Investing in a real estate property can be a risky endeavor—but done right, the high risk truly does pay off with high reward. If you’re a first-time real estate investor looking to break into the Southern California real estate market, read on for our best tips for success:
Timing is Everything
Timing is of the utmost importance when it comes to investing in real estate in Southern California. And we’re not just talking about timing the market right. It’s imperative that you purchase your property at the right time for you, as well. If you’re still working on paying back student loans, your existing home debt, or have any large expenses planned for the near future, this is probably not the right time to invest.
Do Your Research
While we’d like to think this goes without saying, impulsively purchasing an investment property is a fairly common occurrence. In times when demand for properties surpasses the supply on the market and homes are being snatched up like hotcakes, impulse purchases become even more common. Not only will proper research prevent you from overpaying for a property that’s not quite worth what it seemed, but it will also reveal opportunities to you that may never have crossed your mind. For instance, you may set out with the intent of purchasing an investment property in Los Angeles or San Diego, but through proper research discover that Riverside, CA boasts a booming real estate market.
A great place to start your research is with a quick search on a real estate site like Trulia, where you can explore the top 20 real estate markets in California. Keep an open mind when it comes to locations—even though some may not sound glamorous, that doesn’t mean they aren’t worth exploring.
Get a Proper Inspection
Once you’ve found a property you like, it’s imperative that you find out what’s underneath. Even the most pristine property may be sitting on a cracked foundation or hiding deadly mold. Be sure to get an inspection from a contractor that you can trust, or else you might find yourself several months into the project and discover irreparable damage. Once you’ve got your property inspected, it will be ready for appraisal, and you’ll be one step closer to owning your investment property.
Pick the Right Loan for Your Needs
Truth is, investing in real estate requires a whole lot of money up front. There’s the price of the down payment (often higher for investment properties than owner-occupied), the cost of necessary repairs, any labor you may need to hire, and countless other expenses. It’s very likely you’ll need assistance in funding your property. If traditional bank loans with decades-long payment terms that hold you at the mercy of market changes don’t sound too enticing, you’re in luck. If you’re planning on selling the property for profit, consider exploring a hard money loan (often known as bridge loans). These short term loans are secured by real estate and their terms are often only a few years long with fixed rates. A good option for hard money loans in Southern California are Orange County hard money lendersat Source Capital, with a 5-star customer rating and “A+” with the Better Business Bureau. No matter what type of loan you select, it’s vital to make sure it’s a loan you can afford, so you’re not left high and dry several years down the line.
Be Realistic When it Comes to Fixer Uppers
There’s something almost romantic about the thought of a fixer upper. Maybe you’ve watched shows like Flip This House and seen how people like Than Merrill find a shabby, neglected home, craft a vision of what it can be and bring it back to life. But the reality is, taking on a fixer upper is a real project, even for seasoned professionals. Be realistic about how much work you want to put into the home. While you may be handy with caulking and painting, large-scale renovation is a whole different ball game, and one you’re likely not ready for. If this is your first investment property, opt for a home that needs moderate repairs, instead.
Breaking into the CA real estate market can be challenging, but not impossible. Use these tips to help ensure your launch is successful.