Are you thinking about buying investment property in Los Angeles? It can be a wonderful way to add passive income or add to an already robust portfolio. Before you make your purchase, check out these 6 things you should ask yourself before signing the contract!
Buying investment property in Los Angeles is a big decision. There are several things to consider before making your purchase. When you take the time to answer the questions below, you’ll be able to confidently make the investment purchases you have been thinking about! The questions below are just a few things to consider. Get in touch with our team to learn more about how buying investment property in Los Angeles can benefit you!
Do You Understand The Numbers?
How much value will the property potentially offer you? There are a number of ways investors calculate potential profits and values. A few of the calculations that can help you determine value include:
- 1% rule – The 1% rule states that you should be making about 1% of the property’s value each month in revenue. This can help you set your rent prices and determine if a property will really turn a profit before you buy.
- ARV – ARV is the “After Repair Value” of the property. Once all the repairs are made, what will the property really be worth? Knowing this number will help you determine which repairs and upgrades to make and which to avoid.
- LTV – If you decide to use a loan to buy a property, you’ll want to understand the “Loan to Value” ratio. This ratio expresses the amount of the loan to the value of the property.
Do You Know What To Look For?
Shopping for an investment property is different than shopping for a property you plan to live in yourself. You have to remove the emotion and remember you are buying for value, not necessarily your personal tastes and preferences. That said, the property does need to be in a condition that will easily attract buyers or renters. The last thing you want is to be stuck with an investment property that is sitting empty, not bringing in any income.
Who’s Your Audience?
Whether you plan on flipping properties or renting them out, you need to know who you’re marketing to. While many communities have diverse demographics, others are more specific. For example, you’re going to find many more students near a university. Some areas might have more families, while others might have more retirees. It’s not to say you won’t rent or sell to someone outside of the demographic you are aiming to reach, you are only increasing your odds of finding the right buyer or tenant. Improvements to the house should be made with these demographics in mind.
What Can You Really Afford?
When buying investment property in Los Angeles, you don’t want to get in over your head. Doing so will put you in a desperate situation, often causing you to lose money in the long run. Determine what your personal expenses are and how much you will be able to contribute to this new property. In many cases, your costs can be higher than imagined when investing in real estate, so don’t forget to pad your budget for all the “what-ifs.”
What’s Your Long-Term Plan?
When going into any investment, you should have a long-term plan in place. What are you trying to achieve with the purchase of your Los Angeles investment property? Set clear goals and if you find yourself falling short, you’ll be able to mix up your strategy. Of course, plans can change, but going into it with a clear goal in mind will help to ensure you don’t end up losing money on the deal.
Do You Have An Exit Strategy?
Whether the property isn’t performing the way you need it to or you simply want to move in another direction, having your exit plan in place will help save you some of the hassles when it’s time to sell. You don’t want to miss out on another opportunity because you weren’t able to sell. Before making your purchase, make a plan to get rid of it if you need to. Know how much you will need to sell for in order to break even, and keep records of people who may potentially be interested in buying.
Investing in Los Angeles real estate can be an incredibly smart decision. As long as you go in prepared, educated, and open-minded, investing real estate can help you to secure the future you have always dreamed about. It is important to make smart decisions, work with the right people, and make the investments that work for you. To get started investing in Los Angeles real estate, reach out to Jennifer Buys Houses! Our knowledge, commitment, and transparency will help you find the properties you are looking for at the price you want.