As a real estate investor, staying ahead of the curve is essential to success. And that's especially true in today's ever-evolving rental market. With rising prices and changing regulations, investing in residential or commercial properties can come with challenging conditions - making it hard to stay on course and maximize your ROI potential.
Property managers in Los Angeles have the same challenges. At Bell Properties, we are here to make sure you have all the information you need to make good decisions about your current and future investments. We have invested heavily in education and professional development. We have adopted innovative technology to bring us the latest data and show us the upcoming trends. These strategies become part of our leasing, management, and maintenance processes. They’re shared with our investors and owners so you can use them to stay one step ahead of market shifts and evolutions while minimizing risks in this dynamic landscape.
There’s a lot happening in the rental market, and it’s always changing. We’re taking a closer look at how investors can capitalize on shifting trends and unlock new opportunities within this complex market.
This is the general advice we’re sharing with all investors - whether you’re growing a portfolio, just starting out, or thinking of yourself more as a landlord who would like to transition into a real estate investor with multiple properties for rent. Bell Properties can provide some specific advice, too, targeted to your unique situation. Don’t hesitate to reach out and ask for help.
Here are some property management strategies that can easily be put to good use while navigating our Los Angeles rental market.
What We Cannot Avoid: Supply and Demand in the Rental Market
There’s a lot of talk about people moving out of cities like Los Angeles. With remote work becoming normalized post-pandemic, a lot of people can work from anywhere, so why live in L.A.?
Well, there are a lot of reasons to live in L.A. Gorgeous weather, constant sunshine, amazing shopping and dining and cultural experiences, and the buzz and energy of a city that is unmatched anywhere in the world. There are beaches and deserts within an hour’s drive. Mountains, too. Why not live in L.A.?
Despite all the drama around a potentially declining population, it’s hardly a wasteland around here. The greater Los Angeles area is home to 3.86 million people. A lot of those people are tenants looking for rental homes.
So, when we’re talking about an evolving rental market, the first thing we want investors to realize is this: Los Angeles is still a strong market for rental properties. It always will be. Even if the Hollywood strike drags on. Even if people continue to look for more affordable places to live. Even if remote work gets more and more popular. People live in Los Angeles because they want to. Not because they have to.
The market is always competitive, no matter what kind of shifts are happening on the sales front or with rental homes. Rents are high, tenants are qualified, and there is money to be made with your investment property.
Demand for well-maintained homes in good Los Angeles neighborhoods is high. The steady growth is thanks in part to the city’s status as being a desirable place to live, its strong and diverse job market, a population that covers hundreds of demographic classes, and one-of-a-kind cultural attractions. Rental values have consistently pushed higher, which is good news for landlords and rental property owners. Even if rental values plateau and dip a little, you’re still looking at a median rent that hovers around $3,000.
You can push those rents of your own even a bit higher if you’re willing to make improvements to your property and keep it looking modern and attractive. Focus on tenant retention and eliminating vacancy and turnover, and you’ll earn some great recurring rental income while your property continues to grow in value. This is the way success has always worked in rental real estate, and it still holds true today, even in an evolving rental market.
The demand for rental housing is still high, and the supply is still pinched. Construction has slowed a bit, and while there’s enough vacancy to meet the needs of tenants looking for homes, affordable housing is difficult to find. Choose a market where there’s space, and you’ll find yourself very profitable.
Expensive Mortgages Makes Renting Popular
One thing the Los Angeles rental market has going for it is the rising interest rates and the expense and difficulty of getting approved for a mortgage. Lenders are stricter with their standards than they were a few years ago, and buyers have to show up with larger down payments in order to offset the cost of their home loan with interest rates where they are. More people are waiting to buy, especially since Los Angeles home prices aren’t exactly accessible to everyone.
That’s good news for the rental market here.
An evolving sales market impacts the rental market. And this trend of higher mortgage costs is keeping people in the rental market. Even people who can afford to buy are waiting, which means your potential tenants have more money and more requirements. Make sure you and your property can meet those needs.
Evolving Consolidation in the Property Management Industry
As property managers, we’ve been following a trend that we find interesting but not necessarily threatening to the investors we work with. As you may have noticed, a lot of large, corporate companies are diving full into the rental market. Individual investors might be feeling eclipsed by the presence (and the aggressive buying habits) of huge companies that are focused on consolidating smaller property management portfolios into their brand. We’re also seeing a lot of build-to-rent communities, where developers partner with those institutional investors to create neighborhoods of new construction homes that are specifically designed as rentals.
There was talk about the impact this could have on property management and on real estate investing, but in a market like Los Angeles, it’s a bit of a yawn. We aren’t too concerned, especially now that the sales market is less on fire than it was. There are fewer homes for these enormous and well-funded companies to buy.
Also, real estate investing, and especially property management, are still very local businesses, and to invest or to manage investments well, great relationships are required. Good communication skills are essential.
There’s still a role for smaller property management companies, and there’s still a lot of space for the individual investor. No need to panic as this trend continues to evolve; we think that you’ll do better because you’re smaller and more flexible. A large institutional investor with thousands of properties and a huge payroll will have a much harder time shifting with the market trends and responding to the new tenant demands.
Increasing Laws and Regulations in Los Angeles Rentals
In the last three years, California property managers have had to adapt to a number of new laws and requirements. Since 2020, Bell Properties has worked with owners and investors and tenants to manage:
An eviction moratorium during the worst of the COVID pandemic.
Statewide rent control.
Just cause eviction laws.
New screening requirements affecting income verification and Section 8 residents.
Staying on top of the legal requirements that come with renting out a property is part of your job as an owner. It’s not easy, especially in a state with as many tenant protections as California. There are new laws, now, that cover recycling organic waste.
The evolving legal landscape has an impact on how we manage properties, keep you informed, and maintain systems and documentation. We know what kind of language a lease agreement needs. We understand the requirements involved in returning a security deposit, and we know the eviction process. More importantly, we know how to avoid evictions.
With laws growing more complex, property managers have been providing invaluable expertise on how to operate profitably and in compliance with all the new regulations that seem to show up year after year.
Surround Yourself with Experts in Los Angeles Property Management and Real Estate
How can you stay ahead of the evolving rental market and the constantly changing guardrails?
Working with an experienced real estate agent and property manager can be your secret weapon.
Local real estate agents can help you identify properties that match your investment goals, find the best neighborhoods, and navigate the complex process of buying and selling real estate. Having an agent on your side can also give you access to off-market properties that you might not otherwise hear about.
You’ll also want to partner with a property management professional. Don’t wait until after you buy the property and you’re thinking about marketing, leasing, and maintenance. You want the expertise that a property manager can deliver before you make an offer. Your property manager can tell you how much rent you’re likely to earn on a property, what you’ll have to spend on maintenance to get it in rent-ready shape. We can share our estimates on what you’ll spend on maintenance annually, and what sorts of tenants are likely to be attracted to your property. We can share valuable data and analytics that can help you before you buy.
Let’s talk about what the rental market changes mean for you. Contact us at Bell Properties.
