By: Brad Greiner, CEO of Open Air Homes and OpenAiRE Brokerage
Los Angeles, with its vast urban sprawl, sparkling beaches, and iconic entertainment scene, remains an aspirational destination for many travelers. Buying a home in this sprawling metropolis, with the aim of occasionally renting it out, is a lucrative investment opportunity. But how can you make the most of it?
At Open Air Homes, we’ve witnessed and assisted countless homeowners in this journey. Based on our expertise and insights, here are our top three tips for buying a home you plan to use part of the year and rent out for the remainder.
Tip #1: The Golden Price Range: $1.5-3M USD
Why this is the ‘Sweet Spot’
If you’re looking for the perfect home to buy in LA as an investment, targeting the $1.5-3M USD range is the way to go.
Take a $2M home, for instance. Based on LA’s standards, such a property would command a long-term unfurnished rental rate of approximately $10,000 a month. Our data at Open Air Homes indicates our highest demand is for Month+ rentals in the $12,000 to $15,000 a month range, aligning well with homes priced between $1.5-2M.
Our data also indicates that our second highest demand is for homes in the $15,000-25,000 a month range. Homes in the $3M price range typically rent for 15-25K a month and do quite well on our platform. Demand sharply drops off for homes above the $25,000 a month range, unless they are very large homes that do 3-4 day rentals.
* Please note, we are using monthly pricing instead of nightly pricing for ease of understanding, and also because a growing percentage of our portfolio here at Open Air Homes only rents for above 30 days. This is a growing segment of the market, and if you are a homeowner who has considered buying an investment property but are weary of short term rentals, speak with us, and maybe Month+ rentals are for you to help offset the cost of homeownership!
Moreover, from a future resale perspective, anything above the $5M mark becomes subject to Measure ULA, incurring an added 4% tax on the sale. This consideration is crucial, especially for homes that may appreciate in value and cross the $5M threshold over the course of owning the home.
Tip #2: Sell the Californian Dream: Visual Appeal Is Key
Why Aesthetic Matters
Think sunlit patios, panoramic ocean views, open-air living rooms, or a tranquil garden oasis. The California dream is as much about the lifestyle as it is about the destination. A property that doesn’t offer a slice of this idyllic lifestyle might not be the best investment. Homes that command higher rates and consistently boast high occupancy on our platform encapsulate the quintessential Southern California experience.
Guests curate their perfect vacation by scrolling through online listings, and properties that resonate with their aspirations tend to get picked. Essentially, if a property doesn’t make a potential renter daydream about their upcoming California adventure, it might not be the right one.
Tip #3: Invest Emotionally: Fall in Love with Your Home
The Heart of the Home
While real estate is often discussed in terms of numbers and returns on investment, the emotional aspect cannot be overlooked, especially when buying a home you plan to occasionally rent out. Properties that reflect the passion and personality of their owners resonate more with potential renters.
At Open Air Homes, we work with homeowners who cherish their homes, treating them as personal sanctuaries rather than mere assets. We believe that homes designed with love and care reflect that energy, making them more appealing to renters. This, we feel, has been instrumental in helping us maintain a consistent 5-star rating on Airbnb over the past decade.
In Conclusion
LA’s real estate landscape offers countless opportunities, but maximizing the potential requires a mix of strategic financial planning, understanding the appeal of the Californian lifestyle, and adding a personal touch to the property. With these tips in mind, your dream home in LA is bound to be a thriving investment!
