Suppose you wish to buy a real estate property to increase your investment portfolio; investing wisely in properties is a rewarding and exciting venture. However, the problem lies in finding suitable investments. Real estate investing is tricky, and any small mistake can land you in a serious financial problem. Hence the need to conduct detailed research before diving into the industry. From this research, you can easily narrow down the primary features you want to see in your property, like amenities, size, location, and type.
If you’re undecided about where to begin your real estate investing, consider starting with finding good real estate investment opportunities in California. However, ensure to work with a broker to avoid getting a bad deal.
You’ll need to consider several factors before making the payment. For instance, if you intend to manage the property yourself, then opt for nearby locations. But, if you want to outsource the management to a property management company, then don’t limit your location.
This guide contains tips on finding the best real estate investment opportunities in California.
Table of Contents
- What to Consider When Choosing Investment Properties in California
- Steps to Acquire an Investment Property
What to Consider When Choosing Investment Properties in California
Before choosing an investment property for sale in California, consider the following factors:
1. Property Taxes
Depending on your location, check the property tax to ensure you aren’t losing. Although high property taxes aren’t bad in a great neighborhood with long-term tenants, they’re frustrating in unappealing locations.
Contact the municipality assessment office for your tax file or information. You can also ask the homeowners in the neighborhood, if a property increase might occur shortly. A financially distressed town might hike taxes way beyond a landlord’s rent charge.
Your chosen neighborhood determines your vacancy rate and the tenants you attract to your property. If you buy a building close to a college, chances are, your tenants will be majorly students. Thus, you might struggle to fill the vacant units every summer. Note that some towns discourage rental conversions by piling on red tape and imposing exorbitant permits.
You wouldn’t want to live in a criminal zone, would you? Check the public library or local police for accurate neighborhood crime statistics. Assess the vandalism rate, the petty and serious crimes rate, and the frequency of criminal activity.
Then ask around for how frequently police visit the neighborhood.
4. Future Development
Check the municipal planning department for information on already zoned plans or expansion moves. If there are several construction plans ongoing in the neighborhood, this act is a good sign. Look out for any recent developments that might hurt the surrounding property’s price.
Note that new houses might likely compete with your property.
5. Number of Listings and Vacancies
A neighborhood’s number of listings can be a red or green flag when searching for real estate opportunities in California. A community with an unusually high amount of listings will force you to reduce your rents to entice renters, while a low number of listings will enable you to raise your rent.
6. Job Market
Neighborhoods with increasing employment opportunities attract more renters. So ensure to check the local library or Bureau of Labor Statistics (BLS) to discover the area’s job availability statistics.
An announcement about a new large company’s impending move to the area will ensure that workers will take up available vacancies in the community. Depending on the business involved, house prices may go up or down when this happens.
Steps to Acquire an Investment Property
Acquiring an investment property is easy. However, the only tricky part is getting the best investment opportunities in California out of the numerous listings in the real estate market.
1. Choose an Investment Property
After deciding whether to opt for residential or commercial real estate and a suitable neighborhood, find a property with a good projected cash flow and appreciation potential. Assess affordable and expensive properties. Don’t be afraid; most real estate properties sell below their listing price. Also, monitor other properties listing prices and check market records for prices of similar buildings to get an idea of the neighborhood’s market value.
To ensure your property appreciates considerably, lookout for a property that tenants will pay higher for after a few renovations and cosmetics changes. You’ll understand this decision when you want to sell it after a while.
Don’t forget to purchase the property at a reasonable price to ensure it remains profitable. You can search for the best places to invest in real estate in 2020. From there, you can get the best ideas for promising real estate areas.
3. Determine the Rent
Make an informed guess when setting the rent. When you put the rent too high, you’ll likely end up with empty units for an extended time, which will reduce your overall profit. Assess whether your property worth more or less and start from the neighborhood’s average rent.
Consider calculating the property’s cost, removing your monthly mortgage, dividing insurance cost and property taxes by 12, and reserving a generous amount for repairs and maintenance to discover if the rent is suitable.
Don’t underestimate the property’s maintenance cost. Depending on the amount of upkeep you wish to do and the building’s age, it could be lower or high.
A relatively new building will probably need minor repair than an older property. Maintaining the property personally cuts costs, but if you don’t have time to run around frequently for the maintenance, consider outsourcing the task. However, you’ll need to pay about ten percent of your gross income to the property management service you hire.
After checking all these figures and the result appears good, then go ahead and submit an offer.
4. Make the Purchase
The next step after determining the rent is to make the purchase. Unlike residential properties, financial institutions offer demanding lending requirements for commercial real estate. They assume that you’ll be less inclined to sell off your primary residence than a business property when you have financial crises.
Nonetheless, you might pay 20 to 30 percent down payment and closing costs. Ensure a professional property inspector thoroughly inspects the building and ask a real estate attorney to go through the contract before signing the documents.
Remember to pay for adequate insurance to cover your property. Your property’s depreciation, insurance, and mortgage interest are tax-deductible to a specific amount.
The Bottom Line
Investing in real estate is the best way to diversify your portfolio and increase your income. While paying for a property is easy, the stress lies in getting the best real estate investment opportunities in California.
You’ll need to separate the wheat from the chaff thoroughly, and it’ll take a massive chunk of your time. However, the return on investment will be worth it after the whole stress, depending on your investment type.
To avoid this stress, consider using the services of a buyer’s broker like Buy NNN Properties. That way, you’re sure of getting good properties at the best prices.
Also read: How to Become a Real Estate Agent?