Investing in CA Real Estate

Posted by Techyscouts | Posted on 04/01/2021
  •  Real Estate
  • Here’s What You Need to Know Before Investing in CA Real Estate

    How to Get Started Investing in California Real Estate, Even in a Pandemic.

    California has always been one of the best places to live in the US- nice weather, a robust culture, and lots of employment opportunities. It also has been one of the best places to invest in real estate. However, the population of California decreased since 2019, with about 200,000 people moving out of the state, driven by high living costs and few new job prospects. Many haved moved to neighboring states, such as: Idaho, Colorado, Utah, Arizona, and Nevada. And even though California’s real estate market is thriving, investors now have to be much more careful about where to put their money and what kind of investments are the best to make.

    It definitely doesn’t make it much better when we are stuck in a pandemic. As the pandemic becomes longer to endure, more evictions and foreclosures will increase. Permanent job losses have pushed people to move elsewhere, and the housing situation won’t clear up until the pandemic is over. And while ultra-low mortgage rates have prompted a rush of home sales in 2020, we still don’t know if it will roll-over this year.

    The best thing to do is focus on investments that are favored by local economics, and look at each California market, grouped into geographic areas: North, Bay Area, Central Valley, and South. It’s important to note that there is an absence of population growth in virtually all these markets, especially in the past two years. You must consider how your investment is going to change when a market is not growing. What is the strongest in the area: Single-family homes? Apartments? Ownership or rentals? The high or the low end of the market? These are questions to ask when thinking about which market to invest. Population growth goes in waves, so we don’t know if growth will pick back up again.

    Another point to think about is how high the percentage point of renters there are in each market, because it does correlate with home prices. The higher the average price of homes, the fewer people can afford to buy. Even in the Central Valley market (which has the lowest prices in the state), a large percentage of people living there are renters. Californians pay the highest rents in the country. When home prices increase, it is a measure of local demand for all housing, not just single-family homes.

    Once you have picked a market to invest into, you should consider the type of investment is best for you. Apartments or subdividing of single-family homes into multiple rental units are favored investments. Straight single-family rentals without expensive improvements are the best (because demand is weak for straight single-family rentals). If you are thinking or flipping or upgrading a property, it’s best to do it if it will move rent or prices higher than before.

    Because of the pandemic, it’s hard to really know what to expect this year. And while many Californians are moving out, it is still a good place to invest in rental properties. Big markets like San Francisco and Los Angeles are always booming in real estate. If you’re considering a real estate purchase, we will be happy to discuss options and see what investments are right for you. Contact Mike Millea to help you locate the right investment property for your needs. We’re looking forward to working with you!

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