Being a mother is a constant battle to not only raise your kids right, but to keep the family’s finances in the red. Thus, when an unexpected lump sum of cash comes along it can be difficult to ascertain how to use it most effectively. You can save, you can spend judiciously, or you can invest. Despite a few fluctuations in the post-crisis market, investing in property (for you to live in, to flip at a profit or to let out long term as an absentee landlady) is still one of the best ways to make money. If you’re looking to buy property in Los Angeles (or anywhere else in the country for that matter), now’s the time to do it. The market has nowhere to go but up and prices are set to climb for at least the next few years. Let’s have a look at the issues that are affecting the Los Angeles market and why they represent some great opportunities for the savvy Mom looking to invest to help secure her family’s future.
The lie of the land
Before we talk about the real estate situation in LA, it’s a good idea to look at the city from a macroeconomic perspective, taking a look at the big picture. LA’s economy has changed a lot over the past couple of decades. The decline of the aircraft business has been a major contributor to the loss of around half a million manufacturing jobs and while tourism has picked up some of the economic slack, but the decline of manufacture has had a serious consequence. Many people have gone from the manufacturing industry to lower paid jobs in the service industry, although the medical industry is quickly on the rise.
This has led to a decrease in consumer confidence that has seen property sales stall a little in recent years. People have less disposable income with which to save for a down payment on a property and are having fewer kids until their finances stabilize.
Thus, LA is a unique prospect in that its population isn’t growing, yet house prices (slowly but surely) are. The chief reason for this is that LA is quite simply running out of space and as such home prices have risen 30% since 2013. Hence, the importance of getting in on the ground floor now.
Where to buy
Home prices in LA are expensive in comparison to rents except in areas like Riverside and San Bernardino counties where rents are high compared to incomes which has led investors to cut single family homes into multiple rental units making it easier for new investors to gain a foothold. LA County also has a high percentage of renters.
Maximizing your profits
If you have your mind set on a quick flip just be aware that capital gains taxes are much higher on investment properties than homes for private use. Between federal and state taxes you could find your profits end up being way less than you’d expect. You can circumvent this by finding a similar property on 1031Gateway and reinvesting your capital back into a new property thereby reducing your tax liability.
Incorporating is also an oft-used way of incurring more favorable taxation when you sell your property so if you want to turn your investment into a viable business, this could be the way to go!