The Los Angeles real estate market is a hot one, but it’s not without its challenges. The cost of living is high, and the competition for rental properties is fierce. If you’re an investor who is looking for short-term cash flow, you may be wondering if it’s worth investing in other states or cities with better cash flow potential.
There are a few things to consider when making this decision. First, you need to assess your investment goals. Are you looking for short-term cash flow or long-term appreciation? If you’re looking for short-term cash flow, you’ll need to find properties in areas with high rental demand and low property taxes. If you’re looking for long-term appreciation, you’ll need to find properties in areas with strong economic growth and limited housing supply.
Once you know your investment goals, you can start to research different markets. There are a number of websites and resources that can help you compare different markets, such as Zillow, Redfin, and Mashvisor. These websites can provide you with information on property prices, rental rates, and other factors that can impact your investment returns.
Once you’ve narrowed down your search, you’ll need to do some on-the-ground research. This includes visiting the different markets and talking to local real estate agents and investors. You’ll also want to get a sense of the local economy and the rental market.
If you’re still not sure whether or not to reinvest in other states or cities, you may want to consider hiring a financial advisor or real estate investment advisor like OwnApts Multifamily Advisors. They can help you assess your individual circumstances and make the best decision for you.
Here are some factors to consider when making your decision:
- The current status of the Los Angeles real estate market: The Los Angeles real estate market is currently in a state of flux. Home prices have been declining in recent months, and the number of homes for sale has increased. This could be a good time to buy if you’re looking for a long-term investment. However, it’s important to do your research and make sure that you’re buying in a market that is likely to appreciate in the future. ( see the Los Angeles real estate market report from Zillow)
- The cost of living in Los Angeles: The cost of living in Los Angeles is high. This could impact your cash flow if you’re not careful. Make sure to factor in the cost of property taxes, maintenance, and utilities when you’re calculating your potential returns.
- The rental market in Los Angeles: The rental market in Los Angeles is competitive. This could make it difficult to find tenants who are willing to pay a high rent. Make sure to do your research and understand the rental market before you buy a property. (see current rent market report here from Zillow)
- The local economy: The local economy in Los Angeles is strong. This is a good sign for the long-term prospects of the real estate market. However, it’s important to keep an eye on the economy and make sure that it doesn’t take a downturn.
- Your investment goals: What are your goals for your investment? Are you looking for short-term cash flow or long-term appreciation? If you’re looking for short-term cash flow, you may want to consider investing in other states or cities with better cash flow potential. If you do, you need to factor in the cost of investing in properties in other states or cities. This includes the cost of travel and the cost of hiring a property manager. You need to consider your ability to manage properties remotely. However, if you’re looking for long-term appreciation, you may want to consider staying in Los Angeles.
If you’re considering reinvesting in other states or cities, here are Top 5 Cash Flow Markets For Less Than $200k in 2023 from a Biggerpockets blog written by Liz Zack.
- Syracuse, New York
- Median purchase price: 196k
- Average rent: $1,500/month
- Rent-to-price ratio: ~0.80
- Home prices are still up 11% YoY.
- New technology companies are moving into the area.
- Good for added value, buy and hold investors. According to a recent study, only 27% of Syracuse housing is in “good or excellent condition,” which means investors have an opportunity to buy low, fix up, and enjoy both forced and market appreciation.
2. Lansing, Michigan
- Median purchase price: 191k
- Average rent: $1,000/month
- Rent-to-price ratio: 0.73
- Fastest growing “Midwest-metro,” according to a study done with U.S. Census data, many moving from the Detroit area.Michigan State University has reported off-the-chart enrollment over the last few years, bringing record levels of young professionals into the area.
3. Scranton, Pennsylvania
- Median purchase price: 176k
- Average rent: $1,200/month
- Rent-to-price ratio: 0.68
- Buyers are getting properties for 3% under list price, which means you can probably find a deal, helping to offset the lower RTP.
- Home prices may continue their upward trajectory. According to Zillow’s Home Value Index, Scranton home values are up 4.8% year over year (March saw a 1.5% increase month over month alone).
4. Toledo, Ohio
- Median purchase price: 173k
- Average rent: $900/month
- Rent-to-price ratio: 0.52
- Excellent population growth.
- Lead indicators like inventory, new listings, and days on market suggest that prices may keep going up. This is a great location for long-term holds.
- Strong rental demand and a relatively low vacancy rate.
- Diverse economy (manufacturing, healthcare, education).
5. Springfield, Illinois
- Median purchase price: 171k
- Average rent: $1,300/month
- Rent-to-price ratio: 0.65
- Strong fundamentals (low unemployment, fair wages, short commutes, etc.) and strong rent.
- AirDNA ranks Springfield as the fourth best location to invest in STRs in 2023 based on rental demand, growth, cash flow, and regulatory risk (2 out of 10).
For a full analysis of the top cash flow markets in 2023, read this article here.
Ultimately, the decision of whether or not to reinvest in other states or cities is a personal one. There is no right or wrong answer, and the best decision for you will depend on your individual circumstances.