I still can’t find that one person. That one person who ever bought a duplex in Silver Lake and regrets it. Income property prices continue to rise in Silver Lake, Atwater Village, Highland Park and, especially, Echo Park, where the average multi-unit property sells for 29% more than it did last year, on average.
It’s a great time to be a landlord in Los Angeles.
People who own multi-unit properties in L.A. right now are sitting pretty. Demand for rental property far exceeds the number of rental units available today. Few new dwelling units have been added to the area’s housing supply this century and those being built today will barely put a dent in current demand, let alone future demand. The economy is on fire, everyone is working again, more people than ever want to live in the Los Angeles area. It is smart to be a landlord and it is the right time to buy income property in Los Angeles.
Buy a Duplex.
If you are looking for a place to live that also generates income buy a duplex. Buy a triplex. Buy a 4-unit property. Live in one unit, rent the rest, enjoy the benefits of passive income. You can buy up to a 4-unit property using typical-types of conventional financing used for single-family homes, including FHA and VA loans. The projected/actual rents for units you won’t be living in may increase the amount a lender will allow you to borrow. For example, you may qualify for a big enough loan to buy a great duplex in the $630,000 range if $590,000 is your max price for a single-family home. The multi-unit option might be something to consider.
Your First Investment Property
Time to start investing in rental property? Buy a duplex. Buy a triplex. Buy a 4-unit property. Buy a condo or a single-family home. Buy an apartment building. Just like I can’t find anyone who regrets buying a duplex in Silver Lake, I can’t find anyone who can convince me it’s a bad financial decision to buy residential income property of any size in Los Angeles today.
Commercial properties and apartment buildings (anything more than 4 units, in this case) typically require commercial financing which means you may need a larger down payment and pay a higher interest rate on an accelerated schedule. Single-family homes and condos you buy specifically to lease may come with a slightly higher interest rate and require more money down depending on various factors.
Will Rents Ever Go Down in Los Angeles?
I don’t expect average rents to drop in Los Angeles anytime soon. However, there is no guarantee, it can happen and has happened in other parts of California. In San Francisco rents plunged in the early 2000’s as a result of the dot-com bust. Prices dipped for about 3 years then started going back up again. Rents have not stopped climbing since. Today the average rent in SF is double what it was 10 years ago, and nearly double the average here in L.A. Los Angeles is not as vulnerable to a single industry’s collapse as San Francisco is with its heavy dependence on the technology sector to drive the economy, so we are unlikely to see large, sudden drops in rental rates, in my opinion. And the trend is for rents to keep going up, up, up.
For more market statistics click here to access interactive charts with the latest income property sales data for neighborhoods in Los Angeles.
Income Properties for Sale
Click here to see more than 100 income properties on the market today in the greater Silver Lake and NELA (Northeast Los Angeles) area.