Transforming foreclosures/ rehabs into luxury homes for the flip?

[Alan Lambert]

What do you think about buying foreclosures and rehabs, spending all out on remodeling the joint to make it a smart luxury home, then flipping it? Depending on the location, it seems like it should prove quite profitable. If I'm just starting out, how many of those do you think I'd be able to bust out in my first year? I could probably start with the VA home loan, and go from there, eh?

[Will Barnard]

You can do this IF the area in question supports and already has homes of higher end luxury finishes and designs. I don’t know your area so I can’t speak to it knowledgeably, but in my area of southern CA, I concentrate in higher end areas with older homes where many other developers have already built Mc Mansions. I then buy an old, small, outdated home on a nice street where other newly built homes exist. I then knock it down (for the most part) and build a new modern home. The numbers have been working for a number of years however, the spreads have been compressing and as such, the profits have been more slim than in years past.

It is all about the numbers. Taking an average home on an average street and going over the top with finishes and design will not work as nobody will want to pay say $600k for your home when every other home is $450k just because yours has high end appliances, plumbing fixtures, and other higher end amenities.