January 21, 2019

Los Angeles real estate market is one of the hottest of all out there. While California stays on top nationwide with the highest rent prices, cities like LA show positive dynamics for those who want to invest in rental properties.

The latest studies show that the one-bedroom apartment can be rented out for around $1,360 and the trend is going upward.

Yes, Los Angeles has its own rent control laws, and they try to fight the Airbnb hosts to make the housing more affordable. For now, the market still can be considered as one of the best for property investment. Being a landlord in LA opens lots of opportunities for a high monthly revenue to get out of your home.

Let’s dig the fundamental reasons why you should consider investing in the Los Angeles rental market.

Reasons to Invest in Los Angeles

Being a shiny gem among the tourist destinations nowadays, this city is proudly called the most popular destination in the US.

This means that the number of tourists looking for an Airbnb place to rent is tremendous. Any Los Angeles apartment in the city usually doesn’t stay unoccupied more than 2-3 days before the next guests move in.

Statistics show that the occupancy rate in LA is around 82% and the profit that the city generates growth exponentially. The city continues to develop and stays a very attractive Airbnb investment pool for anyone who wants to enter the short-term rental market.

Despite the new regulations that cut the profit for the Airbnb landlords, it still generates a better revenue comparing to other cities around.

On the other hand, the short-term market is not the only solution for you. So as a property investor, you have a few options to choose from.

The second option will be long-term renting.

Since the job opportunities in the IT and Science sectors continue to develop in California and Los Angeles in particular, more and more people seek a place to rent after they move to work in LA.

This means that the traditional long-term renting is still a pretty profitable idea that you can utilize. In this scenario, your property investment will pay off slower, yet it’s potentially a more convenient option. You won’t have to deal with day-to-day renting. Just sign a contract once a year or once in a few years and gather the profit monthly.

What to Expect

Let’s review the numbers and see what prices and cash return percentage you should expect after you try one of the Los Angeles property investment opportunities.

The median house price is currently around $831,560.

The Airbnb rental income will be around $2,208. On the other hand, the traditional long-term renting will be approximately $2,650; this is the average rent price in LA.

The cash on cash return will be set to:

  • Airbnb: 0.97%
  • Long-term renting: 1.19%

As you can see, due to the regulations, traditional renting is becoming a more convenient and profitable way to go with. It will be fair to admit that the revenue difference is not huge.

The Most Promising Neighborhoods

City Terrace

(View Neighborhood Report)

Buying property here gives you fast access to downtown. The commute time to all the commercial areas will be around 10 minutes.

The prices here are currently set to about  $300,000 and $400,000 for a two and three bedroom homes.

This location will work great for both Airbnb and traditional long-term renting property investment.

Inglewood

(View Neighborhood Report)

The neighborhood itself is transforming dramatically. The plans are tremendous, and this neighborhood is about to become a place with dense and walkable housing.

The multi-billion dollar NFL stadium, the new Metro rail line, and other objects are making this neighborhood very attractive for the property investors.

Zoning plans state that this area will be urbanized and changed entirely by the end of 2019. Art studios, light manufacturing, hotels, shops, breweries, and up to six stories tall buildings. All of these things will surround the area. Make sure you review this investment opportunity before it’s gone.

Cypress Park

(View Neighborhood Report)

Cypress Park is located between the Frogtown and Highland Park. With all the gentrification trends applied, this is the sweet spot between the hipster-ish neighborhoods. The community in this area is 80 %, and the whole neighborhood is pretty diverse and friendly.

If you take a look at the real estate photography among the Cypress Park listings, you’ll note the horizontal woodcut and kitchen with unusual designs.

According to the latest statistics, the values of the Cypress Park properties will grow annually for about 8%.

Conclusion

The rental market in Los Angeles is one of the hottest in the USA. While the whole California state shows an upward rent pricing trend, this should be a trigger for anyone who wants to become a landlord in this area and invest in the local properties.

Whenever you decide to go with your guts and buy a house in LA, you should make in-depth research on the neighborhood you consider and review the rent trends in the area.

It’s up to you to decide whether you want to rent out your place to a tenant on a long-term basis or list your home on Airbnb. Even though the city tends to add more regulations for short-term rentals, the number of arriving tourists make the difference.

About the Author: Shirley Lowe, property manager and real estate agent from Burbank, CA. PropTech evangelist, LA dweller, and blogging geek. 

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