As prices rose and real estate sales slowed in Los Angeles during the second quarter of 2020, many developers began to plan their next moves in an unsure market. As reported by the Los Angeles Business Journal last month, multifamily properties such as apartment, townhome and condominium buildings will be the first sector to rebound.
If you are planning to expand your operation by investing in multifamily real estate this year, get started with this simple guide to the Los Angeles landscape.
Historically strong demand
Prior to the recent slowdown, 2019 saw the highest sales ever for multifamily real estate in Los Angeles. This unprecedented volume came from the ongoing high demand for rental units in Southern California. In fact, the L.A. Business Journal also reports increased sales volume in this sector of 574% between 2009 and 2019.
When tenants seek their next home, they are looking for a great location above all else. When choosing rental properties, you should also keep this consideration top of mind. Look for neighborhoods with well-kept homes and amenities, high-demand school districts, nearby retail and dining, and other hallmarks of high growth that attract great renters.
Financial due diligence
Before investing in a multifamily property, carefully review the building’s existing finances. At minimum, you should become closely familiar with:
- All existing financial reports
- Current service contracts
- Current rent status
- Income and expenses for the past three years
- The local vacancy rate
- Copies of existing tenant leases
- Proof of rental payments
If you are new to commercial real estate investment in general or the multifamily realm in particular, work closely with professionals who have experience in local real estate. For example, a property management company or real estate attorney can help make sure your tenant screening practices are in line with state, federal and local laws. This can help you avoid costly housing discrimination lawsuits. A good team will also make sure your leases have the required disclosures and cover your investment from damage and liability.