Many projects do add value to your home, and improve your family’s quality of life. By working on these projects now, you can enjoy the benefits and updates. If you make green upgrades, then you can also start recouping your investment in these green energy technologies once you complete the projects.
Some home improvement projects that add value to a home include:
1. Remodeling the Kitchen
Most people consider the kitchen to be the heart of the home, and because of this, updates in this room pay off. According to HGTV, you can expect to recoup 60%-120% of your investment on a kitchen remodel, as long as you don’t go overboard. You should never make your kitchen fancier than the rest of the house, or the neighborhood.
Why You Shouldn’t Invest in a Deluxe Kitchen For example, a historic home in my neighborhood has been on the market for more than two years. During the owner’s last open house, I went in to check it out, and immediately saw why the house hasn’t sold. The quaint Arts and Crafts style home was built in 1900 and has a lot of charm. Unfortunately, the homeowners had invested over $60,000 upgrading the kitchen.
The enormous kitchen, easily the size of the living room, features appliances and countertops that might look more at home in a fancy restaurant kitchen. The style, size, and quality of the kitchen don’t fit in with the rest of the house, or the neighborhood. If you plan on selling your home within the next five years, keep potential buyers in mind before you start on any major remodel; many people won’t pay for a fancy, deluxe kitchen.
A Little Paint Goes a Long Way When it comes to how much you spend on a kitchen remodel, prices can run the gamut, from $5,000 to $75,000, or more. Get the biggest bang for your buck on a kitchen remodel by looking at color. Fresh paint, in modern colors, can go a long way towards updating the look of your kitchen. Plus, paint is relatively cheap.
You might want to consider using low-VOC paint; this makes your kitchen more eco-friendly, and helps your family avoid breathing in dangerous chemicals, like benzene, that off-gas from regular fresh paint.
Energy-Efficient Appliances Replace old appliances with energy-efficient models. Energy Star-rated appliances are better for the environment, and they also help you save money, because they use less energy. Potential buyers often look for ways to save money when shopping for a new home.
Home sales volume remains low, as does job creation. Residential construction of all types continues to struggle in this region, leaving would-be homebuyers wanting for more.
As the next recession looms on the horizon — expected in 2020 — forward-looking agents will prepare for the slowdown in sales and prices to continue here in Orange County and across the state. The next 30 years are going to be an about-face of the past 30 years of repetitively declining mortgage rates. Homebuyers will face the pressure of these rising rates in the coming years, though a brief reprieve is to be had in 2019-2020 as the Federal Reserve allows rates to cool in preparation for the next recession.
View the Orange County regional charts below for details on current activity and forecasts for its local housing market.
Updated September 1, 2019. Original copy posted March 2013.
Home sales volume dips
Chart update 09/01/19
2018
2017
2016
2003: Peak Year
Orange County home sales volume
35,100
38,400
37,900
53,900
*first tuesday’s projection is based on monthly sales volume trends, as experienced so far this year.
Home sales volume in Orange County remains weak and somewhat stuck at just over half the heights seen during the Millennium Boom. Echoing state trends, Orange County saw a decrease in total home sales volume in 2018, ending the year 9% lower than in 2017. Worse, year-to-date home sales are 13% below 2018 as of Q2 2019.
A sharp bounce in home pricing following the speculator interference of 2012-2014 has held sales volume back from any significant increases. Buyers’ incomes, already insufficient to keep up with quickly rising home prices, were further decimated in 2018 as mortgage interest rates increased.
In review, 2009-2010 Orange County sales volume rose slightly with the introduction of the housing tax credit, falling back in 2011 for lack of end user demand. From the latter half of 2012 through most of 2013, speculator hyper-activity bumped sales volume artificially yet again, as it did in all of California. The speculator buying wave has since receded.
Looking forward, a complete recovery with annual sales volume of around 46,000 in Orange County will be reached only afterend user demand is buttressed by labor force participation and normalized job levels, expected in the 2021-2023 recovery period following the next recession, anticipated by economists to arrive around 2020.
Low turnover rate to continue
Chart update 03/06/19
2017
2016
2015
Orange County homeowner turnover rate
6.8%
6.7%
7.3%
Orange County renter turnover rate
17.8%
18.5%
20.0%
Without turnover, homes do not sell. The homeowner turnover rate in Orange County has remained mostly level since the end of the recession in 2009. The renterturnover rate has declined since 2010 and was at 17.8% in 2017, the most recently reported Census year.
Renters rose at a more gradual pace in 2018, following years of escalating rents and declining rental vacancies. Homeowners are likewise struggling to compete with other homebuyers for a shrunken inventory of homes for sale, meaning the turnover rate remains relatively low today.
Turnover rates are likely to rise dramatically in the convergent 2021-2022 boomlet period raising rental vacancy rates. Then, members of Generation Y (Gen Y) will collectively rush to buy and Baby Boomers (Boomers) will retire en masse, selling and mostly buying replacement homes. International and domestic emigration into California will also play a significant role in suburban housing demand.
Homeownership remains low
Chart update 03/06/19
2017
2015
2014
Orange County homeownership
57.4%
56.7%
56.6%
Orange County’s homeownership rate has fallen since its 2007 peak of 62.7%. The most recent homeownership data shows a 57.4% homeownership rate in Orange County. Statewide homeownership has historically been about two percentage points below Orange County’s. The state average is currently 55%, thus homeownership reports in Orange County in 2017 will likely remain around 57%.
Expect Orange County’s homeownership rate to remain at its present low level until 2021-2023, when the housing market will bounce back from the recession expected in 2020. Only with the return of jobs, higher wages and increased confidence will the first-time homebuyer population gain traction.
However, don’t expect the rate of homeownership to fully return to the inflated heights seen in 2007 anytime soon. This rate was elevated by unfettered access to easy money, which mortgage regulators tamped down in 2014 with enforcement of ability-to-pay (ATR) rules to protect society from certain destabilizing types of mortgage lending. These rules limit mortgage funding to those homebuyers with the financial ability to actually repay their debts.
Thus, the housing market won’t see a repeat of those Millennium Boom homebuyers who lacked the proper finances. Though this translates to a slightly lower homeownership rate in the near term, it fosters a more stable future housing market in Orange County and the state. The shift of Gen Y to rentals for a longer period before buying a home than in past generations also puts a cap on home sales volume.
Construction starts on the rebound
Chart update 09/01/19
2018
2017
2016
Orange County single family residential (SFR) starts
4,500
4,800
4,300
Orange County multi-family starts
3,900
4,800
7,700
The recovery picture is mixed for Orange County residential construction. After years of increased single family residential (SFR) construction starts, 2018 saw a decrease in the number of new SFRs started. In total, 19% fewer SFR starts occurred in 2018 compared to the previous year.
Multi-family starts in Orange County totaled 4,500 in 2018, decreasing about 6% from the previous year and continuing to fall in 2019. This downward trend in starts will likely reverse in the coming years, as legislative moves focus on adding more housing for the ever-growing resident population.
On the other hand, don’t expect SFR construction to recover fully anytime soon. The next peak in SFR construction starts will likely occur in 2021-2023 as renters shift to becoming homeowners following a statewide-push for more construction. Even then, SFR starts are unlikely to return to the mortgage-driven numbers seen during the hyperactive Millennium Boom.
Jobs are recovering, too slowly
Chart update 09/01/19
Jun 2019
Jun 2018
annual change
Orange County jobs
1,673,100
1,631,200
+2.6%
California regained all jobs lost at the end of 2014, but Orange County didn’t catch up until the last quarter of 2015. While total job numbers actually declined in 2018, the number of employed individuals in Orange County is 2.6% above a year earlier as of June 2019, still just 124,100 above the number of jobs held before the recession. However, since Orange County’s population has grown significantly since jobs previously peaked in 2006, the real recovery is still further down the line.
As seen in Figure 9, job additions have been one-third slower to come about during this recovery compared to the 2000s recovery, and at half the pace of the 1990s recovery, echoing the secular stagnation of the 1930s. When will all of these jobs catch up with Orange County’s continuously growing population?
Orange County will likely catch up in 2020, just in time for the housing market to hit a major obstacle as economic factors set up for the next recession, expected by forecasters to arrive in 2020. These factors include the mitigating effect on home sales and the jobs market of increased mortgage interest rates, which began in 2018.
Jobs in the real estate industry
Chart update 09/01/19
Jun 2019
Jun 2018
annual change
Construction
109,100
104,500
+4.4%
Real Estate
39,800
39,200
+1.5%
The number of individuals employed in the real estate and construction industries fell during the recession, beginning to show mixed improvement in 2012. While the number of real estate professionals is now level with pre-recession levels, construction workers are still well below their Millennium Boom peak, and declining going into 2019. Jobs numbers in both of these industries will likely stall in 2019-2020, as sales slow and construction struggles to gain momentum.
Per capita income plays catch up
Chart update 03/06/19
2017
2016
Annual change
Orange County per capita income
$65,400
$62,763
+4.2%
California per capita income
$59,796
$57,497
+4.0%
The average income earner in Orange County made $65,400 in 2017 (the most recently reported data from the Bureau of Economic Analysis).
Sustainable home price increases (not driven by cash-heavy investors or market momentum) are limited to a ceiling set by personal income, the annual rate of increase from 2016 to 2017 in this region being 4.2%. These annual income and price increases will remain low until an optimal employment level is attained with a full jobs recovery for the 10%+ population growth since 2007. Orange County will likely achieve these job numbers in 2020. Meanwhile, price increases will remain low since homebuyer occupants ultimately determine selling prices — they can only pay as much for a home (or rent) as their savings and income qualify them to pay — nothing more for a sustained period of time.
However, per capita income increases will likely slow somewhat in 2020-2021 following the 2020 recession. This, along with higher interest rates, will hold back home sales in the next few years. Look to 2021-2023 for the next significant increase in home sales volume and prices. This period will be driven by the shifting demographic trends of retiring Baby Boomers and their Gen Y children who will become homebuyers en masse following the next recession.
is the writing staff comprised of legal editor Fred Crane, writer-editors Connor P. Wallmark, Giang Hoang-Burdette, Carrie B. Reyes, Benjamin J. Smith, Oscar Alvarez and graphic designer Mary LaRochelle.
Duke Ashwood on June 9, 2019 at 9:11 amCurious if the slow down in China is factored into these numbers. There are huge swaths of Irvine that are nearly 100% Chinese nationals purchasing with cash. The slow down in China (along with the Russian sanctions), have already caused a huge price drop and slow down in NY City’s apartment sales. Not that I expect Irvine to suffer in the same way as NY City, but I would think it would shave a point or two off these projections. Irvine has been a huge factor in new and existing home sales for some time now. Any effect in that market would have an out sized effect on Orange County’s numbers overall.REPLY
Home sales volume remains low, as does job creation. Residential construction of all types continues to struggle in this region, leaving would-be homebuyers wanting for more.
As the next recession looms on the horizon — expected in 2020 — forward-looking agents will prepare for the slowdown in sales and prices to continue here in Orange County and across the state. The next 30 years are going to be an about-face of the past 30 years of repetitively declining mortgage rates. Homebuyers will face the pressure of these rising rates in the coming years, though a brief reprieve is to be had in 2019-2020 as the Federal Reserve allows rates to cool in preparation for the next recession.
View the Orange County regional charts below for details on current activity and forecasts for its local housing market.
Updated September 1, 2019. Original copy posted March 2013.
Home sales volume dips
Chart update 09/01/19
2018
2017
2016
2003: Peak Year
Orange County home sales volume
35,100
38,400
37,900
53,900
*first tuesday’s projection is based on monthly sales volume trends, as experienced so far this year.
Home sales volume in Orange County remains weak and somewhat stuck at just over half the heights seen during the Millennium Boom. Echoing state trends, Orange County saw a decrease in total home sales volume in 2018, ending the year 9% lower than in 2017. Worse, year-to-date home sales are 13% below 2018 as of Q2 2019.
A sharp bounce in home pricing following the speculator interference of 2012-2014 has held sales volume back from any significant increases. Buyers’ incomes, already insufficient to keep up with quickly rising home prices, were further decimated in 2018 as mortgage interest rates increased.
In review, 2009-2010 Orange County sales volume rose slightly with the introduction of the housing tax credit, falling back in 2011 for lack of end user demand. From the latter half of 2012 through most of 2013, speculator hyper-activity bumped sales volume artificially yet again, as it did in all of California. The speculator buying wave has since receded.
Looking forward, a complete recovery with annual sales volume of around 46,000 in Orange County will be reached only afterend user demand is buttressed by labor force participation and normalized job levels, expected in the 2021-2023 recovery period following the next recession, anticipated by economists to arrive around 2020.
Low turnover rate to continue
Chart update 03/06/19
2017
2016
2015
Orange County homeowner turnover rate
6.8%
6.7%
7.3%
Orange County renter turnover rate
17.8%
18.5%
20.0%
Without turnover, homes do not sell. The homeowner turnover rate in Orange County has remained mostly level since the end of the recession in 2009. The renterturnover rate has declined since 2010 and was at 17.8% in 2017, the most recently reported Census year.
Renters rose at a more gradual pace in 2018, following years of escalating rents and declining rental vacancies. Homeowners are likewise struggling to compete with other homebuyers for a shrunken inventory of homes for sale, meaning the turnover rate remains relatively low today.
Turnover rates are likely to rise dramatically in the convergent 2021-2022 boomlet period raising rental vacancy rates. Then, members of Generation Y (Gen Y) will collectively rush to buy and Baby Boomers (Boomers) will retire en masse, selling and mostly buying replacement homes. International and domestic emigration into California will also play a significant role in suburban housing demand.
Homeownership remains low
Chart update 03/06/19
2017
2015
2014
Orange County homeownership
57.4%
56.7%
56.6%
Orange County’s homeownership rate has fallen since its 2007 peak of 62.7%. The most recent homeownership data shows a 57.4% homeownership rate in Orange County. Statewide homeownership has historically been about two percentage points below Orange County’s. The state average is currently 55%, thus homeownership reports in Orange County in 2017 will likely remain around 57%.
Expect Orange County’s homeownership rate to remain at its present low level until 2021-2023, when the housing market will bounce back from the recession expected in 2020. Only with the return of jobs, higher wages and increased confidence will the first-time homebuyer population gain traction.
However, don’t expect the rate of homeownership to fully return to the inflated heights seen in 2007 anytime soon. This rate was elevated by unfettered access to easy money, which mortgage regulators tamped down in 2014 with enforcement of ability-to-pay (ATR) rules to protect society from certain destabilizing types of mortgage lending. These rules limit mortgage funding to those homebuyers with the financial ability to actually repay their debts.
Thus, the housing market won’t see a repeat of those Millennium Boom homebuyers who lacked the proper finances. Though this translates to a slightly lower homeownership rate in the near term, it fosters a more stable future housing market in Orange County and the state. The shift of Gen Y to rentals for a longer period before buying a home than in past generations also puts a cap on home sales volume.
Construction starts on the rebound
Chart update 09/01/19
2018
2017
2016
Orange County single family residential (SFR) starts
4,500
4,800
4,300
Orange County multi-family starts
3,900
4,800
7,700
The recovery picture is mixed for Orange County residential construction. After years of increased single family residential (SFR) construction starts, 2018 saw a decrease in the number of new SFRs started. In total, 19% fewer SFR starts occurred in 2018 compared to the previous year.
Multi-family starts in Orange County totaled 4,500 in 2018, decreasing about 6% from the previous year and continuing to fall in 2019. This downward trend in starts will likely reverse in the coming years, as legislative moves focus on adding more housing for the ever-growing resident population.
On the other hand, don’t expect SFR construction to recover fully anytime soon. The next peak in SFR construction starts will likely occur in 2021-2023 as renters shift to becoming homeowners following a statewide-push for more construction. Even then, SFR starts are unlikely to return to the mortgage-driven numbers seen during the hyperactive Millennium Boom.
Jobs are recovering, too slowly
Chart update 09/01/19
Jun 2019
Jun 2018
annual change
Orange County jobs
1,673,100
1,631,200
+2.6%
California regained all jobs lost at the end of 2014, but Orange County didn’t catch up until the last quarter of 2015. While total job numbers actually declined in 2018, the number of employed individuals in Orange County is 2.6% above a year earlier as of June 2019, still just 124,100 above the number of jobs held before the recession. However, since Orange County’s population has grown significantly since jobs previously peaked in 2006, the real recovery is still further down the line.
As seen in Figure 9, job additions have been one-third slower to come about during this recovery compared to the 2000s recovery, and at half the pace of the 1990s recovery, echoing the secular stagnation of the 1930s. When will all of these jobs catch up with Orange County’s continuously growing population?
Orange County will likely catch up in 2020, just in time for the housing market to hit a major obstacle as economic factors set up for the next recession, expected by forecasters to arrive in 2020. These factors include the mitigating effect on home sales and the jobs market of increased mortgage interest rates, which began in 2018.
Jobs in the real estate industry
Chart update 09/01/19
Jun 2019
Jun 2018
annual change
Construction
109,100
104,500
+4.4%
Real Estate
39,800
39,200
+1.5%
The number of individuals employed in the real estate and construction industries fell during the recession, beginning to show mixed improvement in 2012. While the number of real estate professionals is now level with pre-recession levels, construction workers are still well below their Millennium Boom peak, and declining going into 2019. Jobs numbers in both of these industries will likely stall in 2019-2020, as sales slow and construction struggles to gain momentum.
Per capita income plays catch up
Chart update 03/06/19
2017
2016
Annual change
Orange County per capita income
$65,400
$62,763
+4.2%
California per capita income
$59,796
$57,497
+4.0%
The average income earner in Orange County made $65,400 in 2017 (the most recently reported data from the Bureau of Economic Analysis).
Sustainable home price increases (not driven by cash-heavy investors or market momentum) are limited to a ceiling set by personal income, the annual rate of increase from 2016 to 2017 in this region being 4.2%. These annual income and price increases will remain low until an optimal employment level is attained with a full jobs recovery for the 10%+ population growth since 2007. Orange County will likely achieve these job numbers in 2020. Meanwhile, price increases will remain low since homebuyer occupants ultimately determine selling prices — they can only pay as much for a home (or rent) as their savings and income qualify them to pay — nothing more for a sustained period of time.
However, per capita income increases will likely slow somewhat in 2020-2021 following the 2020 recession. This, along with higher interest rates, will hold back home sales in the next few years. Look to 2021-2023 for the next significant increase in home sales volume and prices. This period will be driven by the shifting demographic trends of retiring Baby Boomers and their Gen Y children who will become homebuyers en masse following the next recession.
is the writing staff comprised of legal editor Fred Crane, writer-editors Connor P. Wallmark, Giang Hoang-Burdette, Carrie B. Reyes, Benjamin J. Smith, Oscar Alvarez and graphic designer Mary LaRochelle.
Duke Ashwood on June 9, 2019 at 9:11 amCurious if the slow down in China is factored into these numbers. There are huge swaths of Irvine that are nearly 100% Chinese nationals purchasing with cash. The slow down in China (along with the Russian sanctions), have already caused a huge price drop and slow down in NY City’s apartment sales. Not that I expect Irvine to suffer in the same way as NY City, but I would think it would shave a point or two off these projections. Irvine has been a huge factor in new and existing home sales for some time now. Any effect in that market would have an out sized effect on Orange County’s numbers overall.REPLY
vDuke Ashwood on June 9, 2019 at 9:11 amCurious if the slow down in China is factored into these numbers. There are huge swaths of Irvine that are nearly 100% Chinese nationals purchasing with cash. The slow down in China (along with the Russian sanctions), have already caused a huge price drop and slow down in NY City’s apartment sales. Not that I expect Irvine to suffer in the same way as NY City, but I would think it would shave a point or two off these projections. Irvine has been a huge factor in new and existing home sales for some time now. Any effect in that market would have an out sized effect on Orange County’s numbers overall.REPLY
pay interest on car loans, credit card balances and mortgages. They earn interest, at least a little, on the money they save with banks.
Technically speaking, Federal Reserve officials did not touch any of those rates when they announced a quarter-point interest-rate cut on Wednesday, the first cut in a decade. The rate they reduced is the federal funds rate, which is what banks and other financial institutions charge one another for very short-term borrowing.
Most consumers don’t do that sort of overnight borrowing, but the Fed’s moves still affect the borrowing and saving rates they encounter every day.
The effect is not always direct or immediate, so consumers probably will not wake up on Thursday to find that all of their favorite rates have changed by a quarter of a point. There is even solid evidence that the mere expectation that the Fed would cut rates on Wednesday had already pushed down some of the key rates that consumers pay.
When you first start researching backyard garden chickens, it will seem overwhelming. Don’t let this stop you. Raising chickens in your garden is easy and entertaining. This article will help get you started in chicken keeping for beginners. Before Getting Backyard Garden Chickens Check your city ordinance to find out how many backyard garden chickens you are allowed to keep. Some cities only allow three hens. Order day-old baby chicks from your feed store or online. Make sure you specify that you only want females. You don’t want any roosters. They are noisy and very bossy. Keeping hens in the backyard is a much better idea. Tips on Raising Chickens in Your Garden When you bring the chicks home, you’ll need to keep them in a cage with a heat lamp, as they get cold easily. Make sure you put wood shavings, water and baby chick feed in the cage. You will fall in love. They are impossibly cute. Change the water, feed and shavings every day. Watch to see if they are too cold or too hot. You can tell this by whether they huddle under the heat lamp or camp out in the farthest reaches of the cage. Hens grow up quickly. By the time they get too big for the cage, they will also be able to tolerate cooler air temperatures. You can move them to a larger cage or straight into their hen house depending on the weather. When keeping hens in the backyard, make sure they have a coop where they can sleep and stay warm and dry. The coop will need nesting boxes with straw where they can lay eggs. They will also need a predator protected chicken run outside. The run should be connected to the coop. Chickens like to peck at the ground, eating bits and pieces of this and that. They like bugs. They also like to scratch the ground and stir up the dirt. Change their water regularly and keep them well supplied with feed. Change the dirty straw in the coop weekly too. It can get stinky in there. It’s fun to let chickens free range. They have distinct personalities and their antics can be hilarious, but chickens in a garden can be messy. If you want part of your backyard to remain neat and tidy, then fence it off from the chicken section. Chickens start laying eggs between 16 and 24 weeks old. You’ll be very pleased with how tasty their eggs are compared to store bought eggs. You’ll get the most eggs their first year. Egg production tapers off after the second year.
Single level designer perfect home just minutes from the best of Dana Point! Manicured foliage and updated hardscape welcome you to this panoramic canyon view home. Once inside you are greeted by a great room complete with extra natural light from French doors to the patio and solar tube lights. The warmth of this home is enhanced by the fireplace, bamboo flooring, neutral paint and fixtures that continue through the residence. Adjacent to the living room is the dining room with a granite bar that flows into the fully updated chef’s kitchen. Granite counters, stainless steel appliances, updated cabinetry, lighting, fixtures and hardware make this kitchen the hub of the home. The master suite features a spa-like ensuite with granite counters and dual sinks with a separate seat makeup vanity, stylish fixtures and high end finishes. Two additional bedrooms, an updated guest bath, and a two car attached garage complete the residence. The pool-sized yard with raised planter beds and a covered patio with showcase plantings create the perfect setting to relax and take in the canyon views and ocean breezes. Located on a great interior street, and with the oversized lot that extends down the canyon hillside, there is a quiet tranquility one might not expect. All of this just minutes from world class resorts, beaches, great dining, shopping and entertainment at Downtown Dana Point and Dana Point Harbor! A must see!
From Freddie Mac’s weekly survey: For the very first time in 2018, rates have dropped. The 30-year fixed averaged 4.44 percent, down 2 basis points from last week’s 4.46 percent. The 15-year fixed averaged 3.90 percent, 4 basis points lower than last week’s 3.94 percent.
The Mortgage Bankers Association reported an almost 1 percent increase in loan application volume from the previous week.
Bottom line: Assuming a borrower gets the average 30-year conforming fixed rate on a conforming $453,100 loan, last year’s rate of 4.30 percent and payment of $2,242 is $38 less than this week’s payment of $2,280.
What I see: Locally, well-qualified borrowers can get the following fixed-rate mortgages at 1 point cost: 15 years at 3.50 percent, 30 years at 4.125 percent, a 15-year agency high balance ($453,101 to $679,650) at 3.75 percent, a 30-year agency high balance at 4.125 percent, a 15-year jumbo (over $679,650) is at 4.25 percent and a 30-year is at 4.375 percent.
What I think: With all of the grumblings about low inventory levels and overpriced properties, home flippers are crushing it. Go figure.
Nationally, 2017 data indicates home flipping sales volume jumped to an 11-year high, according to Irvine-based Attom Data Solutions.
“California ranked as the 11th highest flipper state with 6.2 percent of all homes were flipped,” said Daren Blomquist, Attom’s senior vice president. “The second sale of the same property within a 12-month period defines a flip.”
Fresno led California for the highest number of 2017 flips at 9.6 percent. In Southern California, the Riverside-San Bernardino metro area ranked sixth with a per property gross flip profit of 36 percent. That translates to an average of $79,300. Nice!
The Los Angeles and Orange County market turned a 2017 gross profit of 32 percent, averaging a doubly-nice gross profit of $135,000. Cha-ching!
Not to worry if you can’t pay cash. Financing is available for investors who want to keep the property or fix, then flip it. Fannie Mae has a loan named Homestyle that will provide investor-purchase financing and fix-up funds for one to four units.
One interesting loan I came across for those wanting to “mansion-ize” a flipper allows you to put as little as 10 percent down, not to exceed 80 percent of the “as is” property value. For example, you purchase a property for $1 million but it’s worth $1.2 million before improvements. You can go in with $100,000.
With a cherry on top, the investor will make available as much as 80 percent of the fix-up funds based on the completed value. Interest rates range from 8 percent to 11 percent and 2-4 four points.
There are traditional construction loans available, but the challenge is all red tape to get an approved plan, contractor bids, etc., before the seller gets too impatient with a likely long escrow period.
Now, if you are looking to buy a recently fixed-up property, caution ahead!
Engage an experienced home inspector to dig deep.
“Fifteen to 20 percent of flipped properties I inspect are not done in a workman-like manner,” said Jon Wilhelm of Studio City-based Valley Home Inspection Service.
The biggest problems Wilhelm sees are shoddy structural modifications like opening up walls, electrical violations and moving roof framing without permits.
Wilhelm estimates 20 percent of the first contracted buyers to have inspections done on recently flipped properties walk away because problems are found and the seller is unwilling to fix them. It’s usually the second buyer contract that sticks because the seller now has something on record that can cause liability if undisclosed and or unrepaired.
A property inspection can cost anywhere from $300 to $800.
Pam Manzi can be reached at 949-510-4818 PamManziRE@gmail.com
Before you start looking for a home, you will need to know how much you can actually spend. The best way to do that is to get prequalified for a mortgage. To get prequalified, you just need to provide some financial information to your mortgage banker, such as your income and the amount of savings and investments you have. Your lender will review this information and tell you how much we can lend you. This will tell you the price range of the homes you should be looking at. Later, you can get preapproved for credit, which involves providing your financial documents (W-2 statements, paycheck stubs, bank account statements, etc.) so your lender can verify your financial status and credit.
Step 1: Find the Right Real Estate Agent
Real estate agents are important partners when you’re buying or selling a home. Real estate agents can provide you with helpful information on homes and neighborhoods that isn’t easily accessible to the public. Their knowledge of the home buying process, negotiating skills, and familiarity with the area you want to live in can be extremely valuable. And best of all, it doesn’t cost you anything to use an agent – they’re compensated from the commission paid by the seller of the house.
Step 2: Shop for Your Home and Make an Offer
Start touring homes in your price range. It might be helpful to take notes. HOWEVER IF YOU HAPPEN TO WORK WITH A SEASONED AGENT, CHANCES ARE YOU WILL BE UNPACKING BOXES, TOASTING TO YOUR NEW LIVING SPACE! CHEERS! 45 DAYS OR SOONER, NO STRESS, JUST PERFECT TIMING!
