California real estate investing is a challenging market for seasoned investors, let alone those new to the practice. The Golden State has been in a downhill spiral of foreclosure acquisitions since the banking crisis.
However, this has opened the doors for investors to purchase properties well below market value.
California real estate investing can be a profitable practice as long as investors take time to become familiar with the area. Several markets have witnessed housing prices decline by as much as 40-percent.
Today, investors can locate affordable houses in areas such as Malibu, where prices were often prohibitive for generating positive cash flow.
Housing prices have actually started to rise in inland areas such as San Diego, Los Angeles, and San Bernardino. Investors who desire properties in these areas should develop strategies now in order to capitalize on reduced prices.
To make money with California investments, investors should take time to learn about market conditions and available properties. This is especially important when investors plan to use properties as rental homes or offer owner will carry financing options.
It is crucial for investors to become educated in landlord/tenant laws, as California has some of the strictest in the nation. A good place to start is the California Department of Real Estate website.
Visitors can locate information surrounding rental laws, compliance regulations, and download handbooks and a variety of realty forms.
Investors just starting out should consider working with a real estate attorney to draft leasing or purchase contracts. Those who unknowingly violate laws or are non-compliant with rental codes could be subjected to exorbitant fines.
According to the U.S. Census Bureau, nearly a half million people move to California every year. This provides ample opportunity for investors to generate positive cash flow. The key to success is to understand the needs of new residents.
Investors who plan on renting or selling houses to families should locate properties in highly sought after school districts. Those who focus on renting to white collar workers will want to invest in homes positioned near airports and interstate systems.
Taking time to learn what newly transplanted residents want can help investors attract long-term tenants.
Offering owner will carry financing lets investors reach a vast number of people who want to buy a house but cannot qualify for bank loans. Many people believe creative financing is illegal, but this is far from the truth.
Economic conditions have made qualifying for a home mortgage next to impossible unless borrowers have perfect credit. Many California residents want to buy a home, but ineligible for funding due to credit blemishes.
Investors can offer solutions by offering properties under a lease purchase option agreement or seller carry back mortgages.
Rent-to-own has become a popular option because buyers can reside in the house as a tenant while working toward the eventual purchase. Investors can sweeten the deal by locking in the purchase price within the contract.
Since the average appreciation rate in California is 9-percent, the house will more worth more when buyers are able to obtain financing.
Seller carry back mortgages involve acting as the mortgage financier for partial or whole financing. When partial financing is offered, buyers take out a mortgage loan and sellers carry back the remaining portion of the purchase price.
When whole financing is offered, sellers carry the loan for a few years until buyers qualify for a bank loan.
California real estate investing still offers opportunity for profit, but doing so requires ingenuity and awareness of market conditions. It can be advantageous to work with a realtor or network with other investors that possess solid experience with buying houses in the Golden State.