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4 Tips for Investing in the Los Angeles Real Estate Market

The California real estate market as a whole gives off a vibe of overpriced property and high competition. The Los Angeles real estate market, specifically, isn’t the most affordable one out there, but it’s definitely a market with ample investment opportunity.  Buying a house in Los Angeles might not seem like a possibility for some people, but where there’s a will, there’s a way. As one of the biggest and most competitive markets in the nation, Los Angeles has definitely got our attention. So we’re here to cover some key real estate market trends and to give you some tips for buying a house in Los Angeles.

1) Don’t Hit the Hottest Neighborhoods

You won’t be able to negotiate the deal down to the standards you want if you’re going after areas that are red hot. The property prices have already skyrocketed and competition is already high, so while you can still make a profitable investment, consider slower neighborhoods.

According to Zillow, the median home value in the Los Angeles real estate market is $686,700 and the median price of homes that sold is $705,200. However, these numbers don’t apply to every part of the Los Angeles real estate market. Using Mashvisor’s data, we will help you out in finding the more affordable neighborhoods. Note: The following are considered the most affordable neighborhoods in Los Angeles in regards to the city’s median property price of $1,018,101.

Southeast Los Angeles

  • Median Property Price: $521,318
  • Price per Square Foot: $372
  • Monthly Traditional Rental Income: $2,177
  • Traditional Cap Rate: 1.7%

Central City

  • Median Property Price: $585,064
  • Price per Square Foot: $297
  • Monthly Traditional Rental Income: $2,662
  • Traditional Cap Rate: 1.7%

Wilmington

  • Median Property Price: $566,958
  • Price per Square Foot: $353
  • Monthly Traditional Rental Income: $2,608
  • Traditional Cap Rate: 1.9%

It seems that homes for sale in Los Angeles are starting to slow down in terms of property price growth. A report from Redfin tells us that the current average selling price of $725,000 is only 1.6 percent higher than it was last year. With that in mind, the neighborhoods listed above sound quite reasonable considering that it is the Los Angeles real estate market. Wondering how to buy a house in Los Angeles in one of these neighborhoods? Do it with Mashvisor.

Related: 4 Most Affordable Cities in the California Real Estate Market

2) Consider Value-Add Multifamily Investments

Now if high prices aren’t an issue for you, our tip is to forget single-family home investments for a second and check out the multifamily market. A housing shortage is making multifamily property investments in the Los Angeles real estate market all the rage among investors. Downtown LA has seen a lot of new properties popping up since last year, but the same cannot be said about the rest of the city. These new developments in Downtown have slowed down rent raises seeing that housing supply is up in that area and landlords in Los Angeles are trying to fill up their units. Multifamily property owners outside of the Downtown region, however, aren’t facing the issue of vacancy at all; their units sell themselves and occupancy rates are high.

Now it seems that buying class-B properties in good locations and renovating them is the new trend that you should consider as a Los Angeles real estate investor. These investment properties have been experiencing the largest rent increases from last year (3.7 percent). Actually, a CBRE survey conducted annually interviewed 300 people in commercial real estate investing and one highlight from that report was that 37 percent of respondents preferred investing in value-add investments. Seeing as this is the most attractive strategy for investors in the Los Angeles real estate market, you should check it out.

Related: Value Add Real Estate: A Complete Guide for Beginners 

3) Check Out Foreclosures in Los Angeles

Homes are foreclosed when the property owner constantly fails to make the mortgage payments and the lender needs to repossess the property. Typically, the lender is a bank which wants to price this foreclosure well for a quick sale. Investors can find foreclosures in any market and at any price point.

Related: How to Find Foreclosures: The 9 Best Ways

Probably the biggest pro to investing in foreclosed properties is the fact that they typically sell at below-market value. So real estate investors can get profitable investment properties at discounted prices. Banks do not like holding onto foreclosures and therefore try to sell the properties quickly to end the process. Even if pricing isn’t an issue for you, check out foreclosure listings. Sometimes you can stumble upon a property listing much bigger and nicer than what you were planning on getting for your budget. So you can get a better property for a good price, and even if you find an investment property requiring some work, those upgrades will definitely pay off.

It’s important to note that buying foreclosures isn’t a simple process. If you’re trying to buy a foreclosure at an auction, you may need to pay cash. Other times, investors aren’t allowed to inspect the property before purchasing and this can backfire if the home ends up requiring major renovation.

So why consider investing in foreclosures in the Los Angeles real estate market? The percent of mortgage delinquency in the Los Angeles housing market is 0.7 percent, according to Zillow. A delinquent mortgage is usually the first step of the foreclosure process. You will find that some foreclosed houses are quite distressed properties, while others can actually be found in luxury markets.

Did you know that you can find foreclosure listings using Mashvisor’s tools? Visit the Mashvisor Property Marketplace to focus your property search in the Los Angeles real estate market on foreclosures.

4) Use Mashvisor to Find Profitable Property in the Los Angeles Real Estate Market

LA may not be cheap, but you can find the right investment property using the right tools. Use Mashvisor’s investment property calculator to find key return on investment metrics for properties in the US and make the best real estate investments in any city. Do you have questions about Mashvisor? Read our FAQs and learn about our tools.

Related: What Is Mashvisor? What Can It Do for Real Estate Investors?

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Heba is Content Writer at Mashvisor with a BA in Business Administration. Most of all, she enjoys writing about the constantly changing markets in the US real estate industry. If not writing, Heba is exploring and learning.

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