Los Angeles CA Real Estate Market - Does it have juice?

Question

What are and types of real estate business oppportunities are available in Los Angeles real estate market?

Joseph M. · Answer

I'm not sure exactly what type of investing you are interested in doing in L.A .  Is it wholesale, fix and flipping or buying to rent out/being a landlord?

Looks like people have been doing well with the fix and flip business, but now i'm not seeing as many deals on REO homes in the L.A market. The asking prices on REOs seem to be to high to the point where it's hard to get a deal out of them. But of course asking prices are just asking prices and if a home has been sitting a while the bank might be willing to accept a lower offer.

One bad thing about L.A is you need a lot of money to get in the game , and you don't have the option of renting for cash flow if something doesn't work out because it seems to be nearly impossible to cash flow in the la metro market. Also the rent control laws are very anti landlord/pro tenant.

Of course the good aspect of the L.A market is that when prices appreciate they historically have appreciated pretty rapidly. If you look at apartment buildings the prices have been increasing even though the returns are pretty low on the national level. The reason (in my opinion) that people buy them is for the hope of future appreciation. But someone just starting out probably isn't going to have the money to buy an apartment building in L.A for $1million+ dollars. and then you'll most likely have tenants paying rents that don't cover your expenses. If you already have money and you are viewing it as a place to stick your millions , it's probably better than a bank account paying 1% or whatever.

But with so many markets where you can actually cash flow, I don't see the appeal of buying property in L.A to rent out and I haven't heard of anyone on BP buying in the L.A metro area and successfully renting properties for cash flow. The people doing well are those that bought decades ago or inherited apartment buildings.

I personally don't feel the L.A market is really a great place for real estate investment especially for those starting out.. it seems that most of the L.A area based investors are investing in the antelope valley areas or central California areas.  I could be wrong though.

N/A N/A · Answer

Thank you Jhon!

Your reply has given me a direction to start. I would be garteful if you give me an advice about which type of RE investment will be best for Los Angeles CA real esate market?

Jacob Villalobos · Answer

Michael what cities are you finding deals? I'm new and want to start out in Calfornia too

Joseph M. · Answer

Hi Will F,

I would think that you might do better with multis in the L.A market as far as renting them out. I still don't feel like prices have come down enough to cash flow. Asking prices price per square ft asking prices seem way too high. Even in pretty bad areas people are asking like $100 a sq foot which is kind of nuts .

I think a good strategy might be to find a mismanaged building that you can turn around. As I mentioned before with rent control though if you buy a building that is being rented to tenants with below market rents, you can't just raise their rents. You might be able to find a deal by doing your own marketing directly to owners of buildings. You don't really find REO owned buildings on the market like you do with the SFH homes.

Also if you want to find multis on the MLS in L.A you can use redfin , if you haven't used them it's a service available in multiple cities that pretty much mirrors the MLS.  It looks like pretty much any multifamily building (and SFH/Condos,etc)  on the MLS should show up in redfin.  Most of SoCal shows up too and you might be able to find some deals that actually cash flow in some nearby.

Best of luck!

Michael Campbell · Answer

Completely agree with Joseph M on cash flowing in LA. My brother and I wanted to start here as we live in So Cal, but could never figure out how to make any real revenue. It took us a while but we figured it out.. we found some spots in central California and now we're on our fourth SFH. It's a lot of driving as we do a lot of the rehabbing ourselves, but it's finally paying off.

Will F. · Answer

Thanks Joseph that's the sort of advice I was wondering about.

I would buy to be a landlord and sell in the distant future (or not at all when cashflow is good) 15+ years from now.

I have a few houses worth a substantial amount that are completely paid off.

Do you think single families are better investments or multi units in this market? Where would I go to look into multi-units, would it be a commercial broker?

I figure there have to be some deals out there, I mean I'm sure it's better than the mid 2000s when the market peaked?   I have some ways of getting money, have lots saved up.  I'd prefer to invest locally, but I suppose if the cashflow is so much better I could invest out of state. I was also thinking of Las Vegas.

Any other recommendations?

Will F. · Answer

Revisiting this post.  What do you all think of the Los Angeles area market now? For investing, finding foreclosures, short sales, apartments, houses, and other real estate?

Joshua Dorkin · Answer

John - 
LAHomeSearch only posted his message so people would see his signature.  We get guys like that every once in a while . . . regardless, thanks for your follow up with him.

I am going to close this one, though.

Account Closed · Answer

The 'mistake' is in your request.

There is no best investment or investment model for the market. There are many options and certain things work better for one person compared to another. If you have great credit and lots of cash then you can do deals that others can not. If you are a licensed contractor with years of refurbishment experience then you might see deals where others only see problems.

Some folks buy notes and avoid owning the property. Others are buy and hold landlords but they outsource the property management as they make their money from deal making. Some focus on raising capital and not hunting for property. They know cash is king and LA has a lot of people with cash.

Can you say more about yourself and what you bring to the table right now? What is your starting point in terms of what I have mentioned (credit, cash, skills, network of connections, knowledge)?

Oh, then we have the residential vs. commercial divide. There is major subdivisions in the commercial sector (hotels, apartments, office buildings, strip centers, major malls, industrial facilities, warehouses).

There is also development (raw land into a higher and better use).

We all have to start somewhere. Best to start with something that gives you a competitive advantage. If you know no edge then pick an area that you want to learn and will enjoy even when you hit the speed bumps.

John Corey

Account Closed · Answer

What is available in LA is no different than the rest of the US. Different market conditions exist at different times but...

The biggest difference LA has to some specific parts of the US is LA is growing while some cities reached a population peak up to 40 years ago.

You need to start where you are. By that I mean you have skills, assets (credit, cash) and other things that define you and your starting point.

With education you can change and grow into what you need.

You should focus on the types of RE investing that interest you the most. RE can be a very tough way to make money. Hence you need something you enjoy or at least like enough to stick with through the bad patches.

LA tends to be an expensive market relative to some but a lot less expensive than a few other cities in CA or states. There is also a lot of money in CA so finding partners might be easier than some realize.

I would not expect a strategy to buy and hold will work if you do not have a lot of equity. If you really want to invest following MikeOH's model then I suggest you get out of LA. Or focus on finding investors in CA who want to do deals outside the state and be the guy with money rather than the guy who has the deals.

John Corey

Los Angeles CA Real Estate Market - Does it have juice?

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