Purchasing Los Angeles Real Estate as Income Property

With home prices nearing, if not at their bottom, now might be a great time to buy Los Angeles real estate as income property.  Many more people will be looking to rent now that pre-approved mortgages are more difficult to come by.  However, before you become a landlord, you’ll want to make sure your potential rental property won’t remain vacant for long.

6 tips to help you evaluate your Los Angeles real estate investment:

  1. Determine if your area has a strong rental market. See what kind of homes are for rent and track how long they remain vacant. If the same properties are listed week after week, it might not be the best area to purchase a rental.
  2. Get a feel for the stability of the population.  It’s good to find a rental property in a transient community because residents are less likely to purchase their own homes, and more likely to rent, if they know they’re only going to be there for a couple years.  In particular, look for areas with military installations or colleges nearby.
  3. Keep an eye on Craigslist and the local Classifieds. Track how many rentals are available at any given time, and get an idea of the size of houses most commonly listed. You won’t want to be trying to rent a 1-bedroom house in a neighborhood that is full of young families.
  4. Make sure your potential rental property is located in a good school district. Potential renters with children could be turned off by the quality of the local schools if they have a poor reputation.
  5. Check around with local property management companies. They’ll often have the best information about what sort of properties are the easiest to rent out. You can also check their websites to see the properties they have available.  Newer homes may not even necessitate a property manager–yet another post for another day!
  6. Find a house that’s in good shape. Would you live there? If not, either move on to a different property or immediately fix it up.

Owning a rental home can be a great investment. Do your homework, and purchase a home people will be clamoring to rent — not one that continues to sit vacant.

 

1 thought on “Purchasing Los Angeles Real Estate as Income Property”

  1. Manhattan Beach Realtor

    New investors tend to underestimate the total costs of property ownership. Some factors that should be included in calculations:

    1) Acquisition price + transaction fees (~2% of purchase)
    2) Annual maintenance – rule of thumb is 0.5% all the way up to 2% of home value budgeted annually
    3) Taxes (annual property taxes and capital gains at disposal)
    4) Interest expense on mortgage
    5) Inflation can effect expenses faster than rental rates, so allow some margin
    6) Transaction costs at disposal – these can range up to 8% with Realtor fees
    7) Equity opportunity cost – how much you could have made if you put your down payment in an interest bearing account, or an alternative investment! This is most often overlooked, but is a true economic cost of property ownership.

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