Have you been thinking about investing in Los Angeles real estate? We can help you learn more about which real estate investments best match your style so you can make the best decision about where to put your money!
Some people want to be hands-on, handling their real estate investments full-time (active investors), without the use of a property manager or assistant. Others want to be as hands-off as possible (passive investors), only collecting their dividends each quarter. Each investment type comes with its own set of pros and cons. What appeals to one person may not appeal to others. Below, we discuss a few different types of real estate investments so that you can decide what is right for you when investing in real estate in Los Angeles.
Single-family real estate investments in Los Angeles are typically the best starting point for new real estate investors. Managing one unit on a structure they are familiar with will eliminate some of the unwanted expenses and frustrations investing in a larger property may cause new buyers interested in building their portfolio of real estate investments.
Multi-family properties will often rent for a lower price than their single-family counterparts, however, with multiple units come more income-producing opportunities. Units with 2-4 units are considered multi-family. Anything with more units is an apartment building and classified as commercial property. Multi-family properties are great because even if one unit is vacant, you are likely still generating income from the other units. With a single-family house, when the unit is vacant, you aren’t generating any income at all.
Commercial real estate is often purchased by investors with a little more experience. You can’t use an FHA loan for a commercial property, which means your down payment on the property will need to be pretty significant. Many people work with a partner when buying commercial real estate for this very reason. You’ll also need to have knowledge of items not found in residential property such as the cooling systems and security features. You’ll also need to make sure you are calculating the numbers properly in order to receive a profit.
Owning land is a more passive investment because there are not as many costs. You will have property taxes, but these are much lower than the property taxes on a structure. Also, there may be some maintenance, such as weed abatement, especially in areas where brush fires are prevalent. With land, you can buy and choose to just hold it until it appreciates, you can buy and develop, you can flip it if it is located in an up-and-coming area, or you can possibly subdivide it into smaller lots and resell them at a profit.
Mobile homes are a great investment for someone with a lower down payment amount who wants to test the waters of real estate investment. It’s important to look at the location of the property, especially the management of the mobile home park, the vacancy rates, and the cost of repairs as these will differ from permanent structures.
REITs or real estate investment trusts are perfect for those who wish to want to invest without any hands-on activity. A REIT is a corporation that manages a portfolio of properties. Anyone can buy shares in a publically traded real estate portfolio. By investing in a REIT, you are able to own real estate without ever having to be a landlord. You will be able to invest in large-scale projects as well as smaller developments. There are many different types of REITs, so do your homework so you can choose the one that is right for you.
Acquiring real estate investments are one of the best ways to build wealth. No matter which type of investment property you are interested in, our team is ready to answer any and all of the questions you have!