Building Wealth Via Real Estate Investments

Investing in real estate is touted as a great way to become wealthy. Is Los Angeles rental property good for investment? Buying an investment property is different from buying an owner-occupied home. Investment properties are designed to make money as rentals, which means you must look at it solely as an income producing entity just like any other business. Los Angeles real estate appreciated 52.19% over the last ten years, which is an average annual home appreciation rate of 4.29%, putting Los Angeles in the top 10% nationally for real estate appreciation, according to NeighborhoodScout’s data. LA’s real estate appreciation rates are so strong that despite a nationwide downturn in the housing market, Los Angeles real estate has continued to appreciate in value faster than most communities. Los Angeles real estate appreciation rates in the latest quarter were at 2.08%, which equates to an annual appreciation rate of 8.60%. Relative to California, their data show that Los Angeles’ latest annual appreciation rate is higher than 60% of the other cities and towns in California. Home values in Los Angeles are up less than 3 percent since last year. After years of steady escalation, home prices in Los Angeles County are tapering off, according to a new report from CoreLogic. Los Angeles county’s median home price was $579,500 in January, down slightly from December’s median price of $581,500. That’s a 2.6% increase over the same time last year. By this comparison, prices shot up nearly 8 percent between January 2017 and January 2018. While prices are rising slower than they have in previous years, all indications still point to a continued increase. Here are 5 strong reasons to invest in Los Angeles real estate in 2019. 1. Los Angeles Has Relaxed Rent Control on Homes Rent control applies to many Los Angeles rental properties if they are multi-family units. Single family detached homes rarely fall under the rent control ordinances. The only exception is when there are two or more units on the property that are rented out; then rent control rules are likely to apply.

2. Los Angeles Rental Properties Give Strong Income In the greater Los Angeles real estate market, a 1-bedroom apartment rents for around $1400. A 2-bedroom apartment is rented out for around $1800. The average rent people pay is around $2400 a month. For comparison, these rental rates are roughly twice the national average.

3. Construction Isn’t Meeting Housing Demand in LA The Los Angeles housing market has seen a bump in residential construction. This has helped to satisfy some demand from renters. However, due to increasing demand, the new supply hasn’t brought prices down. It simply means that the vacancy rate in Los Angeles remains around 3% instead of falling any lower. This also suggests that any new wave of construction will at most result in rental rates remaining steady instead of causing them to fall.

4. Geography Limits Supply The Los Angeles metropolitan area is perched between the ocean and the mountains. You obviously can’t build on water. There’s only so far you can build into the hills when mudslides and earthquakes limit how much you can build there. The LA real estate market is further constrained by the vast national parks around L.A. like the Angeles National Forest. These areas simply cannot be turned into residential areas.

5. Renting in Los Angeles Is Becoming a Way of Life Home ownership rates in California have been declining for years. The sea change has been the growth of renting among the middle and upper class. For example, a third of Los Angeles residents with incomes over $100,000 rent instead of own.  Baby Boomers downsizing their homes choose to rent condos and homes that others maintain. Millennials who have a good income often say their parents lost their homes in the Great Recession, and so they choose to rent instead. This is driving demand for luxury Los Angeles real estate market, whether condos, apartments with concierges, or luxury homes rented instead of purchased so that the resident can easily move if they lose their jobs. Only San Jose and San Francisco have more high-income residents that rent than the Los Angeles real estate market.