One place that no one is likely to argue about when it comes to investing in real estate this year is the Los Angeles real estate market 2018.
Instead, there is one thing you’ll hear about the Los Angeles real estate market 2018: “If you can afford buying an investment property there, then do it.” We bring up affordability right off the bat because that is the main argument as to why investing in Los Angeles real estate is not a good choice right now. But with affordability being an issue all over the current housing market, real estate investors should always go for the real estate market that brings a good return on investment nonetheless.
Before we get ahead of ourselves with the top reasons to invest in Los Angeles real estate, let’s take a look at how the real estate market 2018 is faring thus far.
Los Angeles Real Estate Market 2018: This Year So Far
For the first few months of the year, the Los Angeles real estate market 2018 has been carrying on with the heat of 2017. Let’s take a look at the numbers provided by Mashvisor’s investment calculator:
- Median Property Price: $916,724
- Monthly Traditional Rental Income: $3,109
- Monthly Airbnb Rental Income: $1,874
- Traditional Cash on Cash Return: 1.34%
- Traditional Cap Rate: 1.34%
- Airbnb Cash on Cash Return: 0.86%
- Airbnb Cap Rate: 0.86%
- Airbnb Occupancy Rate: 77%
The first thing that raises eyebrows is that median property price of $916,724. The spring of 2018 brought with it an increase in the median property price of $41,000. According to Zillow, Los Angeles real estate prices will continue to rise by another 4.4% this year. However, when compared to the increase of 9.4% last year, it seems that the growth in Los Angeles real estate prices will slow down in 2018.
With this rise in Los Angeles real estate prices, another interesting phenomenon took place early in 2018. That is that sales actually dropped at one point to 4,847 in January. This was down from 6,613 in December of 2017 and down from 5,188 of January last year.
The combination of the increase in Los Angeles investment property prices in the real estate market 2018 and the decrease in sales for a period of time can be attributed to the major housing shortage. A problem across the current housing market, these trends can be found in many of the hottest real estate markets 2018.
Things seem less than ideal for a property buyer in the Los Angeles real estate market 2018. Despite this, under the right financial circumstances, there are good reasons to invest in Los Angeles real estate.
Top 4 Reasons to Invest in Los Angeles Real Estate 2018
Reason #1: California Has the World’s 5th Largest Economy
California was recently awarded the title of the 5th largest economy in the world. Who’s at the center of this unbeatable economy? The Los Angeles real estate market 2018. This is thanks to L.A. being known as the “entertainment capital of the world” because of Hollywood as well as its coastal geographical location.
With Hollywood and hot-spot beaches, your real estate investing instincts might tell you to go for an Airbnb Los Angeles real estate investment. Well, they’d be right.
Click here to learn all about Airbnb in this market.
What’s more interesting for Los Angeles real estate investors to know is that the real estate industry in the state is one of the leading economic factors for growth. The California real estate market was the driving factor (along with the financial services industry) for the $26 billion in growth for the economy.
Why is this reason #1 on the list for why you should invest in Los Angeles real estate? A strong economy that boasts the top 5 title in the world is one that will bring success to a Los Angeles investment property. The economy drives job growth and decreases unemployment, which essentially drives demand for Los Angeles investment property up.
Reason #2: Los Angeles Real Estate Market 2018: A Neutral Market?
Remember those heated debates over the current housing market we mentioned earlier? One of these arguments stands on whether the Los Angeles real estate market 2018 will continue to be a seller’s market or not. Right now buying a Los Angeles real estate investment is associated with rising prices and low housing supply. This is the perfect formula for a seller’s market.
But as real estate experts study the current housing market in the city and take into account how sales fell at the beginning of the year for Los Angeles real estate, some are saying that a buyer’s market is in sight. Along with the rising mortgage rates and low affordability factor, we are likely to see a drop in sales as we move forward. If this continues to be a real estate market trend, then the Los Angeles real estate forecast 2018 might lean towards a neutral market, and maybe in time, a buyer’s market.
In fact, Zillow already labels the Los Angeles real estate market as a neutral market, although other sources disagree and call it a seller’s market. Even looking at the median listing price and comparing it to the median sales price from Zillow, you find something interesting. The median sales price is almost $100,000 lower, showing some negotiating power for buyers who invest in Los Angeles real estate.
Reason #3: Abundance of Tenants in the Los Angeles Real Estate Market 2018
With a Los Angeles real estate investment, a landlord will have no real issues filling up vacancies upon listing the rental property. As mentioned, having one of the top economies in the world drives demand from tenants for a Los Angeles rental property. High-salary jobs, year-round warm weather, and the glamour of Hollywood life continue to make the Los Angeles real estate market 2018 the place to live. These tenants will flock to your Los Angeles investment property.
Reason #4: What All Real Estate Investors Want: A Good Return on Investment
There are a few different real estate investment strategies that will bring a Los Angeles real estate investor a good return on investment.
Buy and Hold Investment Strategy
With the low affordability factor, more and more people moving to L.A. will be looking to rent rather than buy. This will be a trend for a long time in the Los Angeles real estate market. With a buy and hold investment strategy, a Los Angeles real estate investor will enjoy steady and high rental income.
If you want to make money in real estate in this way, you need to learn all about Los Angeles traditional rental properties. Click here to learn about this type of Los Angeles real estate.
Flipping Investment Property
Due to the rise in Los Angeles real estate prices, the competition and demand from homebuyers and real estate investors alike, you’ll be able to get a good return on investment if you put the investment property back on the market soon after purchase.
Airbnb Los Angeles
Los Angeles is a tourist magnet, as you might have guessed. With the high nightly rates, Airbnb rental income will help bring a good return on investment.
You may be doubling back to the cap rate and cash on cash return values as we discuss return on investment. Keep in mind that compared to most of the best places to invest in real estate this year, the cash on cash return and cap rate for the Los Angeles real estate market 2018 are pretty competitive. Plus, a real estate investor can always find investment property with a higher cash on cash return and cap rate in the same real estate market; the values provided above are only the average values.
Should You Invest in the Los Angeles Real Estate Market 2018?
If you can afford the investment property financing, keeping the interest rates and insurance costs in mind and how they will all affect your Los Angeles investment property, then the answer is yes. You should invest in the Los Angeles real estate market 2018. Thanks to the 4 reasons discussed above, you’ll find yourself making money in real estate in one of the best places to invest in real estate in 2018.