California’s property risks are many, varied and potentially devastating for the naive flipper and developer.
Securing and successfully flipping a property is just part of the battle.
California’s geography, climate and natural disaster profile ensures flippers and developers are forced to contend with an additional array of challenges, costs and regulations which must be satisfied.
The state’s strict environmental laws and regulations pertaining to sustainable living must also be negotiated.
These factors all have a significant impact on the finance, insurance, sale and ultimately feasibility of any project.
Here’s the devil in the detail of California’s property risks.
Fire hazard zones
Los Angeles’ catastrophic wildfires in January 2025 were ample evidence of the threat posed by the city’s lush surrounds, even in the midst of winter.
While the damage from those fires was extreme, their occurrence was nothing unusual.
California experiences around 8,000 wildfires every year and in 2024, they burned a total of 1,050,012 acres.
Los Angeles has endured many serious fire events.
The city is divided into Fire Hazard Severity Zones (FHSZs) rated as moderate, high or very high based on the level of threat.
The threat for any address can be determined here.
The level of threat to any particular property may have an impact on a lender’s appetite to finance a project and even if approved, it may trigger a longer time to underwrite.
It will also have a significant impact on the level of premiums associated with insuring the property.
Earthquake retrofitting requirements
California is even more notorious for its long history of earthquakes.
The last major one, centred in Ridgecrest in 2019, had a magnitude of 7.1 and inflicted $5.3bn worth of damage.
Modern houses are built to withstand California’s rumbles.
But houses built prior to 1980 often require seismic retrofitting to safeguard them – especially those in southern California.
The California Earthquake Authority requirements may include bolting the house to its foundations and bracing the perimeter of the crawl space.
Flippers and developers should make themselves aware of any requirements for approvals before purchasing a property.
California Environmental Quality Act (CEQA)
The California Environmental Quality Act is designed to protect the environment.
It adds another layer of complexities to California’s property risks.
The CEQA code applies to “all discretionary projects proposed to be conducted or approved by a California public agency, including private projects requiring discretionary government approval”.
It seeks to identify ways environment damage may occur and limit or avoid that damage.
House flippers and developers may fall under its jurisdiction if the project has the potential to result in any direct or indirect physical change to the environment.
The project would then require CEQA review before commencement.
This can result in costly delays or even the denial of project approvals.
It is yet another significant consideration that all real estate entrepreneurs in California should assess before committing to their development.
Real-world examples of developers hitting roadblocks
An investigation by Holland & Knight in 2020 revealed that almost 48,000 or nearly 50 per cent of California’s housing developments had been challenged by CEQA lawsuits.
The housing crisis has seen CEQA undergo reforms aimed at reducing delays, especially for projects with a focus on sustainable development.
- In 2024, neighbors in Alta Heights cited concerns about increased traffic in a lawsuit to stop a proposal to convert an old church into a childcare facility. The completion of Le Petit Elephant Childcare Facility was delayed for 12 months at a cost of $700,000.
- A proposed housing development near the University of California, Berkeley, which was intended to house 1,100 students and 125 formerly homeless people, was temporarily blocked because of fears it would contribute to noise pollution.
- The Centennial development at Tejon Ranch remains in limbo as environmental groups litigate over the master-planned community’s vulnerability to wildfires and its impact on contributing to a rise in greenhouse gases from additional cars.
Risk score tools and workarounds
It is important to gather as much information as possible when assessing the merit of a development.
Developing relationships with real estate professionals and local government officials can be advantageous.
It is also important to use all available tools.
Besides the FHSZ, these include:
Cal My Hazards – shows the risk of fire, earthquake, flood and tsunami
Climate Check – covers risks for fire, flood, storms and heat
FEMA.gov – shows which communities are most at risk to natural hazards
Reducing your risk profile is essential.
To limit wildfire risk
- prioritise homes in well-developed areas, avoiding high-risk zones
- confirm insurance with brokers before purchase and use the California FAIR plan as a last resort
- clear combustible areas outside the property and landscape with fire-resistant plants
- install ember-resistant vents, fire-rated roofing (Class A), metal mesh screens and non-combustible siding
To limit earthquake risk
- avoid properties on liquefaction zones or active fault lines
- have buildings assessed by structural engineers to measure the integrity of their foundations and seismic vulnerabilities
- for older homes, budget for bolting foundations, cripple wall bracing and strapping water heaters, highlighting the upgrades as selling points
Get support today
Forewarned is forearmed.
If ignored, California’s property risks can quickly sink the ambitions of any budding flipper or developer.
Being familiar with all of the challenges, risks and tripwires unique to the California real estate market is critical to success.
That’s why partnering with Equidy is one of the smartest moves you can make.
Equidy has an intimate and personal history with all aspects of property development in California and has done for more than 40 years.
They work closely with their clients to ensure they maximize their leverage and return on investments without putting themselves at unnecessary financial risk.
They know the local landscape intimately and can advise you about the wisdom of flipping particular properties as well as factoring in margins to account for insurance spikes, retrofit costs and permit delays.
Even better, they are an experienced private money lender, making them the ultimate one-stop shop for flippers and developers.
They stand by their core belief that anything is possible and are determined to prove it every single day.
Even in challenging economic times, they love to reward entrepreneurship and strive to help their clients realize their wealth creation dreams.
Equidy enjoys long and established relationships with serious investors, sellers and real estate professionals.
They leverage their reputation and trust, using clear communication to minimise the risk to all parties.
Contact Equidy today to book your free strategy call.
