January 4, 2023
Real Estate
Real estate investors often balk at the very idea of investing in California, and rightly so! The sky-high property prices of urban California are not affordable to everyone. However, as a top destination for highly skilled talent from across the U.S. and beyond, California has a burgeoning real estate industry that isn’t losing its steam anytime soon. Riverside, CA, in particular, offers a rapidly growing real estate market with property prices soaring each year.
The location, balmy weather, and peaceful neighborhoods of Riverside, CA, are attracting new residents from all across the U.S. Real estate investors are having a field day in Riverside, CA selling properties for ever-increasing profits each year. Here’s why the Riverside, CA, real estate market is proving irresistible for every investor looking for passive income opportunities.
Property prices in Riverside, CA, have shot up by 8.5% in just a year. Interestingly, Zillow’s data indicates that 46.2% of homes in Riverside, CA fetched prices higher than their listed prices. Such is the demand for homes in this beautiful city. It is not difficult to understand why.
Riverside, CA, is part of the Riverside-San Bernardino-Ontario Metropolitan Statistical Area (MSA), the 13th largest MSA in the country. Riverside’s economic powerhouse will continue to grow thanks to California’s business-friendly policies, especially for the I.T. and entertainment industries. As it grows, the demand for housing will too.
Riverside has a thriving economy and is also part of the Greater Los Angeles area. Its proximity to Los Angeles, mountains, and the ocean makes it ideal for families looking for refuge from the hustle and bustle of downtown L.A..
With the work-from-home situation becoming the norm than an office perk, individuals and families are relocating to more affordable cities and neighborhoods close to their base of operations. Therefore, Riverside’s geographical advantage will continue to pull a large population away from major metropolitans like L.A.
However, not everyone who comes to Riverside can afford to buy a home here. For many, the city is a temporary home before they move on to their next big career opportunity. So, they look for rental properties. With a median monthly rent of $2,500, Riverside offers excellent rental income opportunities for homebuyers. It’s a good 25% higher than the national average.
You don’t have to foot the entire bill for your new home upfront. You can contribute as little as 10% of the property’s value out of your pocket and get a mortgage to cover the rest of the property’s value. The interest rates on mortgages would be substantially lower than the rate at which real estate properties appreciate. So, even when you pay interest, you still profit when you sell the property.
More importantly, if you rent out your property, you can substantially offset your mortgage with the rental income. For instance, based on the above figures, an average Riverside home would fetch you $2,500 per month, or $300,000 over a 10-year period. That’s not accounting for the inflation and escalating rental rates. That $300,000 helps you pay off the mortgage on your home, even as it appreciates. In a nutshell, you let somebody else pay a big chunk of your mortgage for you. Isn’t that financially savvy?
As any real estate investor and they’ll swear by the tax exemptions and concessions the industry receives. Real estate investments bring you several tax benefits. For one, you can deduct almost every property-related expense when calculating your tax liability – insurance, property tax, mortgage interest, and the list goes on.
If you run a business from home, you can depreciate the property over several years for your annual tax filings. That should slash your annual tax significantly each year. You can take advantage of this tax benefit even if you are renting out the property, which is treated as a business too.
Perhaps, the biggest tax concession real estate properties get is what’s called a “1031 exchange.” It’s a unique taxation feature wherein homeowners can defer the taxes on the profits they gained by selling their property by buying another property. There’s no time limit on the deferment. So, you can keep selling properties, buying more of them, and deferring the tax liability indefinitely.
Compare that to any other investment opportunity – gold, stocks, bonds, antique items, or something else – they all require you to pay a hefty capital gains tax on the realization of the profits. In contrast, your wealth in real estate keeps growing rapidly due to compounding gains without the weight of taxes.
It’s no secret that real estate is one of the biggest sources of generational wealth for many well-known families in the U.S. What’s secret is the industry insider info on the next big real estate boom. Well-established metropolitan cities like Los Angeles and San Francisco have little room for growth in terms of property values. However, small cities like Riverside have plenty of room to grow and become the next big economic center of the state.
Make a real estate investment in budding economies like Riverside, sit back, relax, and let the city grow your wealth for you. In just a few short years, you can walk away with 100% to 200% tax-free gains.
Diana Renee
I am so fortunate to have grown up in one of the most wonderful places in the world, California. With friendly people, incredible weather, great entertainment, beaches, mountains and the desert all within driving distance, SoCal has it all. I was born and raised in Long Beach, and have lived in Corona since 1996. I truly love this city and I'm proud to assist my clients in navigating the process of buying and selling real estate.
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