Los Angeles Real Estate Market Report 2019

Los Angeles Overview

Los Angeles, located in Southern California, is well-known to the rest of the world as the center of the film and entertainment industry. Los Angeles is the largest community in the State of California, the second most populous city in the US (after New York), and the 66th most populous in the world. LA, as Los Angeles is most commonly referred to, has an estimated population of 4 million, and LA’s metropolitan area is estimated to hold 13 million people. This large coastal city has a population density of 3,275 persons per square kilometer.

Los Angeles has one of the most diverse populations in the country. It is reported that 38% percent of LA’s population is composed of people born in another country. While the city’s residents are predominantly white, people of Hispanic/Latino origin come at a very close second as 49% of the city residents.

3,109,581 of LA’s population is adults, with a median age of 35. However, the city of Los Angeles draws in a lot of young entrepreneurial talent as well, so you will find this sprawling city full of people still in the beginning phases of their professional careers. The median household income for the Los Angeles County is $65,006. Although this is lower than the median California household income of $71,805, it’s higher than the nation’s median of $60,336. It is important to note, however, that the LA median has increased the most over the last three years (12.5%) when compared to both California and the US median increases over the same period (11.9% and 8.5%, respectively).

Los Angeles has got quite the impressive economy, and while known as “The Entertainment Capital of the World,” this city has got a lot more going for it than just Hollywood. It’s a world economic center with fast development in entertainment, culture, media, business, international trade, technology, and education. The city’s most important industries include entertainment, aerospace, tourism, and technology. The LA metro area has a gross metro product of $754 billion. The strong local economy is a positive indicator for residential real estate investments.

Los Angeles also prides itself in the creative freedom it provides its residents with. This city has a large artistic base, with more artists, designers, and people employed in media than 90% of the nation’s other cities. As the city continues to draw more and more people to it for reasons of either business or pleasure, the Los Angeles real estate market benefits.

A housing market supported by employment opportunities, population growth, tourism, and a strong economy is one strong market. The Los Angeles housing market has consistently been one of the biggest and most competitive markets in the United States, and it doesn’t seem to be slowing down any time soon. This fast-paced city won’t wait for anyone, so if real estate investors want a piece of the action, they have to go in knowing everything they possibly can about Los Angeles investment properties for a successful rental business.

Los Angeles Real Estate Market Overview 2019

Median Property Price: $995,995
Price per Square Foot: $555
Real Estate Appreciation: 64% since the last ten years (significantly above the California average and slightly above the national average)
Days on Market: 70
Listings for Sale: 4,754
Price to Rent Ratio: 23 (high)
Buyer’s Market or Seller’s Market: a buyer’s market
Renters’ Percent of Population: 64%

The Los Angeles real estate market is located in one of the hottest and most profitable locations in the United States – California. Investors looking to make high returns on investment and big profits always first think of this location. Los Angeles has a housing market which ranges in property types, property prices, and neighborhood amenities.

Taking a look at PWC’s annual Emerging Trends in Real Estate: United States and Canada 2019 report, we can see that Los Angeles pops up on a lot of lists. To begin with, LA is in the top 20 markets to watch for 2019 and doesn’t seem to be budging off the list any time soon. One big plus for the Los Angeles housing market is the level of competition it hones from not just US investors but from foreign investors as well. The Association of Foreign Investors in Real Estate (AFIRE) annual survey included only two US markets for global investment prospects. Los Angeles ranked in at number 4 globally, and along with the New York real estate market (which ranked in at number 2), helped place the US as the top national investment location for property investors.

Although Los Angeles house prices are high, this is to be expected when talking about one of the most competitive markets. The average home price in Los Angeles is $686,700. Now, although Los Angeles home values are still increasing, they’re moving up at a slower rate than the rest of the nation. This is good news for California real estate investors as affordability in this market won’t be getting much worse. LA real estate investors can now take benefit from the market’s cooldown and search for lucrative investments.

The Los Angeles, CA real estate market conditions are quite well for buyers in 2019 as more properties are going up for sale at lower prices. We can see from the percentage of renters and the price to rent ratio that LA residents find it more affordable to rent their housing rather than to own. This is a positive trend for rental property owners as it means a wide renter pool and high rental demand in the Los Angeles housing market 2019.

Best Property Types for Investing in the Los Angeles Residential Real Estate Market

Single Family Homes for Sale in Los Angeles, CA: 2,785 listings
- Median Property Price: $1,069,443
- Price per Square Foot: $577
- Average Monthly Traditional Rental Income: $3,608
- Average Traditional Cap Rate: 1.5%
- Average Monthly Airbnb Rental Income: $3,884
- Average Airbnb Cap Rate: 1.5%
Condos for Sale in Los Angeles, CA: 807 listings
- Median Property Price: $798,579
- Price per Square Foot: $607
- Average Monthly Traditional Rental Income: $3,060
- Average Traditional Cap Rate: 0.7%
- Average Monthly Airbnb Rental Income: $3,240
- Average Airbnb Cap Rate: 0.6%
Townhouses for Sale in Los Angeles, CA: 212 listings
- Median Property Price: $630,796
- Price per Square Foot: $395
- Average Monthly Traditional Rental Income: $2,900
- Average Traditional Cap Rate: 1.1%
- Average Monthly Airbnb Rental Income: $3,259
- Average Airbnb Cap Rate: 1.2%
Multi Family Homes for Sale in Los Angeles, CA: 896 listings
- Median Property Price: $1,065,728
- Price per Square Foot: $465
- Average Monthly Traditional Rental Income: $3,800
- Average Traditional Cap Rate: 1.5%
- Average Monthly Airbnb Rental Income: N/A
- Average Airbnb Cap Rate: N/A

As we can see from the data, the predominant type of housing in Los Angeles is single family homes. Single family homes make up 59% of housing stock in LA. They are followed by multi family homes which constitute 19%, condos which are 17%, and finally townhouses which make up only 5% of Los Angeles homes for sale.

Why Invest in Single Family Homes in Los Angeles

Seeing as single family homes make up most of the current inventory of Los Angeles houses for sale, you can’t go wrong choosing this type of investment property. LA investors have over 2,000 properties to choose from. You can compare between the different listings and find the best property for your rental investment strategy. The median property price for single family homes in LA is $1,069,443. While this is higher than the citywide median, it doesn’t mean all 2,785 listings of single family homes are listed at that price. Some will be lower, and some will be even higher.

Nevertheless, the wide selection of properties on the market gives you the benefit of finding lower priced single family homes that match all of your investment criteria. Single family homes also offer the most stable return on investment for both rental strategies, so you can expect similar returns with either strategy in 2019.

Why Invest in Condos in Los Angeles

Condos in the Los Angeles real estate market do come at a lower median price than the citywide median. Notice, however, that LA condos have the highest price per square foot ($607). This is because condos typically do come with more amenities and are usually in a Homeowners Association (HOA) which pumps the price up a bit. Condo investors can search through the hundreds of properties listed for sale in Los Angeles and find much more lucrative investments with returns higher than the average for the city. If this is your first time investing in condos, you are recommended to check out the HOA regulations association fees and requirements you would have to meet as an investor.

Why Invest in Townhouses in Los Angeles

The real estate market analysis for Los Angeles 2019 shows that LA townhouses are significantly cheaper than the other property types. The median price of townhouses is about 37% lower than the city’s median. We can also find a significant difference between the price of an LA townhouse price per square foot and that of the other property types. Although this property type has the lowest share of inventory in the Los Angeles housing market, it should still be considered as an investment property, especially for investors looking for more affordable options.

Why Invest in Multi Family Homes in Los Angeles

Multi family home investors in the Los Angeles real estate market can expect to make some serious rental revenue. LA investors torn between choosing a single family home and a multi family investment property in the Los Angeles market 2019 should consider the very close price points these two property types have. In most other markets, multi family homes are much more expensive than single family homes, which is the main reason why most investors lean towards single family properties. However, this isn’t the case for LA investors, as they can invest in a multi family property for the same price, but instead of generating income from only one tenant, a multi family investment offers multiple streams of rental income.

Why Invest in Foreclosed Homes in Los Angeles

Foreclosures are a property type available for investors and homebuyers at below market value price points. You can find foreclosed homes in any US real estate market, but in the Los Angeles real estate market, 0.5 per 10,000 homes are foreclosed. These are a great investment opportunity as they are more affordable and can still offer strong returns. However, real estate inspections are crucial when choosing foreclosed homes in Los Angeles and beyond if you don’t want future repairs and maintenance to cut into your profits.

Important Stats for Los Angeles Real Estate Investors

Safety

Crime Rate Index: 14 (100 is highest)

Los Angeles is safer than 14% of US cities, with a relatively high crime rate of 34 crimes per 1000 residents.

Access

Walk Score: 67
Transit Score: 53
Bike Score: 55

Los Angeles, CA is the 13th most walkable large US city. LA has good public transportation and is considered somewhat bikeable. The most walkable Los Angeles neighborhoods are Downtown, McArthur Park, and Central Hollywood.

Affordability

Cost of Living Index (Excluding Rent): 78
Rent Index: 69
Cost of Living Plus Rent Index: 73

In Los Angeles consumer good prices excluding accommodation are 21% cheaper than in New York City. Rent is 28% less expensive than in NYC. Meanwhile, the cost of living plus rent index in Los Angeles is 24% below the level in New York City.

Property Tax Rates

Los Angeles Property Tax Rate: 0.79%
- - Unified School District Tax Rate: 0.12%
  - Bell City Tax Rate: 0.34%
  - County Property Tax Rate: 1%

California Property Tax Rate: 0.79%

California property taxes at 0.79% are relatively low when compared to the national average of 1.19%. Los Angeles collects at the same tax rates as the state.

If you’d like to invest in states with no property tax, check out Hawaii, Alabama, Louisiana, West Virginia, and Wyoming.

Los Angeles Real Estate Market: Traditional Rentals

Average Monthly Rental Income: $3,538
Average Cap Rate: 1.4%
Price to Rent Ratio: 23
Renters’ Percent of Population: 64%
Optimal Property Type: Single family home or multi family home
Optimal Number of Bedrooms: 0, 3, or 4
Traditional Rental Listings: 9,815
3 Best Neighborhoods for Traditional Los Angeles Rental Properties: Watts, Canoga Park, and Central City
3 Worst Neighborhoods for Traditional Los Angeles Rental Properties: Westwood, Tarzana, and Encino

The Los Angeles real estate market is full of investment opportunities if you’re looking to buy traditional long term rentals. Traditional rentals are dwelling units which are rented out to tenants on long term basis, i.e., for months or years. This is considered a primary residence for the renter, and traditional renters always have landlords who would either be the property owner (investor) or a property manager. Los Angeles real estate investors have a wide renter pool to occupy their rental properties and can expect a reasonable return on investment with this strategy. An average cap rate of 1.4% isn’t bad at all considering this is the citywide rate; this means that investors can definitely find individual properties which generate higher returns. A market analysis shows that single family homes and multi family homes (specifically properties with 3-4 bedrooms) perform best for a long term rental in 2019. Analysis of the LA real estate market 2019 also shows that properties with no bedrooms (studios) also tend to perform well.

Landlord-Tenant Law and Regulations in the Los Angeles Rental Market

Landlord-tenant laws in any market typically lean towards one side or the other. Unfortunately for rental property investors in Los Angeles, the California housing market realizes tenants’ right more so than it does landlords’. This doesn’t mean that it’s impossible to be a landlord in Los Angeles or other California real estate markets such as San Francisco, San Diego, Sacramento, San Jose, and Oakland. It just means that before investing in a long term rental, you should check out the California landlord-tenant law.

Investors should know that because the law isn’t in their favor, rental properties in California really need to be treated like a business. It’s important for both parties to understand the landlord-tenant laws of their market as this clears up their rights and responsibilities to the other party.

Let’s go over a couple of things you should know as an investor in the Los Angeles real estate market. The first thing relates to late rent payments. No one enjoys an eviction process, landlords included. While some states make it easy for landlords to evict bad tenants, that isn’t always the case. For example, Los Angeles landlords can serve a 3-day notice to pay rent, but if they provide a grace period in the lease, they would have to wait for its expiration before they can serve that notice.

You must also make sure to register your rental units with the local housing department. When it comes to rent increases, before raising rent by 10%, landlords must provide a 30-day notice. In cases of increases above 10%, a 60-day notice is required. There are also specific notice periods for ending a lease, depending on the tenant’s status.

Moreover, Los Angeles landlords should keep track of any repairs or maintenance due for their rental units as anything gone unrepaired gives tenants the right to withhold rent, move out without notice, or sue the landlord.

Best Neighborhoods in Los Angeles for Investing in Traditional Rentals

Los Angeles Real Estate Market Report 2019 Best Los Angeles Neighborhoods for Traditional Long Term Rentals

1. Canoga Park

Median Property Price: $609,808
Price per Square Foot: $368
Average Monthly Rental Income: $2,701
Average Cap Rate: 2.3%
Walk Score: 74

Canoga Park is a great neighborhood for investors looking to make smart real estate investments in the Los Angeles real estate market 2019. With an average price per square foot far below the citywide average, this is definitely one of the most affordable neighborhoods in Los Angeles. Canoga Park is home to almost 2,000 people, and while this isn’t the biggest neighborhood in LA, it’s definitely got some investment opportunity. An average cap rate of 2.3% is already above the city average for traditional rentals, so investors can be confident to find even better performing individual properties in this market.

2. Watts

Median Property Price: $491,271
Price per Square Foot: $373
Average Monthly Rental Income: $2,419
Average Cap Rate: 2.1%
Walk Score: 72

Watts is currently the most affordable neighborhood in the Los Angeles real estate market. With a median property price of $491,271, Watts is more affordable than nearly 70% of the LA market. Its population is a good mixture of both homeowners and renters, so investors will definitely find a substantial renter pool in this neighborhood. Similar to our analysis of the best performing properties of the LA housing market, Watts is primarily composed of studio apartments and medium-sized homes (3-4 bedrooms).

3. Central City

Median Property Price: $586,913
Price per Square Foot: $313
Average Monthly Rental Income: $2,617
Average Cap Rate: 1.7%
Walk Score: 84

Central City is another one of the best neighborhoods in Los Angeles for top performing long term rentals. The main thing that makes Central City such a great investment location is, in addition to the above mentioned city average return, the fact that this neighborhood also has one of the highest walkability scores in LA. This leads to high economic activity and adds real value in Central City. Pair that with the fact that most of Central City’s residential real estate is renter occupied, and you have a very attractive investment location.

4. South Los Angeles

Median Property Price: $570,999
Price per Square Foot: $377
Average Monthly Rental Income: $2,404
Average Cap Rate: 1.6%
Walk Score: 58

A rental property in South Los Angeles could prove to be quite profitable, but investors are advised to make a move on this neighborhood market sooner rather than later. South LA is heating up as buyer demand will soon exceed the seller supply. Seeing that South Los Angeles property price is about 43% lower than the city’s median, investors can get a good deal here.

5. Hollywood Hills

Median Property Price: $1,742,800
Price per Square Foot: $754
Average Monthly Rental Income: $6,439
Average Cap Rate: 1.6%
Walk Score: 13

Hollywood Hills is a bit more on the expensive side of the LA real estate market, but the monthly rental income is pretty impressive. Hollywood Hills is ideal for California real estate investors interested in Los Angeles luxury homes for sale. Here the median property price is much higher than the city’s median, but the monthly revenue makes up for it. Investors in the Hollywood Hills neighborhood are looking at 82% more monthly rental income than the citywide average.

6. Reseda

Median Property Price: $581,381
Price per Square Foot: $421
Average Monthly Rental Income: $2,513
Average Cap Rate: 1.5%
Walk Score: 75

The final neighborhood being recommended for a long term rental investment in the Los Angeles real estate market is Reseda. Properties in this neighborhood have been increasing in value at a steady rate, and the market is quite balanced. A stable return and some of the lowest vacancy rates in LA make Reseda a great option for long term rental investors.

Los Angeles Real Estate Market: Airbnb Rentals

Average Monthly Rental Income: $3,702
Average Cap Rate: 1.3%
Average Occupancy Rate: 61.9%
Optimal Property Type: Single family home or townhouse
Optimal Number of Bedrooms: 3 or 4
Airbnb Rental Listings: 9,858
3 Best Neighborhoods for Airbnb Los Angeles: Southeast Los Angeles, Central City, and Boyle Heights
3 Worst Neighborhoods for Airbnb Los Angeles: Downtown, South Los Angeles, and Woodland Hills
Airbnb Los Angeles Legal Status: Illegal for non-owner occupied rentals. Hosts renting out a primary residence on Airbnb must pay an $89 registration fee and a 14% city transient occupancy tax.
Annual Events in Atlanta with the Highest Airbnb Occupancy Rate:

- Golden Globes Awards: January

This is the first major show of the awards season which happens annually in Los Angeles. It’s been taking place since 1944 and has been held in the Beverly Hilton since 1961.

- Chinese New Year/Golden Dragon Parade: February

In honor of the Chinese New Year, this parade takes place annually, drawing in tens of thousands of people to Chinatown’s North Broadway.

- Grammy Awards: February

Taking place every year since 1959, the Grammy Awards is long-awaited by people worldwide.

- LA Marathon: March

The ASICS LA marathon takes place citywide, covering 26.2 miles from Dodger Stadium to Santa Monica Beach. With more than 20,000 participants coming from different parts of the world, this event keeps the LA community busy.

- Fiesta Broadway: last Sunday of April

This celebration, which takes place in Downtown Los Angeles, is considered to be the largest “Cinco de Mayo” celebration worldwide. Guests of all ages come together to celebrate and enjoy live musical performances, food, fun activities, and games.

- Long Beach Lesbian & Gay Pride Celebration: June

This two-day celebration takes place in Downtown Long Beach and draws in participants exceeding 80,000 people. An annual celebration since 1984, you can expect to also see music performances from top-selling artists.

- USC vs. UCLA Football: November

Either happening in the Los Angeles Coliseum (home of the Trojans) or the Rose Bowl (home of the Bruins), this is one of the greatest rivalries in college football and is known to attract up to 100,000 fans.

Real estate investors already know that Los Angeles has a booming tourism industry. The beautiful beaches, numerous events, and the Hollywood atmosphere draw in large groups of people to Los Angeles year round. That means tourism in LA isn’t just hot one part of year and cold the other. The city witnesses a high number of visitors coming from both local cities and foreign countries. The city of Los Angeles has a record-breaking 50 million visitors in 2018 alone. Because tourism is one of the most important factors for short-term rental property success, investors may think they’ve hit the jackpot with an Airbnb Los Angeles investment property.

Looking at the rental income and the high Airbnb occupancy rate, real estate experts would agree. The city average for Airbnb cap rate is 1.3%, and this is as high as it can be considering the circumstances. Although the Los Angeles real estate market may seem like the perfect opportunity for Airbnb investors, there is a catch. In July, new Airbnb regulations went into effect which extremely restricted the ability for real estate investors to operate Airbnb Los Angeles rentals.

Airbnb Los Angeles Laws and Regulations

After three years of deliberation on how to regulate Los Angeles short term rentals, the City Council passed a new set of rules in this Home-Sharing Ordinance back in December of 2018. There is an estimated 23,000 number of housing units available on short term rental platforms such as Airbnb and VRBO. It also reported that 10,000 of these units are explicitly and only being operated as Los Angeles vacation rentals. What pushed the City Council to start regulating Los Angeles short term rentals are the complaints that came from the local homebuyers and residents of LA. Those advocating for the strict Airbnb laws in Los Angeles claimed that these short term rental businesses were taking affordable housing off the local real estate market and worsening overall housing conditions.

Here are some important things Airbnb Los Angeles hosts need to keep in mind moving forward with a short term rental in one of the best cities in California:

Only primary residences can be rented out. This means for legal operation, a host can only rent out the property he/she lives in for at least six months a year.
Hosts can only operate/register one home-sharing rental unit at a time.
Los Angeles short term rentals must be approved for residential use. Any structure for non-residential use (car, shed, trailer,etc.) cannot qualify for home-sharing.
All dwelling units also being operated as short term rentals must be registered with the city Planning Department and must pay a fee of $89 (This will take effect in November 2019).
Renters are required to have written approval from their landlords if they wish to home-share. Rent-controlled units are prohibited from home-sharing.
Airbnb Los Angeles hosts are allowed to rent out their residences for a maximum of 120 nights per year.
To home-share for an unlimited number of nights, Los Angeles Airbnb hosts can register for “extended home-sharing”, paying a $850 fee.
Hosts are responsible for the actions of their Airbnb Los Angeles guests and must therefore provide them with a Code of Conduct regarding safety and security requirements.
If their hosting platform does not have an agreement with the city regarding tax collection and remittance, hosts must receive a Transient Occupancy (Tax) Registration Certificate from the Office of Finance.

Seemingly, these restrictions make it difficult for real estate investors to build up a portfolio of Airbnb Los Angeles rental properties. However, you still have the option of registering your current residence for home-sharing. Or, if you’re willing to purchase a property as a primary residence in Los Angeles, you can legally operate it as a Los Angeles vacation rental. Below is a list of the top-performing Airbnb Los Angeles neighborhoods. Real estate investors should skim through the data and learn about the different performance levels of Airbnb rentals in terms of both cap rate and cash on cash return in the Los Angeles housing market.

Best Neighborhoods in Los Angeles for Investing in Airbnb Rentals

Los Angeles Real Estate Market Report 2019 Best Los Angeles Neighborhoods for Airbnb Rental Properties

1. Southeast Los Angeles

Median Property Price: $544,089
Price per Square Foot: $367
Average Monthly Rental Income: $3,391
Average Cap Rate: 4.5%
Average Occupancy Rate: 69.8%
Walk Score: 63

Southeast Los Angeles is the best Airbnb Los Angeles location as it yields the highest return on investment. Importantly, this neighborhood is also a top performing one for traditional rentals in the Los Angeles real estate market 2019. In addition to being one of the relatively affordable areas in Los Angeles, it’s a strong location for both rental strategies. This makes it an ideal destination for Los Angeles real estate investors in case the Airbnb laws and regulations tighten even further in the coming years. The high Airbnb occupancy rate of nearly 70% is reassuring that guests frequent this neighborhood for accommodation when visiting LA.

2. Central City

Median Property Price: $586,913
Price per Square Foot: $313
Average Monthly Rental Income: $3,122
Average Cap Rate: 4.5%
Average Occupancy Rate: 59.5%
Walk Score: 84

Yet another double-mention. Central City is also quite the profitable neighborhood for either rental strategy. A steady Airbnb return on investment coupled with that great walkability score mentioned before makes this neighborhood a great spot for Airbnb Los Angeles hosts and visitors.

3. Boyle Heights

Median Property Price: $696,759
Price per Square Foot: $476
Average Monthly Rental Income: $3,587
Average Cap Rate: 3.3%
Average Occupancy Rate: 66.5%
Walk Score: 70

Boyle Heights is a top-performing neighborhood for Airbnb Los Angeles and is a great candidate for California real estate investors looking to purchase a primary house and rent it out on short term basis. There are currently 96 Los Angeles real estate listings for in this area, so the options are plenty.

4. Tarzana

Median Property Price: $947,655
Price per Square Foot: $432
Average Monthly Rental Income: $5,743
Average Cap Rate: 3.1%
Average Occupancy Rate: 57.4%
Walk Score: 7

Although the Tarzana neighborhood does have a median property price below the city’s median, the area’s short term rentals generate a rental income much higher than the Los Angeles average (a $2,000 difference in monthly revenue). This makes Tarzana one of the best neighborhoods in Los Angeles for operating a vacation rental business.

5. Lake Balboa

Median Property Price: $630,132
Price per Square Foot: $411
Average Monthly Rental Income: $4,052
Average Cap Rate: 3.8%
Average Occupancy Rate: 53.6%
Walk Score: 50

For California real estate investors looking for a profitable neighborhood to rent out a primary residence, Lake Balboa is the answer. As competition in this market starts to pick, homebuyers should make a move quickly before sellers have the advantage. Lake Balboa promises to be a hot Los Angeles Airbnb location in the years to come.

6. Granada Hills

Median Property Price: $858,745
Price per Square Foot: $350
Average Monthly Rental Income: $4,641
Average Cap Rate: 3.7%
Average Occupancy Rate: 60.8%
Walk Score: 19

Granada Hills is an above average income neighborhood, with analysis reporting that it has an income level higher than 70% of other neighborhoods in the country. A stable occupancy rate and low price per square foot when compared to the city level average make Granada Hills a top Airbnb Los Angeles neighborhood.

Investing in Los Angeles Real Estate: Optimal Rental Strategy

Although both rental strategies can be successful and generate good rate of return in the Los Angeles real estate market 2019, traditional rentals seem to be the winner. When it comes to return on investment, both strategies have promising potential in the LA housing market. However, the enforcement of strict Airbnb regulation in the Los Angeles housing market this year makes it difficult for Airbnb Los Angeles investors to comfortably turn over the profit they want.

Traditional rentals in Los Angeles are profitable in many neighborhoods across the city. Seeing that Los Angeles is a buyer’s market, and housing inventory is wide, real estate investors can easily find lucrative investment properties which match their specific criteria. California property investors can yield a high return and can study up on landlord-tenant laws to make sure things go as smoothly as possible.

As the Los Angeles housing market remains cool for 2019, investors can search through dozens or even hundreds of Los Angeles real estate listings which all feature different things. So, while you can still invest in one of the Los Angeles homes for sale and rent that primary residence out short term, the optimal rental strategy for Los Angeles real estate is traditional rental properties.

Why You Should Invest in Real Estate in Los Angeles in 2019: The Pros

There are a number of reasons as to why buying a Los Angeles investment property would be a smart move to make in 2019. First and foremost is the fact that Los Angeles rental properties are offering stable and sufficient rates of return, as seen from Mashvisor’s real estate data and analysis. The rental revenue investors generate from their rental properties is sufficient to meet the relatively high property prices as the market has cooled down.

That’s another great factor behind successful investments in Los Angeles real estate – it’s a great time for property buyers. Houses for sale in Los Angeles are staying up on the market for longer periods of time which reflects a relief of buyer demand and an increase in seller supply. Since demand has gone down from its peak heights years ago, there has been a relief on property prices. Real estate investors can now find Los Angeles real estate properties at much more affordable prices than what the market is used to. This isn’t to say that LA real estate is getting much cheaper, it just isn’t increasing at such fast rates anymore.

However, if you’re really in the market for a discounted property, foreclosures are always a great option. You can find them at bargain prices, and if you find a pre-foreclosure property, you won’t have any competition. Don’t let the typical idea of foreclosures cloud your judgement. Foreclosed properties in the 2019 market can be anything from that hazard-filled property down the street to a luxury home up the hill. Foreclosed homes in Los Angeles make for 0.5 per 10,000 properties, so don’t miss out on this opportunity in disguise.

We did mention that the Los Angeles market typically lends more leeway for tenants and their rights, but there is news of one positive aspect for landlords. The city has relaxed on the rent control. Single family rentals don’t typically fall under the rent-control ordinance, so if you’re investing in this property type, you don’t need to worry as much. However, multi family units are typically the target of rent control, and almost all LA rentals of multi family buildings are rent-controlled.

Finally, Los Angeles has a very strong economy with a gross metro product of $754 billion. This solid economy is expected to dip just a bit in 2020 and then push back up in the following year. Lower mortgage rates are motivating buyers to make a move on low priced properties. As unemployment goes down, a strong job market is on the rise. Job growth is very healthy for any housing market, and it’s a key factor for successful long term rental investments.

Why You May Not Want to Invest in Real Estate in Los Angeles in 2019: The Cons

Although Los Angeles real estate isn’t as expensive as it’s been in recent years, it is still considered quite expensive for many property investors in the California housing market. For some, the risk is just too high for such a heavily priced real estate property. Keep in mind, however, that if you own a Los Angeles real estate investment, you’ve got yourself a good investment in a high-value market.

The Los Angeles real estate market is cooling down, but the typical trends of a buyer’s market don’t necessarily apply in Los Angeles because inventory isn’t exactly increasing. While there are plans for new construction set in place, and residential construction is increasing, it still isn’t enough to satisfy the demand in the LA housing market. Multi family construction starts are down 8% in Los Angeles, and this can be explained by a number of reasons. One is that Los Angeles simply doesn’t have enough geographical space for any more construction. The city is struggling to find enough land for the new construction starts, and this will eventually put some price pressure on current and future properties for sale.

With regards to the legal and regulatory framework enforced in Los Angeles, real estate investors might be looking for locations which are more landlord friendly and have less Airbnb law restrictions. These things can definitely make real estate investing in rental properties easier.

Los Angeles Housing Market Forecast

The outlook for the Los Angeles real estate market in 2019 and beyond is quite positive. Investors can expect profitable investments if they’re diligent with their property searches and understand cap rates and property prices. Choosing the right neighborhood can make all the difference in how your Los Angeles rental property performs.

A market correction, steady price increases, and a strong economy are all key factors of a stable housing market and point out to positive Los Angeles real estate market trends in terms of investing activities. With news of the next recession hitting the US housing market soon, real estate investors should keep this in mind. A Los Angeles real estate bubble isn’t expected to hit anytime soon. Real estate investors can expect rising rents, high demand for rental units, and lower housing inventory, but also a continued strong economy in the California real estate market as a whole. The local economy, industry growth, and strong investment activity in Los Angeles signify a successful long-term investment.

Additional Resources for Investors in the Los Angeles Rental Market

Best Los Angeles Investment Properties

With the help of an investment property calculator, you can search through the 4,754 Los Angeles homes for sale and filter the ones which meet your criteria such as budget, property type, optimal rental strategy, and expected return on investment in a matter of minutes. A heatmap tool will provide you with a Los Angeles neighborhood map to figure out the top Los Angeles neighborhoods to invest in real estate as well as the worst neighborhoods in Los Angeles for buying an investment property to rent out on short term or long term basis. A Property Finder will help you find the best Los Angeles investment property depending on your preferred rental strategy and other preferences.

Top Real Estate Agents in Los Angeles, CA

If you are a first-time real estate investor or an out of state investor or you simply prefer passive real estate investments, you should hire one of the best Los Angeles real estate agents to help you make a good deal.

Here are Mashvisor’s most popular agents in the Los Angeles housing market:

House Auctions in the Los Angeles Real Estate Market

If you are interested in investing in foreclosed homes for sale in Los Angeles, you can check out this calendar for auctions as well as other foreclosure related events in the California real estate market.

Property Management of Long-Term Rentals

Investing in a Los Angeles rental property doesn’t have to mean becoming a landlord and dealing with all the hard daily work. Instead, you can hire a professional property manager to deal with all your duties and responsibilities, while you enjoy your passive rental income.

Property Management of Short-Term Rentals

If you want to turn your Los Angeles vacation rentals into passive real estate investments, choose one of the top property managers in the LA housing market to handle all responsibilities related to owning and renting out a vacation rental home.