If you want to invest in rental real estate in Los Angeles then one of the first things you’ll need to do is determine the value of the property. After all, how else will you know if it’s the right investment for you? In this blog post, we’ll share with you the 3 ways to value a rental property in Los Angeles so you can know right away if you should invest in a property…
When you’re looking at rental real estate to decide whether to invest in it or not, the asking price is just one way to value the property. That’s the price the seller values the property at. Your job, as an investor is to apply some of these 3 ways to value a rental property in Los Angeles and compare it to the asking price to figure out if it makes sense to you.
3 Ways To Value A Rental Property In Los Angeles
#1. Cash Flow Potential
What is the potential income you’ll make each and every month from this rental property? Consider both gross and net so you can more easily calculate whether you’ll be cash flow positive right away. Ideally you’ll want to be cash flow positive (although there might be a strategic reason to temporarily not be cash flow positive).
Have you seen our list of cash flowing rental properties? Click here and fill out the form to check them out.
#2. After Repair Value
When working with a distressed seller, you’ll want to weigh their asking price against the value of the house after all repairs are made. As an example, a seller might be asking $75,000 for a house and you know the after repair value (ARV) would be $100,000. So you need to figure out how much it will cost you to make repairs. If it will cost you $25,000 to make repairs then there’s no profit for you, you so might need to counter-offer to a lower price.
#3. Value To Tenant
This is a surprising and often overlooked way to value your property – what is the value of the property to a tenant? If you buy a low-priced rental property but then learn that it’s far away from anywhere that a tenant wants to live, the property might not be a good investment. So look at the location of the property in proximity to work, shopping, etc., to help you determine whether a tenant will want to stay in your property and how much they’ll pay.
If all this seems complicated to you, here’s the great news! You can actually skip all the calculations and estimates and just talk to us. We have rental properties with a lot of these numbers crunches already… plus many of them are already cleaned up, fixed up, and ready to rent (some are even rented).
We believe there isn’t a faster way to invest in real estate in Los Angeles.