Setting realistic goals is the first step in coming up with an investment plan. Once you know where you want to go, you can determine the best path to take. The next step is up to you.

Analyzing Los Angeles Property

If you are putting up money or accepting some form of financial obligation, it’s important to remember that, ultimately, the decision to invest is in your hands. Buyers must carefully consider the property, the area and the economy when choosing an investment.

We have a google map tool that enables you to see information on each one of the Los Angeles neighborhoods, as well as search the area for homes and condominiums for sale by price range. CLICK HERE TO VIEW

Location

Location is the most significant factor in a property purchase. Values can vary widely from place to place, so arm yourself with information before making a commitment. Investors tend to suffer the biggest losses when they stray from their area of expertise. Property goes through three stages: integration, equilibrium and disintegration. Look for positive signs in established neighborhoods, such as renovation, gentrification (younger, more affluent residents moving in), and/or low vacancy rates. Moreover, be aware of negative factors like graffiti and other signs of decline, abandoned buildings and the conversion of large homes to apartments.

Other general rules

• Better homes tend to be built outward from a community in the same direction;

• Commercial property grows outward along major transportation routes;

• Desirable recreational facilities as well as the presence of colleges, universities and medical facilities increase the desirability of surrounding housing;

• As a rule, it’s best to buy the least expensive property in a good area. The surrounding properties will raise the value of your land. This is the principle of progression. A similar phenomenon occurs when an expensive property is surrounded by less valuable properties: the value of the expensive property is pulled down.

Zoning

Zoning can also have a significant effect on the value of a property. Restricting the use of properties or adjacent “non-conforming” properties can change value.

CC&Rs

Similar to zoning, Covenants, Conditions & Restrictions (CC&Rs) are private restrictions placed on the use of property in a specific subdivision. This usually pertains to use, size and style of properties. The law states that when restrictions conflict (i.e. zoning and CC&Rs are not consistent), then the more restrictive use governs.

Other factors affecting land value Political climate Accessibility of utilities Topography & drainage Development of roads Vehicular & pedestrian traffic through the area Shape of a parcel (a triangular lot is less valuable than a rectangular one) Highest and best use (i.e. use that provides greatest net income) Income to Expense ratio to maintain property Condition of the physical structure (foundation, paint, electrical wiring, roof, etc) Presence of hazardous substances (asbestos, lead, termites, toxic mold, etc)

Los Angeles Real Estate Appraisals

Methods of determining the value of a property include:

Comparative analysis: shows listing and sale price for properties with similar features, in same area, same size. Generally provided by a broker and used in appraising residential homes.

Market comparison method: The easiest appraisal method to learn and the one used by most people buying property. It is simply comparing one property to another using substitution of a like property providing similar benefits of ownership. Differences in amenities are given a value and added or subtracted to determine overall value. For example, if you are comparing two properties that are exactly the same except one has a pool, the pool is given a dollar value that is either added or subtracted to balance things out.

Replacement cost method: Generally used in the valuation of new structures or those without comparable properties in the area. The building is appraised according to how much it would cost to build a similar structure providing similar benefits. The property value is reached by adding this rebuilding amount to the value of the land, then subtracting accrued depreciation. This method is problematic as it is often difficult to determine the accrued appreciation.

Income method: Used to appraise income properties, the value is found by dividing the net income (gross income – expenses) by the rate of return.

Gross multiplier: not a true appraisal, but a method used to obtain a ballpark figure. For example, if investors of a particular type of property are paying the equivalent of 5 times the annual gross receipts, then an investor would evaluate the property’s price by multiplying the annual gross income times 5 to see how the property price compares.

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We at Valerie Fitzgerald and Associates realize that you are in the information gathering stage of your purchase and we respect your privacy.  Should you have any questions, please feel free to email us at info@valeriefitzgerald.com or call us directly at 310-285-7515.  If you or anyone you know is looking to buy or sell a home, please note that we can provide detailed information and access to:

• Beverly Hills Real Estate
• Brentwood Real Estate
• Bel Air Real Estate
• Sunset Strip Real Estate
• Los Angeles Real Estate
• Santa Monica Real Estate
• Malibu Real Estate

You can count on the services of Valerie Fitzgerald and Associates to provide you with information you can trust.