Insight: Flip that mansion: investors see riches in luxury U.S. homes

Sun Aug 11, 2013 2:13pm EDT
 
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By Tim Reid

LOS ANGELES (Reuters) - Jan Brzeski stands in a sun-filled, beautifully refurbished living room high in the Hollywood Hills, looking out at a swimming pool and, miles (km) below, stunning views of Los Angeles.

Brzeski is a private money lender running an investment firm in Los Angeles that provides loans to house flippers - investors who buy a home, refurbish it, and sell it at a profit. Many flippers turn to money lenders because they cannot get banks to provide such short-term, quick financing.

Standing with Brzeski is Scott Ryan, the realtor who bought this four-bedroom, five-bathroom house in December 2012 for $1.5 million - with money lent by Brzeski - and has transformed it with another $600,000. This week the property will go on the market at $3.295 million.

"People will come in here and fall in love," Ryan said, with a house flipper's standard issue optimism. "This is an emotional sale. If it takes a week to sell, I will be surprised. There are a lot of young, wealthy people here, and a lot of money out there."

Eighteen months ago Brzeski and his firm, Arixa Capital Advisors, were lending investor money to flippers on very different properties: $250,000 single family homes in southern California's up-and-coming lower- to middle-class blue-collar neighborhoods. Most of the deals involved foreclosed homes that were totally refurbished, and then sold quickly.

No more. Brzeski now focuses on developers working on high-end flips of mansions and townhouses in exclusive neighborhoods, such as the Hollywood Hills and Bel Air.

And he is not alone. There has been a surge in high-end and luxury flipping nationwide. Between 2011 and today, flips of homes valued at $1 million or more have risen almost 40 percent across the United States, according to RealtyTrac, the housing data company.

Between 2011 and 2012, high-end flipping soared 456 percent in Phoenix (150 properties from 27); 867 percent in Orlando (29 homes from 3); and to 73 properties from 10 in Las Vegas, according to RealtyTrac. To qualify as a flip for the figures, a home has to be bought and sold within six months.   Continued...

 
Lender Jan Brzeski (L) and developer Scott Ryan show a multi-million dollar home that was their spec renovation project in the Hollywood Hills area of Los Angeles, California August 5, 2013. REUTERS/Jason Redmond