If you like to play it safe, investing in real estate might not be the best option for you. This is especially true when it comes to investing in LA rental property. Stop for a second. Don’t pull up anchor right away. There are many benefits to being a landlord in LA. On the other hand, there are also risks. The good thing about all these risks is that you can prevent them or minimize them if you properly prepare for them. Then, if you want to be a rental property owner in Los Angeles here is what you need to know.
Why is investing in LA rental property so attractive to investors?
Unlike with other types of real estate investing there is no hustle and bustle between investing and starting to collect the rent checks. With that being said, there is usually no construction, marketing, and selling in between. All you need to do is find tenants and the monthly checks are starting to roll in. You get almost instant gratification and the returns are immediate. That sure sounds like a dream. Hearing stuff like this can certainly motivate anybody to begin investing in real estate. Also, this type of investing is an opportunity for potential investors to invest out of their state of residence.
Many are motivated by Hollywood to move to California, therefore rental properties are always in demand.
Los Angeles is a great place to develop a rental property
For example, you can live in Nebraska, but own and rent property in LA. No wonder this idea would be attractive for non-Californians. Not many are moving out of California. Constantly there are big migration waves to California. When moving out of California you might be considered the odd man out. Therefore, investing in LA rental property is a swell idea.
Risks of investing in Los Angeles rental real estate
You hear many stories about people getting rich through real estate investing. Is it possible? Of course, it is possible, and many have done it. However, there are many that couldn’t capitalize on it and ended up broke. For future and current investors, it is important to see both sides of the coin. For those that refuse to see both sides, a rude awakening might be just around the corner. So, in order to minimize the risks, you must be familiar with them. Here are the most common risks associated with investing in LA rental property.
Unreliable and irresponsible tenants
There is no way to predict will somebody be a modeled tenant. Still, there are signs and factors that you must take into consideration before renting out your property. For example, it is very likely that a family will be better tenants then UCLA students. Also, you can check your future tenant’s credit history. Therefore, make sure you investigate your tenants. No need to be Sherlock Holmes, but at least cover the basics.
Because of the constant warm weather, having a pool on your property is always a plus.
Be aware that once somebody signed the lease and moved in the property, it is not easy getting rid of them. Eviction processes are stressful and lengthy. Plus, there are legal fees associated with them, so it can cost you a bundle to get rid of bad tenants. In the end, make sure you are choosing wisely. Finding reliable tenants is not impossible if you do your due diligence.
For those that already have tenants that are planning their move to LA, you can always advise them to visit bestcrosscountrymovers.com. If their move is handled by professionals, they will be happier and more relaxed at their new home from the start. Which will in return make them more attentive towards your LA rental property.
Location is everything
LA neighborhoods differ from those that have a filthy rich residence to neighborhoods where the crime rates are extremely high. Similarly, there are many different options in between. Choosing the right location for your property depends on the vision that you have. Our advice would be to hire an advisor or a real estate agent that can help you in choosing the best possible location. It is not the same if you want to invest in one of the best rental villas or you want to buy a small commercial property. A professional real estate buyer will listen to your needs and wants and based on them will latter on make suitable recommendations. Don’t be cheap, hire help. You will reap the benefits later down the line.
LA is the perfect place for everybody that likes to shop.
At all causes avoid negative cash flow
You will get a negative cash flow if your expenses turn out to be greater then the rent that you collect from your tenants. If you are not careful, this can happen in a blink of an eye. To avoid this negative cash flow, first, you must calculate all your expenses and add them together. Accordingly, make sure you don’t forget your mortgage payment, property taxes, upkeep fees, etc. Second, to the total of your expenses add a little extra. This little extra added money is not your profit. It is the money that you will set aside for unforeseen situations. For example, for appliance changes or other repairs around the property. In the end, to your expenses add a little extra amount and then to all of that together add the amount that is suppose to be your profit.
Never stop following the LA real estate market dynamics
If you are serious about being an investor in the real estate market, you should never take a break from following the real estate market forecast. LA is a very fast passes city, which also dictates the real estate market. One year a location might be trendy and the next it might be a total bust. Pore investment decisions can cost you a lot, so be careful. A professional buyer or consultant can come in handy for this as well. They know the market and they are always on the lookout for new changes in the market dynamics. They will know the LA real estate market forecast like the back of their hand. They will assist you in purchasing LA rental property that is in demand.
Hopefully, you will not chicken out after reading all the risk linked to investing in LA rental property. In fact, the point is for investors to understand the risks so they can diminish them. After all, the greater the risks the more glorious the benefits. Hopefully, you will be the new up and coming investor in LA’s real estate scene. Good luck!