When it comes to real estate investment every investor wants to make a profit with the least risks possible. There are many major metropolitan cities, which can be filled with opportunities you can take advantage of if you understand what to look for in terms of buying properties. Below are the 5 things you should look for when you are investing in real estate properties in Los Angeles, CA.
1. What Type of Property Are You Investing On?
First and foremost, you have to find the type of property that you feel comfortable investing in. Maybe it’s a turnkey property, used for generating passive income or flipping real estate for a quick profit. Single-family homes are considered among the finest investments and if you are planning to invest in them, make sure to take a few things into consideration.
- Make sure you buy well-maintained homes
- Another good idea is to buy as owner-occupied, then promote for better rates
- Keep in mind to avoid expensive homes for cash flow purposes
Expensive homes require an excessive amount of an upfront investment to produce a profit. However, you should buy a well maintained or possibly a newly rehabbed or built home because they increase your probability of getting the best Return On Investment (ROI).
2. Location is Important
Just like the old saying says, “location, location, location”, which makes perfect sense for anyone who is planning to buy investment properties. The neighborhood plays an important role in determining the value of the property and how desirable it is to possible renters. In other words the better the location, the easier the house can be rented. While nicer neighborhoods are usually preferred it is not always a guarantee that it’s a safer neighborhood. There isn’t any single factor more important in comparison with neighborhood safety. If the neighborhood has a high crime rate the property value will continue to lower and not to mention that renting the properties will be difficult rent.
3. What Are the Vacancy Rates?
One easy way to check the potential value of one’s investment property is checking the actual vacancy rate of other similar properties within the same neighborhood. So, if vacancy levels are high in your neighborhood, it might mean that your current potential investment might not surpass its potential.
4. Property Expenses
Many first-time investors underestimate the expenses their properties will face over time. Most of the expenses will happen from monthly bills. These would include:
- Utilities, water, sewer, and garbage
- Maintenance and renovations
- Property management just to name a few
Basically, your expenses should not equal more than 48% of your incoming income of the property. By taking time to accomplish the calculations, you may save yourself from purchasing an investment property that may eventually suffer losses.
5. What is Your Strategy?
Knowing how your relationship while using the property will end is critical. You will also need to have contingency plans in case your original ideas do not pan out due to unforeseen circumstances. Work on an exit strategy with an experienced investor to make sure that you are making a worthwhile investment.