Of the many benefits of investing in real estate is the plethora of options a real estate investor has the ability to choose from. There are different investing strategies, investment property financing methods, and types of investment properties. Under the different types of investment properties is multifamily investment properties. Just like any other investment, these are a great way for property investors to make money and build wealth. However, before buying multifamily property, you need to consider your location or real estate market. Based on numbers computed by Mashvisor’s rental property calculator, one of the best places for buying multifamily property in the US is the California real estate market!
In this article, we will go about explaining why California real estate investors should consider multifamily property, provide you with a list of the best cities in California in which real estate investors should consider buying multifamily property, as well as explain why these rental properties are beneficial and how to use Mashvisor to find the best multifamily investment properties. So, without further ado, let’s jump right in!
Why You Should Consider Buying Multifamily Property in California
Higher Return on Investment
In real estate investing, the main motivation for real estate investors is making money from their rental properties (return on investment). There are a number of real estate investment strategies to achieve this goal, but buying multifamily property happens to be one of the best!
Money is made in real estate investing through cash flow (in the form of monthly rent) and appreciation. Cash flow is simply the profit that property investors make after calculating the difference between their monthly rental income and monthly expenses of the investment property. Buying multifamily property allows for a higher cash flow because there are multiple residential units in multifamily rental properties. This means more tenants to collect monthly rent from and, as a result, positive cash flow and higher rental income. However, to guarantee this positive cash flow, real estate investors buying multifamily property have to keep an eye out for occupancy and vacancy rates.
Related: How to Generate Passive Income from Multifamily Real Estate Investing
As for appreciation, it is the increase of the investment property’s value over time. Multifamily investment properties generally appreciate at a lower rate than single-family investment properties. However, property investors can force appreciation after buying multifamily property! You can do that by adding amenities such as a laundry room, a parking space, or providing extra services. With real estate appreciation, property investors buying multifamily property can hold their rental properties for a number of years and then sell them for a high price, thus, generating a high return on investment.
Easier to Finance
Even though this type of rental properties is expensive, buying multifamily property is actually easier to finance than a single-family property. Thanks to cash flow and high return on investment, property investors have more financing options with lower down payments. Banks and loan lenders are more motivated to give a loan to a real estate investor buying multifamily property as they’re sure that the rental income will cover the loan payments.
Related: How to Buy a Multifamily Property With No Money
Fewer Risks
When we say buying multifamily property has fewer risks, we mean in regards to vacancies and negative cash flow – which are major risks that no real estate investor wishes to encounter. First, with a multifamily investment property, it’s very unlikely to get 100% vacancy rate. As long as you’re investing in a real estate market with a high demand for multifamily rental properties (where people would rather rent than buy a property), then you’ll always have a pool of potential tenants.
Secondly, even if there’s some vacancy, the risk of generating a negative cash flow is still low. For example, assume you’re buying multifamily property that consists of 16 units. Having 4 of these units vacant won’t lead to a negative cash flow as you’ll still be able to collect rent from units that are occupied. On the other hand, when you’re investing in a single-family property and don’t have a tenant, you’ll immediately have 100% vacancy rate. As a result, you’ll start losing instead of making money from your investment property.
To learn more about all aspects of real estate investing, continue reading our blog.
Buying Multifamily Property in California Real Estate
The best places for buying multifamily property have a growing population, high demand, high rental income, and low vacancy rates. This is exactly what property investors will find in the California real estate market! Here is a list of the cities which California real estate investors should consider when buying multifamily property:
Here is more in-depth information and numbers regarding these cities, provided to you by Mashvisor’s rental property calculator:
Related: Mashvisor’s Rental Property Calculator: A Guide for Beginner Real Estate Investors
Buying Multifamily Property in Los Angeles, CA Real Estate Market
- Median Property Price: $891,446
- Traditional Rental Income: $3,074
- Traditional Cash on Cash Return: 1.39%
- Traditional Cap Rate: 1.39%
- Airbnb Rental Income: $1,697
- Airbnb Cash on Cash Return: 0.89%
- Airbnb Cap Rate: 0.89%
Buying Multifamily Property in Long Beach, CA Real Estate Market
- Median Property Price: $685,388
- Traditional Rental Income: $3,147
- Traditional Cash on Cash Return: 1.61%
- Traditional Cap Rate: 1.61%
- Airbnb Rental Income: $1,840
- Airbnb Cash on Cash Return: 1.16%
- Airbnb Cap Rate: 1.16%
Buying Multifamily Property in San Diego, CA Real Estate Market
- Median Property Price: $728,128
- Traditional Rental Income: $2,743
- Traditional Cash on Cash Return: 1.65%
- Traditional Cap Rate: 1.65%
- Airbnb Rental Income: $1,796
- Airbnb Cash on Cash Return: 1.12%
- Airbnb Cap Rate: 1.12%
Buying Multifamily Property in Chico, CA Real Estate Market
- Median Property Price: $363,101
- Traditional Rental Income: $1,866
- Traditional Cash on Cash Return: 2.14%
- Traditional Cap Rate: 2.14%
- Airbnb Rental Income: $1,741
- Airbnb Cash on Cash Return: 2.33%
- Airbnb Cap Rate: 2.33%
Buying Multifamily Property in Anaheim, CA Real Estate Market
- Median Property Price: $576,247
- Traditional Rental Income: $2,763
- Traditional Cash on Cash Return: 2.22%
- Traditional Cap Rate: 2.22%
- Airbnb Rental Income: $4,121
- Airbnb Cash on Cash Return: 4.84%
- Airbnb Cap Rate: 4.84%
To start looking for and analyzing the best multifamily investment properties in your city of choice in the California real estate market, click here.
How to Find the Best Multifamily Property in California Real Estate
Mashvisor’s platform provides property investors with the best real estate investing tools and data analysis regarding traditional and Airbnb investment properties to make smart investment decisions for a successful real estate investing career. To analyze and find the best multifamily investment properties in the California real estate market, make use of Mashvisor’s:
- Investment Property Finder: A powerful and heavily customizable search tool that allows property investors to search for rental properties based on specific criteria, such as finding properties of a certain type, in a certain neighborhood, or with a certain Cap Rate.
- Investment Property Calculator: This versatile and customizable tool allows property investors to calculate the different values related to a property. The main values that real estate investors will be able to calculate are the Cash on Cash Return, Cap Rate, Cash Flow, and Airbnb Occupancy Rate.
- Heat Map Function: The heat map function for the property finder tool allows property investors to find rental properties much faster using visual cues. For example, you can set the heat map to indicate the areas with the highest Cash on Cash Return, and you will immediately be able to tell which areas have the highest potential for high Cash on Cash Return properties.
Sign up with Mashvisor to get full access to these real estate investing tools to start finding and analyzing different types of investment properties in any state, city, and neighborhood across the US real estate market!
Final Thoughts on Buying Multifamily Property in California Real Estate 2018
To sum up, the world of real estate investing offers different types of investment properties, one of which is multifamily investment properties. There are many benefits associated with buying multifamily property including higher return on investment, easier financing, and fewer risks.
Still, just like with everything else in real estate, the location of investment properties affects their profitability. Therefore, before buying multifamily property, ensure you’re investing in a location with growing population, high demand, high rental income, and low vacancy rates. One of the best locations for buying multifamily property that has the aforementioned features is the California real estate market.
The above-mentioned cities are those in which real estate investors will find the best multifamily investment properties in California, according to information and data analysis computed by Mashvisor’s rental property calculator.
Are you a real estate investor looking for an investment property of any type and in any city in the US housing market? Then don’t forget to use the best real estate investing tools provided by Mashvisor to turn 3 months of research into 15 minutes!
To get access to our real estate investment tools, sign up for a 7-day free trial of Mashvisor today, followed by 15% off for life.