Residential rental properties are homes purchased by an investor for the purpose of having them rented out to tenants. Various property types can be used as rentals, ranging from single-family homes to multi-unit apartment buildings. As an investment venture, residential rentals can provide you with a constant cash flow, long-term appreciation, and tax breaks based on the income generated from the rental.
But like all property investments, several factors can make or break your chances of getting great returns on your residential rental property. As such, it’s crucial to know the aspects that influence the rental and real estate market, such as the local economic trends, the property’s location and investment potential, neighborhood or community appreciation rates, quality of life, and more.
Buying rental property can be a wise investment, especially if you’re investing in an area like Culver City. This urban sprawl is noted for its booming economy, family-friendly neighborhoods, and proximity to Los Angeles’ metropolitan center. However, there are certain challenges to face when navigating the city’s rental and real estate markets, in addition to managing the property itself.
So, before exploring your rental property investment options in Culver City with a trusted Westside Realtor, take a look at this comprehensive guide on buying rental property in Culver City:
Table of Contents:
- Rental properties in Culver City
- Why own a rental property in Culver City?
- It has a thriving economy and great investment potential
- It has serene, pedestrian-friendly neighborhoods
- It offers a great quality of life
- How to invest in the right rental property
- Know what to expect as a rental property owner
- Assess your financial capability
- Calculate your rental property returns
- Understand your rights and responsibilities as a landowner
- Work with a full-service real estate agent
Rental properties in Culver City
Renting trends and forecasts
A basic understanding of the latest trends and forecasts in the market can help you in making well-grounded decisions on the best time to invest in rental properties.
Here are several key developments that are currently swaying Culver City’s rental and housing market:
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Culver City rental properties assure investors of consistent income. As of November 2021, Culver City has a median property sale price of $1,289,000, with an average rental income of $ 4,527 for traditional rentals and $ 5,164 for Airbnb or vacation rentals. This translates to returns of 1.60% for traditional rentals and 1.86% for Airbnb or vacation rentals — an indication that rental properties in Culver City provide a steady cash flow.
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Pandemic rent declines are a thing of the past. The pandemic-induced migration has slowed down and big cities like Los Angeles are once again experiencing rising rent prices and declining vacancy rates. Suburban areas around these cities are showing strong rent growth since they provide bigger spaces at more affordable prices. Culver City itself has shown a remarkable 24% year-over-year increase in its average rent price for 1-bedroom apartments while 2-bedroom and 3-bedroom apartments saw a 7% and 8% year-over-year increase respectively.
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Rental demand is booming in Southern California’s suburban areas. According to the USC Casden Real Estate Economics Forecast (2021), the demand for suburban living will keep growing. Researchers project that monthly rental prices in SoCal’s suburban areas will rise by hundreds of dollars. Los Angeles County as a whole has reflected a current average rent of $2,073, which the study predicts to rise to $2,325 by 2023.
Overview of Culver City’s real estate market
Choosing the right property type for your residential rental investment is critical when it comes to assessing your financial capability and returns on investment (ROI). That’s because it determines everything from the mortgage you have to pay to your estimated annual rental income and cash flow.
To aid you in your decision-making, here is a summary of the price range and property sizes of different residential rental property types in Culver City:
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Condominiums
Price range: $469,900 – $839,000
Size of living space: Up to over 1,300 square feet -
Single-family home rentals
Price range: $995,000 – $3,999,000
Size of living space: 760 – 3,474 square feet -
Multi-unit residentials
Price range: $1,550,000 – $4,650,000
Size of living space: up to 9,860 square feet. -
Townhouses
Price range: $929,000 – $1,280,000
Size of living space: 1,254 – 2,049 square fee
It’s also important to note that in the last 10 years, Culver City had one of the highest home appreciation rates in the country at 85.10%. As such, buying rental property in this city can earn you not only a regular rental income but also a significant profit should you decide to sell it in the future.
Why own a rental property in Culver City?
Location is key when it comes to choosing the right residential rental property. Ideally, your property’s location must be a place where renters will have easy access to conditions and amenities like abundant job opportunities, glowing neighborhood ratings, and nearby commercial and recreational options.
If you’re buying rental property in Culver City, you’ll find all of these and more. Here are some reasons why Culver City is one of the best places to invest in residential rental property:
A thriving economy and great investment potential
Culver City’s central location, existing studio infrastructure, and great business environment have made it “one of the content capitals of the world.” Since the 1920s, it has been home to leading television and movie studios like MGM and Sony Pictures. But now, major corporations like Apple, Amazon Studios, Warner Media, and Tiktok have all joined Culver City’s ecosystem of entertainment businesses, tech startups, ad agencies, studios, and design firms.
This is good news not only for creative professionals but also for other local industries. The influx of content industry giants is estimated to bring 7,500 to 9,500 jobs to the city, as well as a whole slew of world-class restaurants and high-end shopping districts. Considering Culver City’s booming entertainment industry, business-friendly environment, and the large tenant pool that comes with both, buying rental property here can be a wise investment.
Serene, pedestrian-friendly neighborhoods
There are many benefits to living in a walkable area like Culver City. Due to higher pedestrian activity, streets, sidewalks, and parks tend to be safer since they are often well-lit and encourage a strong sense of community.
Moreover, walkable neighborhoods promote a healthier lifestyle, with studies showing that people who live in easy-to-walk communities are at less risk of weight-related chronic illnesses and cognitive decline. At a time when everyone is still adjusting to the new concerns and priorities brought about by the pandemic, these health benefits would be highly attractive to a wide range of renters.
Great quality of life
Real estate experts, observers, and existing residents all agree that living in Culver City is a wise decision. Its distinctions as part of Niche.com’s Top 10 Best Suburbs to Live in The Los Angeles Area and its glowing A+ rating are testaments to this truth. Here are more of this L.A. suburb’s finest qualities:
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It is a haven for outdoor enthusiasts and beach lovers. As part of sunny California, Culver City enjoys 281 days of sunshine each year. Moreover, the city has over 13 city parks in which you can spend those sunny days. One of these parks is the Baldwin Hills Scenic Overlook, a 58-acre park and a 500-foot peak that you can hike to see stunning views of Downtown Culver City and the Los Angeles metro.
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It is a mecca for artists, film buffs, and creative spirits. Culver City houses some of the most enthralling museums, art spaces, and galleries in California. You can explore the city’s deep-rooted history in the TV and film industry at the Sony Pictures Museum and the Wende Museum. Walk down the vibrant streets of the Culver City Arts District — home to 26 art galleries, an abundance of murals and street art, and an eclectic selection of boutiques, shops, and cafés.
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It is an epicurean’s paradise. There’s a wide range of bakeries, restaurants, and bars in Culver City; plus, there’s something for every unique palate. You can get your caffeine fix at places like Cognoscenti Coffee then order a matching pastry from Copenhagen Pastry. Hatchet Hall is the place to be for a fine dining experience but for a more casual affair, visit the Citizen Public Market. To cap the night off, you can get a cocktail or craft brew at The Cinema Bar and Seventy7 Lounge.
How to invest in the right rental property
Know what to expect as a rental property owner
Owning and maintaining a residential rental property involves a certain amount of responsibility and sweat equity. Specifically, it requires you to assume three roles:
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As a savvy investor. Making an investment entails putting in good money. That’s why when considering your options, you need to have a clear idea of your investment goals and ensure that the rewards outweigh the risks. This applies even in buying rental property. Since this entails a bigger capital requirement, you need to be financially capable of paying a minimum 20% down payment, closing costs, and months’ worth of bank reserves. Properties also have low liquidity, so you can’t expect to immediately sell your property and get a fair market price.
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As a quick-witted businessman. The greatest benefit of owning a rental property is the fact that it can provide you with a substantial constant income. However, know also that it comes with a level of unpredictability. You may, at times, find yourself spending more than earning with your property. This could happen when there’s a vacancy, costly damage must be repaired, or you have a problematic tenant. As such, you need to be quick on your feet in figuring out the best and most cost-effective solutions.
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As a handy landowner. Owning rental properties is an active, yet time-consuming, way to invest in real estate. Repairing and maintaining the property is your main duty to your tenants, so you may need to know how to use a toolbox. You also need to hone your people skills, especially when handling tenant screening processes and dealing with the daily tasks of property management.
If you live out of Culver City or California, fulfilling these roles effectively can be extremely difficult. Thus, it’s wise to hire a local property management company that can handle all the work and details for you, ranging from managing tenant concerns to overseeing financial statements and cash flow reports.
Assess your financial capability
Getting pre-approved for a mortgage is the best way to check if buying rental property in Culver City is a sound financial decision for you. Bear in mind that the underwriting standards for rental properties are more stringent and demanding.
Before approving a rental property mortgage, lenders usually require the following:
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High credit score. In general, a minimum score of 620 is required when applying for a rental property mortgage. However, lenders advise that you should have a credit score of 740 or higher to qualify for better mortgage rates and terms.
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Low debt-to-income ratio (DTI). DTI is the percentage of your monthly income allotted for paying off any existing debts. Rental property mortgage loans are only approved if you have a DTI that’s between 36% and 45%, so you should avoid carrying any sort of debt when investing in a Culver City residential rental property.
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Large down payment. Rental residential properties require a bigger down payment than traditional owner-occupied residential properties. While you can pay for as little as a 3% down payment for a primary residence as long as you pay private mortgage insurance, rental properties — on average — strictly require a 20% minimum down payment.
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Ample amount of savings. Along with your DTI thresholds, your mortgage lender will also look at your bank savings to see if you have the capability to cover three to six months of mortgage payments. These include the principal amount, interest, taxes, and insurance. Depending on the kind of mortgage loan, your lender might also consider your employment history, income, and landlord experience.
Navigating the strict standards and requirements of rental mortgage loans can be tedious and difficult without the help of an expert real estate agent who specializes in buying rental property. Although this kind of conventional financing is the most common way of purchasing a rental property, you can ask or explore other financing options with your real estate agent, such as buying with cash or using asset-based loans.
Calculate your rental property returns
Before making an offer for a residential rental property in Culver City, you need to determine its profitability as an investment property by calculating or estimating its ROI. Your real estate agent can give you a more detailed report and forecast of the property but it pays to know how the calculations are done.
Your potential property’s ROI will depend on the following:
- An estimated monthly and annual rental income
- Annual operating expenses such as repairs, property management fees, taxes, and insurance and mortgage payments
- The down payment on the property and other upfront cash payments
Understand your rights and responsibilities as a landowner
Even if you plan to have a full-service property management company handling most of your residential rental property’s operations, it’s still important to be familiar with the landlord-tenant laws in Culver City.
As an investor and landowner, you should be aware that the Culver City Council has adopted a permanent Rent Control Ordinance and Tenant Protections Ordinance during the latter half of 2020. Some of the most pertinent points include provisions on maximum permissible annual rent increases, re-establishing rents at market rates, tenant eviction protections, and tenant buyout agreements. You can read the Ordinance in full here.
Take note that the Ordinance includes a provision requiring all rental units to be registered at the City’s Rental Unit Registration Portal. You can learn more about the registration process here.
Work with a full-service real estate agent
There’s no question that the benefits you get from owning a residential rental property depend greatly on the work you put into it. However, you don’t need to work hard to work smart.
By working with a Culver City Realtor and property management veteran like me, Martin Feinberg, you hit two birds with one stone: You find the right residential rental property to invest in and you have someone handling all your property management operations for you.
With over 32 years of experience in residential income property sales and full-service property management, I remain the only top-producing Realtor in the Culver City real estate industry who owns and operates a property management company. Here’s what you get with me as your property management guide:
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Real estate expertise. Gain exclusive knowledge on Culver City’s real estate market, as well as access to real estate databases such as the Multiple Listing Service and my wide-reaching professional network
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Comprehensive property management. Save your time and energy by letting our team do the heavy lifting. Our full-service property management company handles reverting from marketing your rental on multiple online platforms to handling rent collection and tenant emergencies.
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Personalized services. I am committed to managing clients’ properties as if these were my own. While other property management firms simply assign a property manager to a client and their property, I personally oversee each detail in all ongoing management operations and issues.
Let me, Martin Feinberg, help you with all your real estate and property management needs in Culver City. Call me today at 310.729.6573 or send an email to martin(at)martinfeinberg(dotted)com.
