What Out-of-State Investors Should Keep in Mind When Adding a Los Angeles Rental Property to Their Portfolio
For out-of-state investors, Los Angeles can be a good city for real estate investment due to its strong economy, great climate, growing population of renters, global entertainment industry, and high-income neighborhoods. Reports show that home values in the city have increased by 17.7% over the last year.
However, out-of-state investment comes with big responsibility and can become troublesome if not handled properly. Here are some suggestions that out-of-state investors can keep in mind before adding a Los Angeles property to their portfolio.
Identify The Right Neighborhood
The location of your rental property plays a significant role in contributing to your rental profit. Therefore, it is important to choose a neighborhood that offers a high rental yield and fits in your budget as well. Map out what outdoor amenities a neighborhood offers, such as sidewalks, parks, walking trails, proximity to grocery shops, high-standard schools, pharmacies, department stores, commute to work, and adequate street lighting. It is also important to check the crime rates and scope for vandalism in the preferred location.
Los Angeles has multiple neighborhoods, but not all are equally good for investment. Westwood, Silver Lake, Los Feliz, Hollywood Hills, Beverly Hills, and West Hollywood are some of the most expensive neighborhoods but which also attract a very desirable pool of tenants with high incomes. If you are looking for something in a lower price bracket, you can consider neighborhoods like Highland Park, El Sereno, West Washington Boulevard, Mid City West, West Hills, and Central City for their Los Angeles property investment.
Explore the Los Angeles Real Estate Market
Once you decide where you want to invest, the next step is to study the local real estate market. Look at the micro (specific neighborhoods) and macro (general market) levels of the real estate market before making an investment. Make sure you study the demographics, the overall economy, and the job market. The large job market draws in youngsters, resulting in a larger pool for potential tenants. Also, conduct a thorough research about the ROI metrics of the city, such as average rental income, average cash on cash return, and average median home prices.
Understand which type of property is performing well in the market. For instance, condominiums and single-family rentals are currently very popular investment options in Los Angeles.
Study Local Laws and Regulations
Each city and state in the US have their own amendments apart from federal housing laws, codes, and regulations. Make sure you fully understand the California real estate laws such as the Fair Housing Law, Anti-Discrimination Law, Megan’s Law, Landlord-Tenant Law, and California Landlord Disclosures before investing in a Los Angeles rental. The state website is a good place to start, but if you need help understanding the local laws, it is always good to talk to a professional property manager who knows them inside out.
Decide The Type of Property You Want to Invest In
Decide the type of property you want to invest in, according to your budget and your ROI expectations. Los Angeles offers a diverse variety of properties for investors, such as multifamily properties, commercial properties, condominiums, and apartments. Each type of rental will attract different types of tenants.
If you consider single-family and multifamily homes, you have the advantage of low vacancy rates, low tenant turnover, and lesser property maintenance costs as compared to commercial properties. Short-term rentals are another option for investors as the city attracts around 35 million tourists every year, which gives short-term rental owners a lot of opportunity.
Hire A Property Manager
It can be challenging to manage your property and tenants as an out-of-state investor. Hiring a property manager can ease this worry to a great extent. Your property manager can conduct regular inspections, provide proactive maintenance, manage your tenants, collect monthly rent, and send you an annual performance report. This way, you can track all property-related activities successfully without being in the city yourself.
MGMT Group is a full-service residential property management company with over ten years of experience managing real estate throughout the Los Angeles area. We take a proactive approach while managing our properties and believe in working intelligently to provide better results for client portfolios.
Contact us at MGMT Group, Inc. for more details on managing your out-of-state investment.