UNITED STATES—California’s real estate market is in an intriguing position right now. It is one of the most expensive areas of the world in terms of property prices, and yet this is creating a conundrum for many residents who simply cannot afford to stay put, causing the population to fall.
Even so, for investors there are always opportunities; it’s simply a case of knowing where to make your money work hardest for you, and how to go about it.
With that in mind, let’s look at a few juicy investment strategies and tips for those who want to get a foothold in Californian real estate.
Finding the right new construction loan for you
The first point to make is that you don’t need to necessarily start your property portfolio with nothing but your own money. Whether you plan to buy, renovate and sell an existing property, or alternatively to build one from scratch on land you own, then you could get a hard money loan to make this achievable.
A quick look at this list of hard money lenders will reveal that there are a multitude of organizations in California set up specifically to help out ambitious investors who don’t have a huge chunk of capital to their names right now. Just be aware of the added risks involved, as well as the higher interest rates on these types of loans compared with traditional mortgages.
Looking for the best rental opportunities
One common mistake which real estate investors make is to assume that if they buy in the most expensive parts of the state, they will get a better rental return on their investment.
In reality, it is better to closely consider the relationship between average home prices and average rents in a given area. This is worse in San Francisco than it is in Modesto, for example.
The greater the disparity, the harder it will be to find renters that can afford to become tenants in any property you purchase. So rather than aiming for the highest possible rental income, seek out the locations that will leave you with lots of prospective tenants to pick between, thus more stability and reliability.
Analyzing price increases
Another statistic that should shape your California real estate investment plans is that of the year-on-year change in property prices.
This is a simple figure to get a grip on, as increases are obviously attractive while downward slides are a warning sign that you might want to put your money elsewhere.
Once again, it is the more affordable parts of the state that are enjoying the largest increases at the moment; in aforementioned Modesto, home prices were up by 6 percent in 2020, while they actually fell by almost the same amount in San Francisco that year.
You should not necessarily expect to see such strong annual surges in property prices indefinitely, and market volatility is to be expected. However, if you pay attention to trends in the long term, you should get a better sense of where a safe place to park your cash is.
Embracing mid-tier investments
The last point to keep in mind is that whether you want to buy a house to flip or purchase it to rent out, it is trickier to do this at either extreme of the price spectrum.
There are problems which come with both bargain properties and high end homes alike, so don’t be put off by the prospect of aiming for the middle of the market. At a time of significant economic uncertainty, this is the best bet.