Today we’re going to talk about How to buy Rental Property in Los Angeles. Buying rental properties in Los Angeles can be a great way to build your personal wealth. However, as in most real estate investments, it is sometimes difficult to know if you’ve found a good deal, on it’s face – especially the first time getting your feet wet. Here are some things to look for to be sure that the rental you’ve spotted on Zillow is the right investment for you.
How to buy Rental Property in Los Angeles
Find the best location
If traffic is slammed, and the road is blood red on your iPhone Google maps, rentals are easier to rent. A “For Rent” sign will often pull more responses than an ad in Craigslist.com – believe it or not. If it is a nice location, it will usually rent quicker, but lets be real, everything rents in Los Angeles by the sheer number of people unable to afford to buy housing.
How to buy Rental Property in Los Angeles
Run the numbers
Get every single last expense figured into your budget calculations, and be sure you’ll have positive cash flow from the start, or at least breakeven if it’s the right spot. A few things to put in your calculations are mortgage payments, taxes, insurance, maintenance, management, utilities and don’t forget reserves. The biggest mistake is to not budget enough for reasonable reserves. A good rule of thumb is at least $100 per small unit per month for remodeling, vacancies and roof replacing needs to be kept, and at least $200 dollars per month must be budgeted for large units per month.
How to buy Rental Property in Los Angeles
Look in towns with high home prices
Fortunately for you and me Los Angeles is a magnet for thousands of new faces every week hopping to fulfill dreams of Hollywood stardom or who knows what else. Either way, what do people do when they can’t afford to buy? They rent. Period.
How to buy Rental Property in Los Angeles
Avoid cedar-shake roofs, and wood-sided buildings
Look beyond current expenses to how much maintenance the building will need. Low maintenance means less headaches and more profits for you. High maintenance building have many stories, stairs, elevators, flat roofs, basements. Large units have more maintenance than smaller units- get it? And very small units like bachelor pads tend to have more vacancies so more time is spent cleaning, painting and showing. Medium sized units in great locations have the least maintenance and the least vacancies which means, at the end of the month, more money in your pocket.
How to buy Rental Property in Los Angeles
Ask to see the rental history
Make sure you note how long residents are staying on average, and have they paid on time or do you have troublemakers in the house? Buying rental properties with below-market rents means you get to raise rents. Raising rents means you immediately raise the value, because rental property values are based on cashflow and income.
How to buy Rental Property in Los Angeles
Find out if it complies with zoning and fire codes
Have it inspected by licensed & bonded professionals, and ask local officials if there are or have been any problems. You’d be smart to have the seller pay for a C.L.U.E. report too. If the property is less than 20 years old it’s somewhat arbitrary. If you limit your search to newer buildings, you will be less likely to have building code and maintenance problems, however, you should still have a physical inspection by a licensed property inspector.
How to buy Rental Property in Los Angeles
Consider “Owner/Manager that is out of state”
These properties are often the best deals, because it is tough to manage a property from far, far, away. An out of state seller is often more concerned with a quick sale than a high price, but that’s just a rule of thumb. I’m dealing with an out of state seller right now that drew a line in the sand on price, which tells me she isn’t very motivated to sell.
How to buy Rental Property in Los Angeles
Determine if the neighborhood is stable or improving
Stable is okay, but if you can buy in a neighborhood that is improving (a prettier way to say gentrifying) you’ll rent the units more easily, and therefore get automatic appreciation in value with time – yahoo!
If you have any specific questions about How to buy Rental Property in Los Angeles contact me directly and it would be my pleasure to chat real estate investing with you. We do real estate seven days a week!
Your Los Angeles Real Estate Expert
I’m a local real estate agent with The Shelhamer Real Estate Group, and It would be my pleasure to help you find the perfect property to call home in Downtown Los Angeles, or if you’re thinking about selling a house, condo, or multi-family building in, Los Feliz, Silver Lake, Atwater Village, Glassell Park, Mount Washington, or Downtown Los Angeles, it would be a privilege to help you get top dollar for the sale of your property.
Let’s chat sometime. 310-913-9477 or contact me
