Los Angeles features the type of rental property investments that pay dividends throughout your lifetime. It also represents a market with plenty of growth potential, a high proportion of renters to owners, and strong demand. If you’re interested in LA, you need to understand the data and fundamentals driving growth in this city. Here is a guide to why LA is so hot and even some neighborhoods you should consider when investing in a rental property.
The Los Angeles Economy Is Growing and so Are Rents
A growing economy is always a good thing for landlords because people can afford to pay more for rent and there's less risk in taking on a tenant. Right now, LA’s economy is booming with the unemployment rate at 6.9 percent, the lowest it's been since 2008.
This healthy economy has translated into solid rental price growth over the last year as well. In 2014, LA saw a 4.9 percent growth in the annual change in rent. The median currently sits at $2,460, which is substantially higher the national average of $1,350 per month. In addition, 70 percent of landlords said they plan to hike their rents in 2015, underlining the level of confidence present in the LA rental property market.
It’s a Landlord’s Market
There are plenty of opportunities for landlords because LA has the highest rate of people in the United States with renters making up 52 percent of the population. The huge market of potential renters might be why rental units don’t usually stay long on the market in LA and why landlords are expected to be able to raise rents by an average of 8.2 percent into June 2016. LA's vacancy rate, which is the second lowest in California at 3.3 percent, also is another advantage for landlords.
A Long-Term Investment
If you’re worried that LA’s explosive growth over the last few years is a flash in the pan, don’t be. LA’s rental prices show the type of long-term and consistent growth landlords love to see. In fact, since 1970, median rent has risen 175 percent in Los Angeles, which is higher than rent nationwide, underlining the lifetime investment a piece of property LA can represent.
Be Picky About Your Neighborhoods
While LA represents a great investment, not every neighborhood is created equal. Places like Silver Lake, Highland Lake, and Echo Park are hip, in-demand, and still offer some affordable investment property options. More established neighborhoods such as Beverly Hill and Mid-City command some seriously high rents, and are also worth exploring.
At the same time, it’s a good idea to research where the next hot area will be. These are the types of areas where property may be a bit cheaper, and represent a spot where you can really see a substantial return on investment. Fox Hills, which is still affordable, is currently being named as one of the hottest neighborhoods in 2015, which means it’s poised for future growth.
Ultimately, LA rental properties represent a hot investment that can really pay off over time. Given the strength of LA’s economy, and the large pool of young people and renters, LA is set for growth. If you’re interested in LA, do your research and pick your property wisely, and you should have no problem getting an excellent return.
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