Hello, I'm a newb from Southern California, and I'm in the process of building a business plan/strategy to start investing. I live right on the border of LA and Orange County, and I know both if those cities are a tough hill to climb, especially for a newb with no money. So my question is, what is a good market in So-Cal to get started?
There are cities near me where the real estate market is much lower than "the big city", towns like Whittier, Norwalk, Pico Rivera, etc. but these cities seem like the lower priced homes are mostly in bad neighborhoods.
My other option is, I own some property up in the northern part of LA county in a little town called Acton. While the market there is pretty pricey, 20 miles up the road is Palmdale. The market there is much more affordable, but is it a worth while place to invest? I know you can get some really cheap houses, but what's the rental market like in the Antelope Valley? I know the High Speed Rail is eventually going to have a station there (and it's also threatening to cut through my property in Acton, buts thats another story) but is that a good thing?
By the way I'm looking to fix/flip houses for living income, and also acquire rentals, apartments and SFR's, for long term. I also want to develop raw land and build SFR's as a strategy, starting with my Acton property. We've found a builder, picked a house design, and we're about to pull the trigger on that, but it's a home for my family and I to live in. If it works out (on paper the numbers look great) then I'd like to use that model for investing. Is Palmdale a good place to build though? Not sure if the price to build would leave any room for equity in that area, but maybe it's a good market to find good buy and hold deals.
Any insight or knowledge of any of these markets would be much appreciated. Thanks! And thanks for the warm welcome to BP!
Hey Nick. I live in Venice and used to live up in Palmdale/Lancaster. For fixing and flipping, you have a shot in SoCal. For straight rental properties though, you're going to have a hard time, even in those cities you mention.
Palmdale, for example, I can tell you the problem with rental properties up there. Well, a couple. First, as with any city, you have to make sure you will be able to make cash flow on it. Even with the lower prices up there, you have to make sure the rents are high enough to cover all of your expenses (mortgage, taxes, insurance, etc.) plus leave some profit. Typically the rents aren't high enough in Palmdale to do that. The second problem is tenant-quality. By no means am I saying that everyone who can't afford to buy a house is going to be a low-quality tenant, but because the houses up there are much more affordable, most decent-quality folks are going to just buy a house instead of rent. To further expand on that, from my experience living up there- there are two types of people who live in Palmdale. Aerospace folks, and locals. All of the aerospace folks are going to buy houses. That leaves the locals. Again, not all Palmdale locals are bad by any stretch, but by the time you find a property that is cheap enough to maybe cash flow, you aren't going to be in a great part of town. And Palmdale in itself already isn't that exciting of a town to draw in high-end people. I only bring in quality of tenant because bad tenants are possibly the highest expense you can have on a rental property. Then add to that, CA is a tenant-friendly state...it could cost a fortune just to get rid of a bad tenant! And I mean, a fortune.
Unfortunately, for price reasons mostly but also because of tenant laws in CA, buying for cash flow is next to impossible around here. There are other methods available but cash flow isn't really one of them.
Sorry to be a buzzkill!
Ali makes some great investment points as usual. I would not disagree with her take except that, having been exploring, hunting, 4x4ing, drag racing and essentially creating harmless havoc in this area since I was a teenager I think Acton is a slightly different animal. I would not lump Acton in with the rest of Antelope Valley. In fact it is 10 to 15 miles away and a whole set of different metrics and possible future values comes into play. You will get the well to do Valley dude to consider a custom home in Acton. That is not going to happen much in Antelope Valley proper. There was a time Acton had much of this custom ranch home activity for valley dudes. I specifically remember the activity from the late 80s and early 90s. There could be a time when this value gets rediscovered. The land and views and proximity were very attractive for Socal as compared to other options back then. This location factor has not really changed other than the LA proper areas never missed a beat during these flat spots for Acton. Yes, it is off the radar today but with homes prices where they are now, I would expect this area to fully recover the highs and more in the nearest future. I would not consider spec homes yet but it is definitely a future prospect area worth more investigation. When you start to compare one bedroom SFV condos priced the same as ranch homes in Acton...for the guy who works from home and still wants togo to a Lakers game tonight...Acton can be an optional possibilty. It really feels like 1989 all over again to make the historical investment point.
I bought some rental homes in the AV between 2010-2012 in the 93551 zip code (one of the nicer zip code in the AV) and they are performing very well when you look at current rents vs. purchase price. However, home prices have gone up by almost 50% since then and it doesn't pencil now since rents have only gone up perhaps 3-5% at best.
In addition to Aerospace and locals, you do have quite a few LA commuters. My tenants have included:
2 aerospace employees
2 LA commuters
3 families that lost their house to foreclosure
Palmdale (and Lancaster) seems to ebb/flow with Los Angeles, reaching higher peaks and lower lows. I think the major driver for growth in that region is when LA becomes too expensive and families seek more affordable housing, in exchange for a longer commute. The mayor of Lancaster is trying to bring business to the area, but I don't see major drivers for the area to expand and attract new residents, other than overflow from LA. Aerospace is a big deal in the AV and there are many well paid employees, but I don't know whether it is expanding. Beyond that, you have retail and government workers as the next two large groups of workers, if I recall correctly.
Check out the Greater Antelope Valley Economic Alliance (GAVEA) website and their Economic Reports -
They might help you out a bit.
I like what Matt said about Acton. Very interesting.
Thanks for all the info @Andrew Werner , I appreciate your insight. What markets do you invest in now? @Matt R. , we love Acton. It's a whole different world their, and hard to believe it's in LA. Seems like you're in the Midwest somewhere. I am going to build a home on my property to live in with my family. Acton will be home base. @Ali Boone I appreciate your honest opinion. To all of you, suggest any markets in So-Cal, meaning anywhere from Bakersfield to south Orange County, Riverside, San Bernardino, etc, that would still fare well for a new investor? Or am I in the wrong state for this?
I'm sniffing around Inglewood right now. There are some posts on this site about the area. The Crenshaw Metro line is being built through Inglewood connecting the Blue Line to LAX. While I'm just not sure how much the train will actually be used initially upon completion, I do believe it provides an anchor for new development in the area. Then there is the redevelopment near downtown/Market and Hollywood Park. Also, Inglewood is its own city and does not have rent control.
Back to the AV, there is no rent control there either. I have had 6 tenants over 4 years and they have all paid the entirety of their rent (though a few times late). My best advice to you on tenants is 1) screen and don't compromise on getting a good tenant; 2) hire an agent to rent out your units if don't have the tools and aren't close by. It costs me 1/2 months rent, but I'm sure the agents rented out my places at least 1/2 month faster than I ever could have myself, so it paid for itself. Don't be afraid of people coming out of foreclosure. They were homeowners and will probably treat your home like it was their own.
I am thinking if you are going to be living Acton? Look out for that fixer and act quick in Palmdale, Lancaster....you could throw in Bakersfield but I am now preferring AV to Bake. I was leaning towards Bake before. I think AV is more civilized now. Ali points on cash flow will be the challenge. Thanks, Matt
Hey Nick, I live and invest in the Antelope Valley. I started with zero experience in 2011 and built my way up to 6 houses in the past 3 years with a positive cash flow of 3k a month. I have been doing 20 percent down payments, with my first house being 10 percent down. Right now is still an excellent time to buy. If the numbers make sense, do it. You can't make positive cash flow anywhere else in Southern California (with a mortgage) other than the Antelope Valley. I'm sure some of you can prove me wrong about that statement about the cash flow, but I GUARANTEED you aren't anywhere near the returns I have on my investments UNLESS you are in the AV. As for finding solid tenants I have had zero issues. Majority of them commute to Santa Clarita or LA for work. I could ramble on and on about pros and cons of the AV but numbers speak louder than any drawn out reply. My last 2 investments were in August 2014 and November 2014. In August I got a detached duplex for 110k in a low income neighborhood. 20 percent down, total payment of 641 a month. Rents are 800 and 850.. netting a return of 900 a month. November I got a 3+2 SFR in West Lancaster, excellent neighborhood for 110. Payment=580 and rent is 1125 netting $500 positive cash flow. Email me if you want to chat, I think you are very smart for looking into the AV. best of luck. [email protected]
I appreciate your insight @Scott Caceres I am pretty certain that the Antelope Valley will be where I set up shop. Once I get my new construction project going I plan on getting after it. How are you finding deals out there?
A network of real estate agents and my awesome lender from Guild Mortgage linked me up with a few. I have used 4 agents so far. I keep in touch with all my agents and they keep me in mind when they come across a deal that can get me a good rate of return. Quick question, how do I navigate to the private messages portion of this website? I cant find it anywhere...
@Scott Caceres to send someone a private message, click on the picture of yourself up in the top right and go to inbox or "send a message". To reference someone in a forum post, type @ and then start typing their name and it will pop up at the bottom of the screen. Click on their name and it will be highlighted in blue, and when you post the message they will be notified directly by email.
@Scott Caceres , do you know of any REIA here in the AV. Several other AV BP members looking for meet ups or REIA. I suggested we start one here...
Those of us here in the AV are co-ordinating a meet up for either a Saturday or Sunday after 5pm --- coming soon!
Join the discussion "Looking for Investor in Antelope Valley California".
@lorraine, please keep us posted through this thread
Welcome to BP. This will be a good resource for you.
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