It’s no secret that many of the cities in the California real estate market are absurdly expensive. The City of Angels, Los Angeles, is among these pricey markets. However, there are relatively affordable real estate opportunities in the Los Angeles real estate market worth considering. Today, we’re here to tell you about the most affordable neighborhoods in Los Angeles and why you should invest in them.
Related: Wondering Where to Buy Rental Property in the Los Angeles Real Estate Market?
Los Angeles Real Estate Market 2019: City-Level Statistics
Before we talk about where you can purchase inexpensive Los Angeles investment properties, let’s learn about the city’s averages. Where can you obtain the data on the Los Angeles housing market? Look no further! With Mashvisor’s investment property calculator, you can analyze any market or neighborhood in the US! Click here to learn how! In the meantime, here are the statistics for the typical Los Angeles real estate investment.
Pricing
- Median Property Price: $1,018,101
- Price per Square Foot: $562
- Price-to-Rent Ratio: 24
Traditional Investing
- Rental Income: $3,534
- Cap Rate / Cash on Cash Return: 1.3%
The 4 Most Affordable Neighborhoods for Investing in Los Angeles Real Estate
As you can see from the data, the median price of a Los Angeles investment property is quite high at approximately $1 million. This is also higher than the state median of $693,843, according to Mashvisor’s calculator. Luckily, there are several locations in LA with relatively affordable real estate opportunities, ranging from $500,000 to approximately $600,000. According to Mashvisor, the best neighborhoods in Los Angeles for cheaper rental properties are Southeast Los Angeles, Central City, Wilmington, and North Hills.
Related: The Ultimate Rental Property Analysis Calculator
Southeast Los Angeles
Pricing
- Median Property Price: $521,318
- Price per Square Foot: $372
- Price-to-Rent Ratio: 20
Traditional Investing
- Rental Income: $2,177
- Cap Rate / Cash on Cash Return: 1.7%
Central City
Pricing
- Median Property Price: $585,064
- Price per Square Foot: $297
- Price-to-Rent Ratio: 18
Traditional Investing
- Rental Income: $2,662
- Cap Rate / Cash on Cash Return: 1.7%
Wilmington
Pricing
- Median Property Price: $566,958
- Price per Square Foot: $353
- Price-to-Rent Ratio: 18
Traditional Investing
- Rental Income: $2,608
- Cap Rate / Cash on Cash Return: 1.9%
North Hills
Pricing
- Median Property Price: $619,835
- Price per Square Foot: $373
- Price-to-Rent Ratio: 21
Traditional Investing
- Rental Income: $2,517
- Cap Rate / Cash on Cash Return: 1.4%
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Why You Should Invest in the Los Angeles Real Estate Market
Affordability isn’t the only key feature of the previously mentioned neighborhoods or the Los Angeles real estate market as a whole for that matter. There are plenty of other reasons why a PwC report ranked the Los Angeles real estate market in the top 15 for overall real estate prospects for 2019. These other Los Angeles real estate market trends include rental income, appreciation, being a buyer’s market, having a strong economy, and high demand.
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Rental Income
A staple of California real estate, and West Coast real estate in general, is high rental income. The city’s average traditional rental income is a little over $3,500. In the 4 neighborhoods mentioned a moment ago, rental income averages range from about $2,100 to $2,600. Keep in mind that these numbers are merely averages. You can easily find a Los Angeles investment property will generate above-average income with the right tools.
Related: What Features Make the Best Investment Property?
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Appreciation
Rental income and return on investment aren’t the only forms of profitability in LA. Appreciation is also historically high in the Los Angeles real estate market, which provides both short-term and long-term real estate investors with more benefits. According to NeighborhoodScout, during the last 10 years, the Los Angeles housing market appreciated by over 64 percent. This equates to an annual average of 5.07 percent, which places LA in the prestigious club of the top 10 percent for national appreciation. The city’s appreciation rate is also top-tier in the state, as its rates are higher than 70 percent of other cities and towns in California.
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Buyer’s Market
Although the Los Angeles real estate market has had high appreciation rates for a while, its rates are starting to cool down. According to Zillow, the 1-year forecast for the market is a mere 0.3 percent. This reduction in appreciation is one of the reasons why the Los Angeles real estate market is a buyer’s market in 2019. Now that LA is a buyer’s market, and not a seller’s market, real estate investors are in a much better position for purchasing investment properties. This is particularly helpful in affordable neighborhoods, like the ones mentioned above.
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Economy
The success of the superb LA economy is another motivator to invest in Los Angeles real estate. According to Bloomberg, Los Angeles is the most productive economy of the five biggest US cities. The city is outperforming other big cities, like New York and Chicago, in terms of GDP per capita, growth of personal income, and corporate equity and municipal debt. Los Angeles also has a gross metropolitan product of $1.044 trillion, making it the third-largest economic metropolitan area in the world. The LA economy is also very diversified, with over a dozen industries, including media, tourism, trade, fashion, petroleum, and technology.
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Demand
The interplay of all the Los Angeles real estate market trends mentioned lead to high demand for an investment property. This is evident with 63 percent of residents renting out a Los Angeles investment property. Part of this high demand in LA is its price-to-rent ratio of 24, according to Mashvisor’s data. This ratio indicates that it is more affordable to rent out a property as opposed to owning one. Even in the affordable neighborhoods in Los Angeles, the price-to-rent ratio is well over 18, indicating the same situation. No matter the location in the Los Angeles real estate market, there is plenty of demand for rental investment properties.
To sum it all up, the Los Angeles real estate market is definitely not an affordable one on the national level, but you can find relatively affordable real estate opportunities that are worth every penny as the LA housing market is very profitable, in terms of both rental income and appreciation. The city is also a buyer’s market and has a strong economy, which further reinforces the high rental demand in Los Angeles. To start searching for affordable real estate properties in Los Angeles or anywhere in the US, click here to start your 14-day FREE trial with Mashvisor!