The average American landlord makes about $73,406 annually. In Orange County CA, this number is even higher at around $75,141. If you’re looking to make an investment with a high return, you can’t go wrong with real estate.
The Orange County commercial real estate market is one of the best in the nation for property owners to collect rent in. Read on for an overview of this market and some trends to keep an eye out for.
Averages and Statistics
The first thing that you may wonder is whether purchasing Orange County real estate is worth the return. The answer to this question is a resounding ‘yes.’
Los Angeles is about one hour north of Orange County, but its market is similar for several reasons. Both are high-end communities in Southern California. Both have excellent real estate markets, wealthier homeowners, and good weather and living conditions.
In Los Angeles, the average commercial property sells for $484 per square foot. Most business landlords ask for about $46 per square foot of commercial space monthly.
This amounts to $552 per square foot every 12 months. After leasing a building out for 1 year, the average LA property owner turns a 14% profit. In
That’s not bad, especially considering that you’ll be leasing it out over several years! Plus, when tenants remain in the building longer, you’ll have the opportunity to increase their rent and make more money.
Would Residential Renting Be Better?
Short answer: no.
Residential property costs less to purchase up front, but the average California landlord only gets $3-4 per square foot of rental space. Property values will obviously vary – a well-maintained home may be a better investment than a dilapidated office building. But these are exceptions to the standard, not the norm.
Commercial properties are also a superior investment because they’re long-term. They require more care and maintenance than residential buildings, but this is a blessing in disguise. You’ll have a lot of chances to raise the property value and turn an already-lucrative investment into something extremely profitable.
Not only that, but commercial property landlords also get a lot of tax benefits. Maintenance comes with deductions, but so do interest expenses and depreciation deductions. There also will be deductions for Qualified Business Income, so you’ll get a lot of tax breaks.
The pandemic hit the Orange County real estate market hard. Leases had 12% vacancy rates in 2021 at the heart of the COVID-19 crisis.
However, they’re now coming down and have reached about 11%. This is still higher than the 2016-2022 10% vacancy rates, but it’s a step in the right direction.
In both commercial and residential real estate markets, rent also did not grow during the pandemic. In 2021, the average rent for all property types decreased by about 5%. However, it’s bouncing back and is at about -0.8%.
Landlords in Orange County can expect future growth, though. California’s real estate market is currently characterized by high demand, growing businesses, and varying supply chain needs. Each of these factors makes the state a top-notch place to purchase and lease out property.
The Orange County Office Market
Commercial property sales in Orange County are lower than the national average. They make about 350 trades when compared with the national average of 400.
It’s important to note, though, that the value of property sales is higher than most. The overall $2.7 billion value means that the market is likely to make a pretty good comeback in the coming years.
More Financing Options
If you were to purchase a residential property to rent out, your financing options would be severely limited. You’d need to take out personal loans or specialized mortgage loans for residential properties.
However, commercial real estate has far more financing options. Banks offer specific loan programs for those looking to make commercial property investments. There are also third-party lenders looking to give people commercial loans to buy property.
Many of these loans also have lower APRs than residential property loans. They certainly have lower interest rates than normal personal loans. You’ll be able to choose from more funding options that give you better bang for your buck.
Many Types of Commercial Buildings
It’s also important to note that there are several types of lucrative commercial investments. Orange County commercial real estate encompasses office buildings, retail venues, industrial facilities, manufacturing plants, and warehouses. You’ll be able to determine what type of property you want to maintain and rent out.
To determine the best option for you, consider:
- The condition of the specific properties you’re looking at
- The location of the property you’re looking to lease
- Which facilities require more maintenance
- How much the current rent is (so you know how much you’ll make)
- The square footage of the property (so you can accurately calculate ROI)
- The distance between the property and others you’re looking to buy in the future
Note that you aren’t committing to only leasing out a single type of property. Once you have an in with the commercial real estate investing market, you’ll have access to all these property types. You can expand your reach over time to be even more lucrative.
Beyond the Orange County Real Estate Market
Now that you know the basics of the Orange County commercial real estate market, it’s time to begin investing in high-ROI properties. Our team is committed to helping you locate a property to manage so that you can collect rent and earn passive income.
We offer office spaces, retail venues, and more, so you’ll have a diverse selection to choose from based on your specific needs. Call (877) 775-9625 to learn more about leasing or buying property.