Investors struggle in CaliforniaÕ competitive housing market

The good news? Those rising prices will pay off

The investment climate in California is becoming even more competitive in 2016 as real estate deals become increasingly harder to find, according to a recent survey by the California Association of Realtors.

With California’s ever-increasing home prices, the final sales price often matches the listing price. In addition, a property’s days on market are declining and more properties are now located further outside the city. It is no surprise then that investors have struggled.

Although last year about 65% of investors rented out their properties, that has decreased in 2016 to 62%. Unchanged from last year are the 26% of investors who are flipping houses. That is down slightly from 28% in 2014. The remaining 12% intend to use the property for other purposes, such as leaving it vacant or using it for vacation rentals.

About 75% of investors remodel their properties, however, the cost increased this year. Whereas the average cost to remodel was $10,000 in 2015, this year that increased to $13,500.

On the up side, about 76% of Realtors working with investors believe property values will increase in the next year, and 71% said it would continue to increase even in five years.

The average time investors plan to hold their properties jumped two years from 6.1 years in 2015 to 8.1 years in 2016.

Whereas investors own an average of 5.6 properties, down from 6.4 in 2015, more of them now own properties in other states or even countries. In fact, a record number of investors now own properties located outside of California, with 15% in other states and 2.4% in other countries.

Fewer investors have paid cash for their properties in 2016, down by 11% from 2015’s 66%. Investors said their primary source of cash funds were personal savings, followed by proceeds from a previous investment and lastly, private investors. 

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