Picking a Zipcode and Market Research

[Patricio P.]

Hi BP Community!

I've been reading tons of posts and listening to the BP podcast and thinking a lot about my goals and plan for investing in Real Estate. My general thoughts so far are to get started with rehabbing but I understand there is a steep learning curve. I will try to find a mentor or someone experienced to partner with on my first few deals (and maybe more). Before I take that step I'm joining the local REIAs and want to learn as much as I can and formulate a general plan.

What advice would you give to someone who lives in Silicon Valley in the Bay Area when it comes to performing market research and selecting zip codes to search for deals?

I want to identify a target area to search for potential rehabs and could use your advice on best way to find which homes are selling the most and the fastest. From there I can get a good idea of the general ARV for those types of homes in those areas and work backwards (using the 70% rule) to find homes that meet my criteria.

I want to get as focused as possible so I can get some actionable leads. Thoughts?

Bonus questions:

1. Can flipping be a profitable endeavor in silicon valley, CA?

2. Does the 70% rule apply in hyper-expensive markets like the San Jose Metro area?

3. For those of you who are currently flipping houses in the Bay Area are you finding the deals via direct marketing, MLS, Realtors, or wholesalers?

[Jeff Pollack]

@Patricio P.

I've given some answers after your questions.

What advice would you give to someone who lives in Silicon Valley in the Bay Area when it comes to performing market research and selecting zip codes to search for deals?

Focus in an area you know well, or one that a trusted team member knows well. Get access to MLS or get a member on your team (e.g. agent/agents) who have access.

I want to identify a target area to search for potential rehabs and could use your advice on best way to find which homes are selling the most and the fastest. From there I can get a good idea of the general ARV for those types of homes in those areas and work backwards (using the 70% rule) to find homes that meet my criteria.

The market is still hot and inventory still very low.  Homes on the entire peninsula and East Bay are selling the most and fastest.  Don't overthink things in this market.

I want to get as focused as possible so I can get some actionable leads. Thoughts?

Take action.  Talk to people.  Build your team. Network and market using a broad range of techniques. 

Bonus questions:

1. Can flipping be a profitable endeavor in silicon valley, CA?

Yes.  Very.

2. Does the 70% rule apply in hyper-expensive markets like the San Jose Metro area?

Rarely.  I know few people in the Bay Area who religiously apply the 70% rule here.  One person I can think of who applies it religiously does very few deals per year, but in so doing dramatically reduces his risk on each deal.  For me whether it is 70%, 75%, 80%, etc depends entirely on the deal.  If it is paint and carpet and I have a buyer before I even buy the place, thus dramatically limiting my exposure I'll go to 80%+, since my risk is so low.  If we're talking a 10 month rehab my exposure is much greater and I need to but at much more of a discount.  

3. For those of you who are currently flipping houses in the Bay Area are you finding the deals via direct marketing, MLS, Realtors, or wholesalers?

All of the above.  I like casting a wide net vs using one or two methods exclusively.

Happy hunting!

Jeff