Every real estate investor knows that the California housing market is one of the toughest to penetrate. However, California is also known to be one of the best states to invest in when it comes to both long-term and short-term investments.
For many years, the real estate market in the Golden State has provided wealth for investors and it still has great investment opportunities to offer. Like all investment decisions, the finest real estate ventures are the ones that best serve the investor.
Here are four ways to invest in CA real estate:
- Buy a Rental Property
Of course, buying and renting out an entire investment property is a great goal. The trick is to find one with combined expenses lower than the prospective rent amount.
It is good to note that rental properties come with their fair share of repairs and fumbles with tenants. If avoiding this responsibility altogether is an end goal, investing in a property manager to tackle such mishaps would be a smart decision.
- Consider Flipping Houses
This is HGTV in real life. Invest in an underpriced home in need of a little love, renovate it as inexpensively as possible, and then resell it for a profit. This is called house flipping, and the strategy is slightly more complicated than interpreted on TV with a larger capital outlay needed to get started.
If opting for this route with little experience, it is important to find an experienced partner. Find a contractor who is good at estimating expenses or managing the project.
The other risk of flipping is that the longer the property takes to flip and get back up on the market, the less money the investor makes with monthly expenses such as paying the mortgage and vetting the upgrades without bringing in any income. Living in the house during renovations can cut costs, but only if most of the updates are cosmetic.
- Real Estate Investment Trusts (REIT)
REITs give the option to invest in real estate without physical real estate. Often compared to mutual funds, they’re companies that own commercial real estate such as office buildings, retail spaces, apartments, and hotels.
REITs tend to pay high dividends, which makes them a common investment in retirement. Investors who don’t need or want the regular income can automatically reinvest those dividends to grow their investment further. Depending on the REIT, there may also be favorable tax treatment.
- Rent Out Portions of the Property
Finally, renting out portions such as rooms, or guest houses is also an option. This can be done both short-term and long-term, depending on the preference of the owner. One option for short-term, high turnover renting (depending on the competition and property’s location) is Airbnb. It is essentially house hacking for the commitment-phobe: no long-term tenants, potential renters are at least somewhat prescreened by Airbnb, and the company’s host guarantee provides protection against damages.
*It is important to note that many counties have laws in place to deter/prevent owners from renting on Airbnb, so be mindful of this before purchasing specifically for Airbnb.
If you have any questions about the California real estate market and want to discuss your financial options, please reach out to us at (760) 930-0569 so we may assist you.
