Real estate investing in California is a challenging market for seasoned investors, let alone those new to the practice. Golden State has been on a downward spiral of foreclosure acquisitions since the banking crisis. However, this has opened the doors for investors to buy properties well below market value.
Real estate investing in California can be a profitable practice as long as investors take the time to familiarize themselves with the area. Several markets have seen house prices fall by as much as 40 percent. Today, investors can locate affordable homes in areas like Malibu, where prices were often prohibitive to generate positive cash flow.
In fact, home prices have started to rise in interior areas like San Diego, Los Angeles, and San Bernardino. Investors wanting properties in these areas must develop strategies now to capitalize on the reduced prices.
To make money from California investments, investors need to take time to learn about market conditions and available properties. This is especially important when investors plan to use properties as rental homes or offer the owner financing options.
It is crucial that investors educate themselves on landlord / tenant laws, as California has some of the strictest in the country. A good place to start is the California Department of Real Estate website. Visitors can find information on rental laws, compliance regulations, and download manuals and a variety of real estate forms.
Investors just starting out should consider working with a real estate attorney to draft lease or purchase agreements. Those who unknowingly violate the laws or fail to comply with rental codes could be subject to exorbitant fines.
According to the United States Census Bureau, nearly half a million people move to California each year. This provides ample opportunity for investors to generate positive cash flow. The key to success is understanding the needs of the new residents.
Investors planning to rent or sell homes to families must locate properties in highly sought after school districts. Those who focus on renting to clerical workers will want to invest in homes located near airports and interstate systems. Taking the time to learn what newly transplanted residents want can help investors attract long-term tenants.
Offering homeowner financing allows investors to reach a large number of people who want to buy a home but cannot qualify for bank loans. Many people believe that creative financing is illegal, but this is far from the truth.
Economic conditions have made qualifying for a home mortgage nearly impossible unless borrowers have perfect credit. Many California residents want to buy a home, but are not eligible for financing due to credit defects. Investors can offer solutions by offering properties under a lease purchase option agreement or the seller transfers mortgages.
Rent-to-own has become a popular option because buyers can reside in the home as tenants while they work toward the final purchase. Investors can sweeten the deal by setting the purchase price within the contract. Since the average appreciation rate in California is 9 percent, the home will be worth more when buyers can get financing.
Seller’s return mortgages involve acting as a mortgage financier for full or partial financing. When partial financing is offered, buyers obtain a home loan and sellers recoup the remainder of the purchase price. When full financing is offered, sellers hold the loan for a few years until buyers qualify for a bank loan.
Investing in real estate in California still offers opportunities for profit, but doing so requires ingenuity and knowledge of market conditions. It can be advantageous to work with a real estate agent or network with other investors who have solid experience buying homes in the Golden State.
