Real Estate: California/Buying real estate
Thanks, Kathryn, for volunteering your time!
I was wondering how you set-up a trust for investment property? For some reason, I haven't found much information online -- I must be searching wrong!
It looks like you can set-up an LLC without a lawyer. Do you recommend that? How about setting up a trust -- do you think that should be done through a lawyer? (Or maybe it has to be done through a lawyer?)
Is it a better strategy to buy R3 property that can still be built on and build on it, rather than to buy property that has all the multi-units it can have on it? (Assuming you have the finances to build on R3 property in the first place.)
I live in the Los Angeles area. What do you think about buying investment/rental property in California? It's so expensive and the rent you get is not really that much higher than in other states. (Similar properties, one in California and the other in Texas, for example, may be 5 times more expensive in California but the rent isn't 5 times more!)
Thanksgiving is coming up and I know you may not be free to answer these questions immediately.
Thank you again,
You are certainly facing some big concerns. As you might expect, the best I can do is provide some fairly general answers as I do not have all the necessary facts and do not know you personally re: your risk tolerance, investment experience, handyman skills, visionary abilities, etc. Please bare with me <smile>.
As a Realtor, I am bound to suggest you seek legal advice. As a source for info, I will point you in the direction of lawyer.com, legalzoom.com, and avvo.com for starters. You can get trust documents and free advice when asking a specific question. Generally, my -opinion- is if a person knows how a trust works, it's contractual restrictions and terms, and have previous investment experience yet few properties to place in a trust, a do-it-yourself trust may be an appropriate approach. Please keep in mind there are allso tax concerns re: properties coming and going from a trust that an attorney can advise on...
Different parts of California have VERY different growth rates, building requirements and returns on investments. This is true not only from county to county but from differents areas within a city in some places! This makes answering the second part of your query a bit of a slippery slope as how does one compare an area in Texas with one in LA without knowing both intimately?
These are some of the concerns I would suggest considering when investing in rental property:
* What is the condition of the property? This goes beyond roof, plumbing, electrical, etc. you I'll need to check with the city or an experienced Realtor in your area about street access, parking requirements, environmental impact concerns, any previous structural or nuisance violations, crime, etc.
* Will you manage the property yourself or hire a property manager? This could mean an added expense, yet provide peace of mind -- especially if you do not live within driving distance of your investment.
* Have you ever dealt with the city inspectors in the area you're considering building? You may or may not be willing to do that again <smile>.
* How much profit are you looking to make in the short, medium and long term? Can these goals be met in the area you are considering investing in post-build or fix-up?
* What is the cost differential between fix-up and build from scratch? How does that effect your financial goals?
* what will it take to meet the aesthetic requirements for your preferred rental market? Will they be willing to rent in that location for top dollar and helpmyounmeet your financial goals if you meet the aesthetic ones?
This list could go on and on. What's most important, in my mind, is that you understand the risks and your experience matches those risks. For example: I rarely suggest an investor make their first investment farther away from home than they can drive. Keeping an eye on your first property can help reduce your stress level. Naturally, for those who have a higher threshold for delegation and trust of a property manager and can afford one, that -can- be an option.
I sincerely hope this has been helpful, Rachel. Good luck in whatever direction you choose! Be sure to hire a Realror who communicates openly and in all candor in both LA and TX as no website can replace cultural nuances or negotiate a deal for you...