By Dave Friedman, Realtor
I will be writing a series about the “Real Scoop” on real estate investment choices among houses and duplexes along with the returns and risks. Well to do neighborhoods like Porter Ranch and working class neighborhood‘s investment cash flow and risk will be discussed. I have gained much experience in understanding property returns and risks over the years from personal and client investments.
Investors with limited experience in real estate should start out with houses or small apartment complexes up to four units. (Over four units require a commercial loan that is very expensive and harder to qualify) Commercial property can have higher risks since they are more sensitive to economic downturns. Houses and apartment buildings tend to be more conservative since people need housing in good neighborhoods such as Porter Ranch. If you avoid buying during frothy market times or in an over built area, then some wonderful opportunities are available.
Should you purchase an investment house in Porter Ranch rather than in a working class area such as North Hollywood or Van Nuys? Reviewing Investment Returns and Risks are important. The more expensive areas offer less volatility or price gyrations along with lower cash flow returns and higher capital investment requirements. There is also less wear and tear from tenants. Working class neighborhoods such as Van Nuys offer the investor higher cash flows relative to the investment dollar but are subject to higher valuation volatility. These properties can appreciate and correct at a higher rate compared to more expensive areas such as Porter Ranch which is more stable. The reason for volatility in the less expensive areas is because more investors can afford to move into and therefore out of those investments.
The correct option depends on your goal of more stable appreciation with lower cash flow or higher price volatility that comes with higher cash flow. I do not advocate purchasing in extremely overbuilt areas such as San Bernardino since appreciation that is driven by limited supply will take much longer than more densely populated areas such as Porter Ranch or other good neighborhoods in Los Angeles.
Feel free to call me with any Real Estate Questions at 818-Myhouse (694-6873). With over 20 years experience in Real Estate I can assist you with property sales, purchases, leases, investing and resolving distressed loans. 818MyHouse.com with Keller Williams Realty – Experience Turns Real Estate Dreams Into Reality
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