Undervalued properties are the diamonds all flippers and developers seek.
The most successful ones know how and where to find them.
The lower the purchase price, the higher potential profit after renovation.
The trick is knowing how to spot that diamond in the rough that other investors and developers miss.
California has one of the most competitive and expensive real estate markets in the U.S.
But undervalued gems still exist in almost every corner of the state – you just have to know how to unearth them.
When you do find one, it is also important to act quickly before another developer snaps up your find.
That’s why access to fast hard money is so critical.
Here’s how to identify undervalued properties with the most potential that can make you the biggest bucks from L.A. to the Bay and everywhere in between.
Scout unfashionable neighborhoods
Gentrification can quickly turn unfashionable or ‘bad’ neighborhoods into gold mines.
The trick is to buy at the first sign of improvement before prices have risen and the market catches on.
Be sure to track city planning updates and regional development news for early signs.
Look for key indicators such as:
- new infrastructure like highways, public transport, schools and shopping centers
- young professionals moving in
- businesses, restaurants, entertainment venues and co-working spaces opening
- investor activity rising as people seek cheaper options
Target seller distress along property distress
Undervalued properties are usually seller distressed or property distressed.
Both offer buyers substantial discounts.
Flippers usually look firstly to property distress, but seller distressed properties usually require a lot less work while offering a quick and substantial profit.
These properties are often structurally sound and available at a reduced price because of time constraints.
Seller distress happens for a variety of reasons such as the need for a fast sale to avoid costly bridging finance.
It also occurs in the event of:
- divorce
- foreclosure
- job relocation
- deceased estates
Look for FSBO (for sale by owner) listings, homes with price reductions, pre-foreclosures, off-market deals and properties on the market for an extended period with few updates.
Look beyond cosmetic damage
Ugly houses can offer great rewards with a little makeover.
Many buyers are instantly turned away by outdated interiors, peeling paint, old carpet, bad landscaping or poor presentation.
But these are simple fixes for flippers that can generate big returns.
Even properties that need kitchen and bathroom upgrades will still offer a high ROI (return on investment).
Look for ones that are structurally sound with a good layout and in a good location.
Avoid ones with roofing issues or cracks in their foundations.
Utilize property metrics
Undervalued doesn’t necessarily mean cheap.
It means underpriced relative to its potential.
Use property metrics like ARV (After Repair Value) and DSCR (Debt Service Coverage Ratio) to uncover hidden equity.
Seek properties with low Price-to-Rent ratios, indicating strong investment opportunities.
Consider how you can add value to a property, be it via an extra bathroom or bedroom, an ADU (accessory dwelling unit), an attic or garage conversion or an open plan layout.
But be sure to check any zoning requirements first!
Leverage tech and data
The best investors utilize all available data to identify patterns and help them find underpriced bargains.
Look for properties selling at under the median price-per-square-foot for the neighborhood.
You should closely analyze:
- days on market
- equity position
- recent sales in the area
Embrace tools like PropStream, Privy, PropertyRadar, Zillow filters and Redfin alerts.
They will help you sift through the countless properties on the market and highlight the ones you should consider buying.
Build a local network
Networking with key industry players is paramount.
It helps flippers get the jump on their competitors, learning about new properties that become available before they go to market.
Build trusted relationships with local real estate professionals including agents, wholesalers, contractors and property managers who often hear about impending sales.
Attend investor meet-ups or real estate groups in your target market.
Get advice today
Undervalued properties are everywhere – you just have to know where to look.
Identifying them becomes second nature for the most successful flippers and developers in California.
With the right tools, discipline and access to fast funding, you can become one of them!
When you are seeking to widen your professional network, you really should start by chatting with the real estate industry leaders at Equidy.
Equidy has an intimate and personal history with property in California and has covered all aspects of real estate and property development in the state for more than 40 years.
They work closely with their clients, advising them about the types of properties to flip and how to find them.
They also work creatively with them every step of the way, providing their wealth of knowledge and support network as their projects take shape.
Equidy also doubles as a hard money lender, meaning you can acquire expert advice while gaining instant funding for your project.
That way, you’ll never miss an undervalued property when you find one.
Equidy stands by their core belief that anything is possible and they are determined to prove it every single day.
Even in difficult 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 while leveraging their reputation and trust, using clear communication to minimise the risk to all parties.
Contact Equidy today to book your free strategy call.
