California real estate investing is a challenging market for experienced investors, let alone those new to the practice. The Golden State has been on a downward spiral of foreclosure acquisitions since the banking crisis. However, this has opened the doors for investors to purchase properties well below market value.
Investing in California real estate can be a profitable practice as long as investors take the time to familiarize themselves with the area. Various markets have witnessed home price declines of up to 40 percent. Today, investors can locate affordable homes in areas like Malibu, where prices were often prohibitively expensive to generate positive cash flow.
Home prices have actually started to rise in inland areas like San Diego, Los Angeles, and San Bernardino. Investors seeking property in these areas should strategize now to capitalize on the reduced prices.
To make money with California investments, investors must take the time to learn about market conditions and available properties. This is especially important when investors plan to use the properties as rental homes or offer owner financing options.
It’s 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 break laws or comply with rental codes could be subject to exorbitant fines.
According to the US 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 new residents.
Investors planning to rent or sell homes to families should locate properties in highly sought after school districts. Those who focus on renting to white-collar 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.
The owner financing offer allows investors to reach a large number of people who want to buy a house but are not eligible for bank loans. Many people believe that creative funding 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 problems. Investors can offer solutions by offering properties under a lease purchase option agreement or seller conveyance mortgages.
Rent-to-own has become a popular option because buyers can reside in the home as renters while they work toward the final purchase. Investors can sweeten the deal by setting the purchase price in the contract. Since the average appreciation rate in California is 9 percent, the home will be worth more when buyers can get financing.
Seller Transfer Mortgages involve acting as the finance mortgage for partial or full financing. When partial financing is offered, buyers get a home loan and sellers take 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 California real estate still offers opportunities for profit, but doing so requires ingenuity and knowledge of market conditions. It may be advantageous to work with a real estate agent or network with other investors who have solid experience buying homes in the Golden State.
