How to Find a Property That’s Worth Investing In | Los Angeles Property Management
Los Angeles has been a leading market for real estate investors for years, thanks to the opportunities that exist here. There’s a large and growing population of renters, the economy has been and remains strong, and the entertainment business keeps people well-employed and locally engaged. For investors interested in short-term rentals, there’s a gorgeous climate and plenty of entertainment and recreation.
Every investor is different, and your goals are yours alone. However, there’s something that meets every investor’s requirements in the Los Angeles rental market. The question you have to ask is: How can you be sure your potential acquisition is a good investment? You want to make sure you’re investing in a property that’s worth your resources. We have some ideas on how to identify those opportunities.
Cash on Cash Return and Cap Rates Drive Decisions
You’re looking for the highest return on your investment, and that means cash on cash return and capitalization rate are going to be front and center when you’re evaluating potential investments. Los Angeles is a large and diverse market, so make sure you’re focused on the neighborhoods that are going to deliver the best cap rate and cash on cash returns. As an example, let’s look at two communities that make sense financially.
Koreatown
Real estate in Koreatown has been growing for the last two or three decades. This diverse and dynamic neighborhood is a mix of residential and commercial activity, and many of the businesses are owned by Korean immigrants who settled in Los Angeles generations ago. This neighborhood is growing culturally and economically. Expect a strong cash on cash return and almost immediate appreciation.
Silver Lake
Closer to downtown L.A., Silver Lake has a cash on cash return that’s around 2.3 percent, and a traditional cap rate at around 4.7 percent. It’s a diverse, active neighborhood that’s walkable and attractive to several demographics of residents.
Always do the necessary math when you’re investing in a Los Angeles rental property. Your cap rate and your cash on cash return should make the decisions for you.
Preparation: Los Angeles is a Competitive Investment Market
Los Angeles is a competitive seller’s market, even now when the entire country is trying to establish some kind of normalcy in the wake of the COVID pandemic. Los Angeles real estate prices are continuing to rise, and as an investor you’ll need to be competitive from the start. When you’re searching for good rental properties, it’s important to be ready to act.
Most investors will balance short term cash flow with long term returns based on appreciation. When you’re buying, you’ll want to pay attention to location and set reasonable expectations for how your property will perform. Once you know what you’re looking for and how you’re going to pay for it, prepare to act quickly. You will not have the luxury of time.
Property Type: Single Family or Multifamily?
Whether you invest in single-family homes or multifamily properties depends on your investment goals and financial strategy. You know there are pros and cons to each. Single-family homes will result in lower vacancy and turnover rates. You’ll have stable tenants and higher rents. Multifamily properties will reduce your vacancy risk and save you money on per-unit maintenance and management costs.
Remember that you’re looking for properties in good condition. It’s easy to romanticize the rehab and renovation projects of those low-cost buildings, but the work usually takes longer than you expect and costs more than you budgeted. Find investment properties that are as close to rent-ready as possible so you don’t delay earning rental income.
We work with new and experienced investors all the time, and we can help you find the best rental property for your investment portfolio. Contact us at MGMT Group, Inc. We’re your best Los Angeles property management solution.