California, the 3rd largest city in California, is attracting many investors because of its key features: the growing economy, increasing population, rich environment, and high employment rate. The current housing price in the city is around $263,560, which has gone up by 32.9% over the last year. With that said, investors can earn a high appreciation rate and returns on investment in California City. So, if you are thinking of investing in California's real estate, this is the right time.
However, every investment decision has risks and rewards involved. It depends on how effectively you analyze the risks and are willing to tolerate them. Let us consider both sides of investing in California City real estate.
California is a consistently growing market and its meteoric rise is expected to continue in the near future. With that in mind, let us look at some of the benefits of buying a property in California city.
1. Steadily Growing Population Equals Vast Tenant Pool
According to the California City Chamber of Commerce study, the city remains a viable area for growth and development. The city population is growing at the rate of 0.22% and has increased by 1.21% over the last two years. With a current population of 14291, the city is the 423rd most populated city in the state and has a population density of 70 people per square mile, including 10,921 adults. As housing becomes more and more expensive, many people are looking for rentals, which ensures a large tenant pool for investors in California.
2. Rapid Economic Growth
California is becoming a buyer's market and thriving in terms of economy. Even after the pandemic, the region continues to flourish due to industrial growth, recreational advantages, diverse landscape, and tremendous educational opportunities.
3. Great Climate
Sunshine, warm weather, proximity to California coastal cities, and fertile land are synonymous with California. This provides a lot of options for development and population growth, which results in tenants looking for long-term leases in the city.
Also, it is one of the top vacation destinations in the country for local and international tourists. Major tourist attractions, such as encompassing mountains, coastal areas, national parks, and deserts, offer their own outstanding experience to the tourist, increasing the scope for short-term rental investment.
4. Employment Opportunities
The job market in the city has increased by 1.2% over the last year. It is likely to grow by 19.6% in the next ten years with established employers within commutable distance, such as Edwards Air Force Base, Wind Hub Generation, Golden Queen Mines, and Mojave Air & Space Port.
Additionally, several reputed companies and entrepreneurs are planning to invest in the region, offering new employment opportunities. This upcoming growth will eventually translate to more money in the market, which can further your investment goals.
5. Demand For All Types Of Properties
California City has a great inventory of commercial as well as residential properties. Since different properties offer different benefits, you can invest in any property based on your investment goals. This includes:
If you want to diversify your real estate portfolio, investing in commercial properties can be a solid step. Although the investment cost of commercial properties is higher than residential buildings, they can offer high ROI, steady cash flow, and a high occupancy rate. In California city, you can rent commercial property for shopping malls, grocery shops, office buildings, and industrial warehouses. Make sure you do your due diligence before and calculate the risks before investing.
With the growing population, California's demand for residential properties is also growing. Here are some residential properties that are in trend in the city.
Single-family properties always attract investors and tenants. Since highly qualified tenants search for a single-family rental, buying one is always a great investment option. It also offers high appreciation, increases your property's value, and ensures a steady income for investors.
Multifamily properties also bring you closer to your goal of diversifying your portfolio. They are more cost-effective and require relatively low maintenance and management costs. Additionally, investing in multifamily properties ensures reliable income and a low vacancy rate. For example, if one unit remains vacant in your property, the income from another rented unit can compensate for that vacancy, reducing financial risks.
6. Investor-Friendly Market
Despite the skyrocketing home values and living costs, California's real estate market has always been a favorable option for investors or buyers due to its extensive inventory, variety of tenants, and significant appreciation. Even if most cities across California have a seller's market, the situation is likely to change in the upcoming years.
According to the 2022 housing market forecast, a decline in sale pace will be a welcome relief for real estate investors with more inventory. Homebuyers will have plenty of old and newly constructed properties available in the city and an affordable range of housing prices.
Additionally, some positive aspects of living in the city include growing industrial opportunities, agriculture, proximity to other metropolitan cities, and highways. This has given rise to the demand for rental properties and buying opportunities for investors.
7. Stable Rental Rates
Unlike other cities, California has had a relatively stable rental market over the past few years. The average rent for a one-bedroom apartment in California City is $850, which remains flat compared to the last few years. The data ensures positive and steady cash flow considering the rental price at the point for many properties.
Additionally, a larger pool of qualified tenants, including workers, students, and families, are likely to pay more for well-maintained properties. The market in California City doesn't fluctuate the way it does in other neighboring cities like Los Angeles, or San Francisco, ensuring consistent monthly rental income in the long run.
8. High Returns On Investment
Investing in real estate may have several purposes. If you consider it a retirement destination, you may buy and rent a property until you move into the property after the retirement or keep it as long as you can and pass it on to your heirs.
The longer you rent the property, the more appreciation and returns you get on your investment. Since there is a larger pool of renters, it will hardly stay vacant, ensuring steady income. Renting a property also provides tax benefits to homeowners, reducing additional expenses and boosting ROI.
Along with the rewards, you should also consider the downsides of investing in real estate to eliminate the risks of financial loss.
1. High capital investment costs
You will have to raise capital for investing in real estate. Once you buy a property, the fund will be tied up for longer. However, several factors, such as volatility of the rental market, high vacancy rate, and location, may adversely affect your investing, causing you negative cash flow and additional financial expenses.
2. Vacancy Rate
Not all days are the same in terms of rental property income. The time of the year or seasonality may affect the renting process, resulting in a high vacancy rate. For example, the leasing process is at its peak during summer and spring. At the same time, the demand for rental properties is less during winter.
In addition, if you need to evict your bad tenants for several reasons, you may need to wait until you get the right tenants for your property. You may have to wait until you get the right one, keeping your property vacant.
3. High Maintenance Costs
As an investor, it is your responsibility to maintain the habitability of your property and keep it clean and safe. You may need to invest in routine maintenance services to check the essential items available on the property, such as walls, roofs, appliances, HVAC systems, fixtures, plumbing, and drainage.
Maintaining single-family and multi-family apartments has significant costs in a city like California and they require constant attention to stay in good shape. Also, if unexpected maintenance issues arise, like water leaks or gas leaks, the associated maintenance costs can be substantial.
4. Real Estate Scams
Unfortunately, a big city like California is also home to real estate scams. Often investors fall prey to such get-rich-quick schemes and end up losing their hard-earned money.
Avoid trusting things like phony investment seminars, signboards like empty houses for rent, unrealistic guarantees, lack of documentation, and demands for wire money to secure your down payment on a property. We suggest going through the proper channels and hiring professional property managers or real estate agents before making any investment decision.
Investing in real estate can be challenging in California, especially if you are new to the business. Hopefully, the factors mentioned above can help you make the right investment decision. If you need additional help buying a property in California City, JBL & Associates is here to help. We are a full-service property management organization in California city, also serving Rosamond and Tehachapi.
For more information, contact us at JBL & Associates.
760-373-1800 Office
