The investing community has always considered placing money in real estate a haven. Like gold, property prices are assumed to remain stable, and because of this, many people looking for lucrative opportunities invest in properties.
Like the rest of the world, Americans widely invest in the real estate sector, and investing in California real estate was a no-brainer for many years. The state gained half a million people who mainly wanted to live in Los Angeles or San Francisco every year. These places were already crowded; rents and home prices went up, so investors couldn’t afford to miss.
Today, it is a different story. California had no population growth in 2019, and 200,000 people left due to high housing costs and few new jobs. Their neighboring lands of opportunity opened up, so they moved to Arizona, Utah, Colorado, and Idaho.
It is estimated that 15 million homes are still on the market in California, and one million homes are sold every year. However, investors now have to be cautious about where and how they invest.
Added to this is the pandemic, which further complicates everything. As a result of the economic disaster, mortgage rates were ultra-low in 2020, driving up home sales. Financial strain will result in evictions and foreclosures as the pandemic continues. More people will be forced to move elsewhere due to permanent job losses. We don’t know when the pandemic will end so that the housing situation won’t be clear until then.
Therefore, if you’re thinking about investing amid these uncertain times, consulting an estate planning attorney in California beforehand is necessary because they can help you make a sound choice that will benefit you in the long run.
Today, we will share some handy tips that you must keep in mind when buying property for investment.
Invest in High-Growth Markets
Real estate investments should be made in cities where employment and career prospects are substantial. For example, Forbes’ 2019 California housing market study indicates that some markets have seen higher job growth than others.
With stagnant domestic economic growth, the state’s overall labor market is as strong as ever, with the average unemployment rate projected to stay at 4.5% in 2019. It is predicted that unemployment will drop to 4.3% in 2020 and 2021.
Due to its strong economy, which is the strongest globally, the California housing market is still in many investors’ portfolios even amid high property prices. In addition, among the states, California added 28,500 construction jobs between January 2018 and 2019.
However, real estate experts recommend that it is always wise to invest in markets with growth potential for a safe and secure investment. So, based on this, before buying any property for investment, you need to check the growth potential of the state’s future market.
Research is Crucial
It is good to know that investing in real estate in California or any other state is rewarding and profitable. Be sure to research beforehand. Before investing money, make sure you research the company or individual with whom you plan to do business and your state’s licensing requirements.
Ensure that the property is located in a location that is likely to attract your target market, yield the returns you are anticipating, and be in demand.
When you do the proper research and apply an analytical approach logically based on financial factors, rather than considering your personal preferences, you will end up with the best property. Investors don’t make decisions based on emotions. They make decisions based on economics.
Location of the Property
Investing in real estate still boils down to the adage, “location, location, location.” Location continues to be the most important factor for profitability. Residential property values are heavily influenced by amenities, scenic views, parks, and the neighborhood’s status. At the same time, a commercial property’s proximity to warehouses, markets, freeways, transportation hubs, and tax-exempt areas plays a key role in its valuation.
Taking a mid-to-long-term view on how the area is expected to change over the investment period is crucial when considering property location. For example, today, a peaceful open area behind a residential building could reduce its value if it is transformed into a noisy factory. So take time to determine who owns and plans to use the immediate areas where you are planning to invest.
To learn more about the prospects of the area around the property you are considering, contact the town hall or another public agency in charge of zoning and urban planning. You will have access to long-term planning and can determine how favorable or unfavorable it is to your plans.
Expenses and Predictions
There is an old saying that says only paranoid people survive. Okay, not always, but it doesn’t hurt to be a little paranoid and think through every detail beforehand. Before purchasing your first investment property:
- Calculate how much you already have and how much you can borrow.
- Determine how much the house will cost to purchase and renovate.
- Do not forget the costs of operation.
- Get an idea of your potential profit by estimating the price you will list your property for and subtracting the costs.
There is a chance you won’t even hit half of the estimated profit, but you should do this calculation to ensure your safety.
Refrain from Emotions or Impulsive Decisions
When buying a home, most people listen to their hearts more than thinking logically about it, making sense since they will live there for many years. However, don’t let your emotions influence your decision when purchasing your first investment property. Instead, be logical when negotiating to get the best possible price by strictly considering it a business investment. If you get a property for a lower price, you are more likely to profit from it.
Ultimately, we can say that real estate investing can be profitable or disastrous, just like every other business. Therefore, playing it safe and following smart tips from the beginning will surely put you on the right foot. To ensure a successful investment, start small to test the waters first.