Despite its reputation for expensive housing, California is ideal for investors interested in breaking into the real estate market. With warm weather, big cities, beautiful beaches, and a steadily growing population, California offers a range of opportunities for real estate investors.
Today, California is considered the eighth-largest economy in the world at more than $2.2 trillion. However, some real estate experts advise prospective investors to approach the market with caution, because home prices appear to be edging toward bubble territory. With that in mind, here’s what you should know if you’re investing or considering investing in California real estate.
The housing market is cooling down
With the California housing market now experiencing a cooldown, 2019 is a better time than ever to invest in real estate. Because markets across the state are softening, investors are finding it easier to find and take advantage of affordable housing prices. Although California’s economy and employment levels are steady, the housing market is expected to continue cooling down into 2020.
In March 2019, the Southern California housing market experienced an annual decrease in the median home price for the first time since 2012. Combined with market prices cooling down about $18,500 since 2018, the Southern California housing market will likely continue to experience a decline during the upcoming months. Consequently, prospective investors should prioritize increasing inventory in Southern California while prices are at a 7-year low.
Inventory levels are rising
Although houses have been staying on the market longer, inventory levels have risen over the past year. For real estate investors, an increase in inventory levels translates to lower home prices.
According to Zillow, homes for sale in Los Angeles increased 24 percent from 2018, while Orange County experienced a 40 percent increase. If you’re worried about an investment property staying on the market too long, consider enlisting the services of a professional property management company.
Many companies maximize investors’ profits by providing full-service management for real estate properties. A simple Google search like “property management companies fresno ca” will yield a variety of results and can help you enjoy quicker turnaround time on investments.
Watch out for short-term rental regulations
If you’re in the short-term rental business, staying up-to-date with recent regulations is imperative. In areas such as Pacific Grove and Redwood City, renting according to the new Airbnb regulations can help short-term rental owners avoid costly fines. In addition, Los Angeles recently banned short-term rentals owned by investors, so make sure to adjust your investment strategy as needed.
New regulations require rental owners to cancel or deactivate listings after their rental license has expired. Violators are subject to high fines—equal to 100 percent of the total rental revenue earned while hosting with an expired license—and are barred from earning another rental license for at least two years.
Redwood City also requires short-term rental owners to receive a license from the city and collect an occupancy tax from guests. Rental owners must also provide on-site parking, as well as designate a contact for handling complaints in the absence of the host.
In most California neighborhoods, investor-owned short-term listings remain legal. To maximize short-term rental profits and gain an edge over the competition, consider checking out custom home inspiration or practicing search engine optimization.
The Golden State offers a wide spectrum of opportunities for real estate investors. However, prospective investors must carefully evaluate the risks and beginners should approach the California real estate market with caution. Ultimately, investing in the California real estate market can serve as a lucrative source of income if done correctly.