When it comes to investing, there’s just something special about property ownership. Unlike investing in the stock market, investing in the California housing market gives you something tangible.
This allows investors to take a more hands-on approach, both literally and figuratively. The ability to take control is a factor that many investors appreciate about real estate.
That said, there are still several aspects of real estate investing that are out of an investor’s control. A fluctuating housing market can lead to a real estate bubble, which causes housing prices to drop dramatically.
For this reason, it’s important to understand the features of the market before you invest. Evaluating existing trends can help you make predictions. This way, you can invest your money with more confidence.
What does 2017 hold for California real estate? Let’s take a closer look at some current trends in the California housing market.
California Housing Market Prices
The California housing market has some of the most expensive housing prices in the country. This has led some investors to question how long prices can continue increasing.
This is certainly a legitimate concern. After all, one of the first rules of investing is to try to buy low and sell high. If prices are already high and at risk of peaking, that strategy won’t work.
But at this point, that doesn’t appear to be the trend. Experts predict that housing prices in California will continue rising. In fact, in many cases, home prices still haven’t reached the pre-recession peak.
So, if you’re thinking of buying into the California housing market, you should consider acting quickly. There is still room for prices to grow, and it looks like prices are only going to go up.
Demand Is Increasing
It makes sense that many Americans would be interested in living in, working in, and moving to California. Our beautiful landscapes, delicious cuisines, and great industries make California a great place to live.
These features have led to increased demand for housing in California. This is good news for the California housing market.
Housing bubbles happen when home prices in a particular area are overvalued. The fact that California currently has more demand for housing than it can supply indicates that a bubble is not forming. Instead, the rising values reflect the actual prices people are willing to pay to live in California.
Renting Will Remain Popular
We mentioned earlier that real estate is a more hands-on approach to investing than other options. Depending on your preferences, this can be a positive or negative feature.
For other options, like stocks or bonds, you can basically purchase your investments, and let your money grow based on the market. To make money with real estate, however, you typically have to do something with your property.
One of the main ways that investors make money on their income properties is by renting them out. Whether you own a single-family home or a multi-family property, collecting rent can be a steady source of monthly income.
Luckily for investors, the California housing market is likely to continue to encourage renting. With median home prices well above $400,000 in many areas, it can be difficult for young people to save the money they need for a down payment. This had led many millennials to continue renting, rather than buying their own properties.
High prices aren’t the only factor that discourages home ownership. The current generation also values mobility. Millennials tend to place more emphasis on traveling and experiences as opposed to possessions.
These values have led many millennials to be less interested in purchasing a property. This is good news for landlords. As long as people are opting to rent, whether by choice or by necessity, landlords will have a steady stream of tenants.
Additionally, if people choose to continue renting later in life, they will likely be interested in higher-end properties. Or, they might look for properties that can accommodate a family. These types of properties will have higher rent, which means more money for landlords.
Flipping Homes Is a Good Option
One of the challenges for people interested in investing in the California housing market is the high cost of entry. With prices around $700,000-$1,000,000 in many areas, it can be impractical to purchase a single family home and rent it out.
That said, there are other options for making income in real estate. For instance, if you are interested in working with single family homes, you can consider flipping houses.
There are many areas in California with hot housing markets that are filled with properties in need of rehabilitation. This is a prime opportunity for investors.
If you purchase a run-down property, you can get it fixed up to the same conditions as other properties in the area. Selling the property can be a great way to make some quick income.
Consider Mult-Family Rentals
Of course, flipping does not provide income consistently the way renting does. With flipping, you can get large payoffs, but can also go several months without generating any revenue.
This is why another good alternative to single-family homes is a multi-family property. Purchasing and renting out an apartment building can be a much more effective way to get a return on your investment.
This is because, with a multi-family property, you’re not dependent on a single tenant to make your rental income. If one tenant moves out, you’re still collecting rent from several others.
Additionally, when you look for tenants for a single-family home, you must find renters who can afford a high enough monthly payment. This is because you’ll be depending on their payment to cover the cost of the whole property.
With a multi-family property, however, you can rent to tenants who are looking for lower monthly payments. There are more of these kinds of renters available. This will make it easier to get tenants consistently.
If you’d like to save money on your investments in the California housing market, contact us. We’ll work with you to discuss the best insurance options for your unique needs.
[video_player type=”embed” width=”560″ height=”315″ align=”center” margin_top=”0″ margin_bottom=”20″][/video_player]