There’s no doubt that the Los Angeles real estate market has provided excellent returns for investors in the past. But with the Coronavirus pandemic destroying many people’s livelihoods, is this trend likely to continue? And is buying a rental house or apartment still the best way to make money from property? The answer to both questions is yes. Read on to find out why 2021 is as good a time as any to invest in the local real estate market and how you can take advantage of this opportunity.
Great Mortgage Rates
If you are thinking of buying luxury real estate because of the rock-bottom mortgage rates currently available, you’re not alone. In fact, LA real estate prices rose by 13% from January 2020 to January 2021, partly because so many people decided to take advantage of the low rates. This trend is likely to continue for the rest of the year, as 30-year mortgages under 3% are still available.
To find the best deal possible, you’ll want to make sure you have a good credit score, a solid down payment, and talk to several lenders to see which option is the most affordable. Another way to reduce your interest rate is to go for a shorter-term mortgage. 15-year rates approached 2% in March of this year, which could be an intriguing prospect for real estate investors.
Good Long-Term Prospects
Despite the steep rise in the market over the past year, most experts are optimistic that the trend will persist. Although some predict that appreciation will slow in 2021, the consensus is that a price drop is very unlikely and modest to strong market growth will continue. There are three main reasons for this optimism. For one, mortgage rates are set to stay low in the mid-term, which will encourage prospective homeowners and investors to keep buying.
Additionally, the end of pandemic-related restrictions now seems more and more likely as large groups of the population are being vaccinated. This will allow the economy to recover and people to regain a more solid financial footing, empowering them to buy more real estate as a result. Finally, with many millennials now aged between 30-39, they are starting families and settling down, which will provide the market with a whole new segment of potential home-buyers. All of these factors are likely to contribute to continued growth over the mid-term, so investing in local real estate now could be an excellent choice.
A Promising Rental Market
When looking to buy real estate as an investment, you will be considering both price appreciation and rental income. Because of the rapid growth of LA real estate, some investors elect to rent out their properties instead of flipping them. At the moment, many renters are on an unstable financial footing, which has caused mixed results in the LA rental market, with some areas benefitting from price increases and others declining as people have moved to the suburbs.
Consumer behavior has also changed significantly since the start of the pandemic. Many people now focus on goods, such as their homes, instead of services. As a real estate investor, this could be an advantage because renters working from home are moving to more luxurious and spacious dwellings in the surrounding commuter belt. With many companies incorporating at least part-time telecommuting into their long-term strategy, the trend could be here to stay, making houses within driving distance of LA a great investment choice.
On the flip side, a significant segment of the population will also return to work in downtown LA as soon as the pandemic is over. Affluent young professionals will be seeking luxury rentals in the local area, many of which are currently vacant and on the market. The impending end of the pandemic could be your chance to break into the luxury real estate market and find great deals on this type of dwelling.
Depending on your personal situation, an investment in a suburban property or in a luxury rental downtown could be a good choice. Keep in mind that many multi-family buildings are subject to rent control, so buying a single-family detached home could be a good strategy when it comes to maximizing your rental income. Despite this, you should stay on top of both markets and consult with a leading Los Angeles real estate agent over the next few weeks to see which option could suit you.
Unlike your primary residence, an investment property is all about the bottom line and you’ll be looking out for the best deal possible. Luckily, there are some strategies to find hidden deals, even in the affluent Los Angeles market. Though prices are high it is still possible to find homes at prices that make sense with some improvements post-sale.
The Ideal Time to Buy Los Angeles Real Estate in 2021
There are different theories about which time of year is best to buy a house. It’s generally accepted that the autumn and winter seasons are better for buyers, as most people are busy with the holidays, thus reducing competition. What’s more, most homeowners wouldn’t choose to sell their house in late November or December unless they are facing a time-sensitive issue, such as a relocation. However, in 2020 the fourth quarter was hot with buyers seeking more space or choosing to relocate for work to more affordable areas. Of course there are always death, disability and retirement that are motivators for movement in the real estate market.
If you have specific requirements or would like a lot of choice, start your search a bit earlier and aim to buy in the fourth quarter, when competition may be less and there is a possibility that more inventory will be available. It pays off to do your research and start looking a few months before you intend to buy, so contact your local real estate agent sooner rather than later.
A Seller’s Market
As we have seen, there are many reasons why Los Angeles real estate can be a great investment for 2021. However, the market is also very good for sellers at the moment. If you’re looking to sell a home in the local area, now could be the perfect time to take action. December 2020 statistics showed that LA is currently a seller’s market, which means that there are more buyers than houses available. The median list price was $950k and on average, homes sold after being listed for only 64 days. As more of the population is vaccinated and the economy starts to accelerate again, this trend is expected to continue into the rest of 2021, with an expected price appreciation of at least 5% this year.
No matter whether you’re looking to buy or sell in LA, 2021 could be the year to make the leap. The market is red-hot, allowing both buyers and sellers to get a great deal in the next few months. While sellers can benefit from the double-digit price appreciation of the last year, buyers can capitalize on low interest rates and expect their new property to continue increasing in value and the rental market to remain strong.
Whether you are interested in purchasing or selling a home, you’ll need an expert by your side to help you find the perfect place and optimize your investment returns. Book your first appointment with Teresa Mack, your friendly local real estate agent. With her extensive corporate background and 15 years of experience in Los Angeles real estate, she offers competent and professional service from LA’s leading real estate professional.