Are you a prospective real estate investor in California? If you are, now is the time to make that move! Buying an investment property in California is a great idea.
Being a California landlord can come with a lot of rewards, from investment portfolio diversification to monthly rental income generation.
California real estate is known for being pricey. However, the Golden State offers a plethora of opportunities for real estate investors willing to invest in single-family homes and other rental properties.
With a growing population, an energetic culture, sparkling California cities, increasing property values and beautiful beaches, there is no doubt California is a great option for investing!
In this article, we here at Pinnacle Property Management will get into the basics of buying rental property in California and highlight California's positive real estate market.
Follow our top tips and increase your chances of realizing a high return on your potential real estate investment!
What is the California Real Estate Market Like?
So, what makes the California housing market desirable to prospective investors? Despite being pricey, the California housing market still remains favorable in the eyes of real estate investors.
The job market is still strong, the property taxes remain favorable, home values are increasing, and the demand for rental properties is high.
Top Tips for Real Estate Investments in California
1. Invest in the Right Location
Location, location, location – it’s every real estate agent’s mantra. You want to buy an investment rental properties in a desirable California location.
Ensure your location meets the following criteria:
- The job market is expanding.
- There is access to public transportation.
- The neighborhood has a low crime rate.
- There are plenty of amenities, including restaurants, malls, parks, and movie theatres.
A location that possesses such qualities will attract people to the area. This means you will have more prospective tenants.
2. Minimize your Debts
If you have huge debts, buying an investment rental properties may not turn out to be a great move.
So, make sure to minimize your debts as much as possible before buying a rental property in California. Reducing your debts will increase your credit rating, which in turn may help you secure a good mortgage.
3. Understand the Landlord Responsibilities
Landlording isn’t all about collecting rent checks every month. It’s more than that! Being a landlord comes with many responsibilities.
Common landlord responsibilities in California include:
- Complying with all health and building codes in California.
- Making needed or requested property repairs within a reasonable period of time.
- Giving renters a notice of 24 hours before accessing their rented premises to carry out important landlord responsibilities.
- Maintaining the peace and quiet by removing any unnecessary disruptions.
- Drafting a legal lease agreement and enforcing it.
- Treating California tenants fairly and equally as per the state’s Federal Fair Housing law.
- Abiding by all terms of the lease.
- Following the legal eviction process as set out in the state’s statutes.
If you’re a first-time landlord, such responsibilities can be quite overwhelming. So, hiring an experienced California rental property manager may be the best solution for you.
4. Understand your Legal Obligations
California landlords must abide by certain laws, from federal to state to local ones. And ignorance of the tenancy laws can never be a defense in court.
Some of the California laws you’ll need to know include:
- Tenant Privacy Laws: California tenants have a right to privacy. In California, you must provide your tenants with a notice of at least 24 hours prior to entering their rented premises.
- Security Deposit Laws: California has rules that every landlord and tenant must abide by in regard to security deposits.
- Tenant Eviction Laws: Your tenant has a right to remain in their rented premises until you follow the proper California eviction process. You cannot evict your tenant using “self-help” eviction tactics, such as locking them out or removing their belongings.
- Fair Housing Laws: You have a responsibility to treat your tenants respectfully and fairly as per the California antidiscrimination laws.
5. Understand the Expected Profit Margin
Avoid making a blind investment move. Crunch the numbers and know what to expect. After all, buying an investment rental property is a huge financial and emotional undertaking.
Broadly speaking, a good rate of return is usually about 10% annually. So, for an investment rental property worth $400,000, you should be able to make at least $40,000 in annual gross rental income.
Note, however, that the $40,000 isn’t the expected profit. To calculate your profit margin, you’ll also need to factor in the expected operational expenses. Usually, expenses sum up to 1% of the value of an investment. Therefore, in this case, expenses would amount to around $4,000.
6. Take Your Time
As already mentioned, buying an investment rental property is a huge financial and emotional undertaking. As a matter of fact, a property will probably be the largest purchase you’ll ever make in your lifetime.
So, if you find a California rental property, take your time and make sure it’s really the perfect one long-term.
In a Nutshell: Real Estate Investing Tips in California
Are you looking to buy investment properties in the Golden State? A ton of investment opportunities exist throughout California. You just need the right team to help you navigate your way through the many potential hurdles.
Pinnacle Property Management can help you! We have over 30 years property management and California real estate experience. Contact us today for more help or for any remaining questions!