February 21, 2022 | MagMedLife
If you’re thinking about investing in California real estate, you’re not alone. Over the past few years, the Golden State has been one of the top markets for real estate investment. Whether you’re a first-time investor or a seasoned pro, here are five tips to help you succeed in the California market.
Use Strategies Like Real Estate Crowdfunding
Here are a few ways in which real estate crowdfunding can help you invest in California real estate:
- Crowdfunding websites make it possible to find relevant information on real estate opportunities at a much lower cost than traditional methods, making investing in California real estate affordable for a wider range of investors.
- The equity from other investors that backs your investment is what gives you the leverage needed to stretch your funds further and get more creative with how you finance investing in California real estate.
- In exchange for equity, many of these sites offer tools designed specifically to simplify the process of investing in California real estate while saving time and increasing accuracy through automation. This means investing in California real estate can be even more profitable.
- A reliable crowdfunded investment platform is transparent and allows you to track your investment as the individual properties generate profits through renting or selling investments in California real estate.
- You can share investing in California real estate with others who may be interested, allowing them to invest alongside you without having to risk their own funds, sharing the burden of any bad investments while still reaping the benefits of successful ones.
Try House Flipping
House flipping is a term used to describe the practice of purchasing and then quickly reselling homes at a profit. The key to house flipping is making sure that you buy the home for as little as possible and then sell it for more than what you paid, all within a short period of time. This way, any profit made will be the result of speculative investing.
When it comes to land investing, California is one of the wealthiest states in the country. A lot of people are looking for houses to buy and rent out or live in. However, many first-time investors who try real estate investing will decide on a single property that they would like to flip before selling it later.
Flipping entails more risks, especially if you plan to sell it for profit since this type of transaction has been discouraged by banks these days because they have been associated with losses. But if done right, there is no reason for your investment not to flourish.
If you are planning to buy a house with resell in mind, then house flipping would be a perfect choice.
Make Sure You Qualify As An Investor
To qualify as an investor, you must have enough available cash to purchase property and the funds must be disposable. This typically means liquid assets and not retirement accounts and other long-term investments. You should probably plan on investing for a minimum of two years so do not count on selling a property quickly to get your money back out. If it is a longer-term investment, you can consider tax deductions on depreciation expenses if there is sufficient revenue from rent to cover them.
Investors qualify as those who have capital available to purchase real estate properties with the intent to gain income from such property. There are two types – active investors and passive investors. Active investors require full-time attention since they engage in daily activities concerning their investment properties while passive investors only need spare time because their investments are managed by someone else.
Invest In REITs
Real estate investment trusts (REITs) are a type of security that owns and finances income-producing real estate. Investors in REITs include pension funds, retired individuals, small investors, corporations, and foreigners. A California Real estate trust invests in specific types of property such as office buildings, shopping centers, or apartments. Pension funds may invest because many consider it a bond substitute. The two main categories within the REIT sector are equity REITs and mortgage REITs:
Equity REITs finance properties through the sale of common stocks to public investors while mortgage REITs typically use debt financing so usually have higher dividend yields than equity REITs
Mortgage real estate investment trusts generally have lower volatility than publicly traded equity real estate investment because they derive a significant portion of their total return from the yield on their mortgage assets.
Their respective dividend yields reflect this difference in capital structure. Mortgage REITs tend to have higher dividend yields than equity REITs because they do not need to distribute earnings to maintain asset growth given that they fund new investments with debt rather than equity.
Understand Cash Flow And Equity Potential As Keys To Investing
Valuating a property is important in any market, yet understanding cash flow and equity potential are the keys to investing in California real estate. The value of each investment will vary depending on its perceived cash flow and growth potential. Investors are best suited to choose properties that have the highest potential for equity appreciation, rather than choosing a property just because it has a higher cash flow.
If you’ve been hesitant about investing in California real estate because of one or more of the misconceptions listed above, it may be time to reconsider. We know this decision can seem intimidating at first but our team is here to help! No matter what your level of experience with property investment, we are confident that we have something for everyone and would love to hear from you today. Give us a call and let’s chat through all these common misconceptions together so you feel better informed about whether or not investing in California real estate is right for you after all!
Are You Looking to Invest in Real Estate in Northern California?
The top real estate agency in Northern California, Sexton Group Real Estate | Property Management in Berkeley, California is a boutique real estate company specializing in residential sales for properties throughout the San Francisco Bay Area. To better serve our clients we have three local offices, one in the heart of picturesque Berkeley, one near downtown Oakland and the third in the heart of historic Lafayette, California. The Sexton Group encompasses the essence of Berkeley’s charm, Oakland’s history and Lafayette’s family-oriented vibe all with a relaxed, down-to-earth nature. We are an amazing group of real estate agents whose wealth of experience spans more than 25 years in the industry. Looking to buy a home in Contra Costa or Alameda County? Contact us today for your free consultation!