $1.1 million.

Carrying costs are an important consideration when deciding whether to do a fix and flip. High property prices mean high carrying costs and large mortgage interest and property tax payments.

In addition, San Francisco is already flush with real estate investors. With so much money flowing into the area and a limited number of available properties, it is difficult to identify a profitable deal.

In addition, the San Francisco Planning Department is known for its uncanny ability to add cost and uncertainty to any project. San Francisco's Planning Department combines long wait times with high fees. To make matters worse, San Francisco's entitlement process allows neighbors to debate the addition of a bathroom; bathroom additions, additions of bedrooms, and changes to decks are frequently debated in public meetings, even when they fit within the existing zoning code.

East Porterville

East Porterville, California has become known as the town without water. Located three hours north of Los Angeles, East Porterville is a victim of California's long-running drought. Most homes in this town of 5,000 are not connected to a water system, but rather rely on private wells which are running out.

Most families who can afford to do so are moving out.

Rehabbers make money by buying homes that few people want to live in and making them more livable and more attractive. No quantity of exterior paint and marble countertop will make families want to move to a house with no shower.

California is a great environment for real estate investors, but some areas -- those with high competition and carrying costs, or with no demand -- are worth avoiding. There are hundreds of cities and towns in California where real estate investors can turn a profit. If you are seeking financing for your next project, please contact us.