California real estate investing can be tricky for investors inexperienced in buying properties for profit. California has taken a hard hit in foreclosures since the subprime lending crisis. According to DQ News, nearly 80,000 foreclosures occurred within the third quarter of 2008 and continued to rise through the first quarter of 2010.
California real estate investing could turn out to be the next gold rush for investors who purchase foreclosure properties. DataQuick states, “At formal foreclosure auctions last quarter, an estimated 24.6 percent of foreclosed properties went to investors. That’s up from an estimated 17.6 percent a year ago.”
Some California markets have witnesses housing prices drop as much as 30-percent; making real estate more affordable in the Golden State. However, home prices are beginning to rise in inland areas and property sales rose by nearly 10-percent in Los Angeles, San Diego, San Bernardino, and Orange counties. Investors who desire to purchase investment property should develop strategies now as real estate prices are expected to escalate throughout the year.
In order to turn a profit with California real estate investments, investors must take time to learn about the market as well as real estate laws. This is particularly important for investors who plan to use properties as rentals.
California has some of the most stringent landlord tenant laws in the country. Investors should visit the California Department of Real Estate website before buying investment properties. First time investors would be wise to work with a real estate attorney to ensure they are in compliance. Otherwise, they could be subjected to exorbitant fines.
The U.S. Census Bureau reports nearly 500,000 people move to California each year. This presents profitable opportunities for real estate investors who understand the needs of new residents. Many people who relocate need suitable housing with easy access to interstate systems and located within desirable school districts.
Investors who take time to review real estate trends and comparable sales reports can better determine housing market trends. Investors should locate the best school districts and focus on providing affordable housing to families with school-aged children. Networking with other real estate investors can shed light on what types of homes tenants and home buyers want.
Another niche investors should consider is offering houses for sale using creative financing options. Many people think of creative financing as illegal, but nothing could be further from the truth.
In today’s economy, obtaining a home mortgage loan has become difficult for buyers with less than perfect credit. Many California residents want to purchase homes but are unable to qualify for financing. Investors can solve this problem by offering properties as lease-to-own or providing seller carry back financing.
With lease-to-own homes, buyers provide a down payment and a portion of rent monies are contributed toward purchasing the home. This type of financing typically extends for two or three years to give tenants time to rebuild credit. When the contract expires buyers obtain financing through a conventional lender.
With seller carry back mortgages, investors act as the lender and carry all or a portion of financing. Buyers provide a down payment and submit monthly installments to the seller. Most investors carry back a portion of financing and borrowers obtain a home loan for the balance. Seller carry back contracts usually last between two to five years. Once the contract expires, buyers refinance mortgages into a conventional home loan.
Investors who buy homes in the state of California have many opportunities to obtain a good return on investments. However, they must engage in due diligence when buying distressed properties or offering creative financing.
It is best to develop of network of real estate professionals including attorneys, realtors, mortgage brokers and private investors. Join California real estate clubs to locate potential business associates and expand investment opportunities.
DQ News (DataQuick) – www.DQNews.com
DQ News – California Foreclosure Statistics – www.dqnews.com/Articles/2010/News/California/CA-Foreclosures/RRFor100420.aspx
California Department of Real Estate – www.dre.ca.gov
U.S. Census Bureau – www.census.gov