Many individuals have the goal of owning income properties and apartment buildings with the hopes of obtaining financial freedom. While investing in real estate is a no-brainer, there are several questions that must be answered before purchasing a property.
One of the main questions investors must ask themselves is “What is the best city for investing in real estate?” To answer this question, it is wise to determine which markets have a track record of solid performance. Historically, Southern California has been one of the best areas to invest in real estate. In this article, we are going to use market-derived statistics to show you why Long Beach, California is the last affordable coastal city in Southern California and one of the best cities for real estate investing.
When considering Southern California, there is certainly an abundance of options. While every investor has different criteria, one thing is certain: a favorable price is always important when purchasing a property. In order to determine where you will get the “most bang for your buck,” our analysts at Sage Real Estate have researched small apartment building sales (2-4 units) since January 1, 2020 in six coastal cities, including: Santa Monica, Redondo Beach, Long Beach, Huntington Beach, Newport Beach, and San Diego.
Most Affordable City for Buying a Duplex (2-Units)
Since the beginning of 2020, these six cities are ranked in average duplex sales price from most affordable to most expensive as follow:
- Long Beach, $881,232
- Huntington Beach, $1,191,208
- Redondo Beach, $1,491,338
- Santa Monica, $1,693,251
- San Diego, $2,306,045
- Newport Beach, $2,538,207
Long Beach is the most affordable city for a duplex by 35% compared to the next affordable city, which is Huntington Beach. Compared to the most expensive city for duplexes, Newport Beach, Long Beach is 188% more affordable. The appeal of a duplex as the first investment property for an investor is the low barrier to entry, both in terms of price and available financing. While FHA financing is a great option for those looking to get started, unfortunately, many investors and lenders alike are unaware of the FHA Self-Sufficiency Test.
The Self-Sufficiency Test is essentially a breakeven analysis, where the Federal Housing Administration wants to ensure that 75% of the gross rents will cover the debt obligation of the property; this breakeven test is nearly impossible to pass in Southern California. The beauty of a duplex is that it is actually exempt from the FHA Self-Sufficiency, making a duplex the perfect place to start.
Duplex Opportunities (as of May 18, 2021)
- Long Beach – 28
- Huntington Beach – 4
- Redondo Beach – 4
- Santa Monica – 6
- San Diego – 47
- Newport Beach – 10
In terms of the number of options for buying a duplex in a coastal community, San Diego is first with 47 duplexes currently on the market, followed by Long Beach which has 28 active duplexes. This is important because as an investor you want to have several options to choose from. This allows investors to pick from various locations within each city. If the number of investment opportunities is low, obviously investors are limited to the few choices that are actively listed.
Most Affordable City for Buying a Triplex (3-Units)
Since the beginning of 2020, these six cities are ranked in average triplex sales price from most affordable to most expensive as follow:
- Long Beach – $1,019,609
- San Diego – $1,108,967
- Huntington Beach – $1,673,750
- Redondo Beach – $1,854,692
- Santa Monica – $1,975,111
- Newport Beach – $2,352,500
Just like duplexes, Long Beach is also the most affordable city when it comes to 3-unit properties. While there is a significant increase in the average price compared to duplexes, Long Beach is still the most appealing when it comes to triplex prices. In terms of favorable financing, it is important to note that 3-unit properties ARE subject to passing the FHA Self-Sufficiency test. This means that down payment requirements will be higher in order to get the property to breakeven. With that said, a triplex still makes great sense for an owner-user situation if the numbers make sense.
Triplex Opportunities (as of May 18, 2021)
- Long Beach – 25
- Huntington Beach – 1
- Redondo Beach – 2
- Santa Monica – 3
- San Diego – 21
- Newport Beach – 2
For triplexes, Long Beach has the most options actively on the market with 25 properties for sale. San Diego is a close second with 21 triplexes for sale. In cities like Huntington Beach, Redondo Beach, Santa Monica, and Newport Beach, your chances of purchasing a triplex are extremely low as there are only a few options currently on the market. The triplex market in Long Beach has a wide variety of properties with variations in price, location, and rental rates.
Most Affordable City for Buying a 4-Plex (4-Units)
Since the beginning of 2020, these six cities are ranked in average fourplex sales price from most affordable to most expensive as follow:
- Long Beach – $1,168,223
- San Diego – $1,404,179
- Huntington Beach – $1,704,264
- Redondo Beach – $1,969,574
- Santa Monica – $2,026,036
- Newport Beach – $3,535,000
Fourplex properties are in abundance in the City of Long Beach, and they are also the most affordable when compared to the five other cities used in this analysis. There are more duplexes in the City Of Long Beach than any other small apartment building type, and fourplexes are our second with over 2,800 four-unit properties. As the market leader in Long Beach fourplexes, we have our “finger on the pulse” and are always in-the-know when it comes to all things related to fourplexes. To view our full market update for 4-unit properties in Long Beach, click here.
- Long Beach – 21
- Huntington Beach – 3
- Redondo Beach – 0
- Santa Monica – 9
- San Diego – 13
- Newport Beach – 1
There are far more 4-plex opportunities in the City Of Long Beach than any of the cities used in this analysis. San Diego is a distant second with 13 properties on the market compared to Long Beach with 21 properties on the market. When combined with the affordability of this asset class in Long Beach, fourplexes make a great deal of sense for both new investors and seasoned investors looking for a good return at an affordable price. More importantly, four unit properties often trade hands off-market and the only way to know about these off market listing is to become a Sage VIP member.
The Long Beach Lifestyle
The numbers show that there is a clear trend when comparing the affordability and number of options of Long Beach to surrounding coastal cities. This makes a perfect combination for investors looking to get take advantage of the last affordable coastal community in Southern California. While affordability and the number of opportunities are both equally important, the biggest driver of sales in Long Beach right now is its location, appreciation rates, and improvements happening throughout the City.
Tenants in Long Beach enjoy the lifestyle opportunity that is encompassed by a bustling downtown, miles of ocean frontage, walkability to shops and restaurants, and it’s convenient access to destinations both North and South. With an amazing climate year-round, the weather is hard to beat, allowing residents to take full advantage of all of the attractions and activities that the city offers.
Not only does Long Beach claim one of the largest portions of ocean frontage in the United States (hence the name “Long Beach”), it is also home to the second busiest port in the United States. Employers are coming to the city in droves as they have began to realize the value and the direction that the city is heading due to its business-friendly political climate. All of these factors prove that Long Beach is truly a hidden gem and is hands-down the best city in Southern California to invest in real estate.
If you would like some more information about different property types in the city of Long Beach or how you can get started, please send me an email at [email protected] or a text at 559-707-2136.