Why Do You Invest in Los Angeles? (Testimonial for BP!)

32 Replies

BiggerPockets! I work at BP and I'm working on building a landing page for Los Angeles. 

Would anyone be willing to share why you choose to invest in the city? What makes it so wonderful? Would you tell others to invest here, if they can? 

@Lauren Hogan

I invest in LA. There are so many reasons to invest here-high values, lack of supply, high rents, low caps. There are lots of reasons it’s hard-rent control, tenant’s right, cities that are anti landlord/anti development. Did I mention lack of supply and huge demand, weather, and industry?

Great housing stock, low inventory, high demand, still lots of areas to be "discovered".

@Lauren Hogan There is lots of opportunity for all stages of investors (wholesalers, flippers, developers) because there is that significant demand for housing. The cost of entry is difficult for a lot of people, but if you are able to creatively discover ways to break into it then the opportunities and growth are incredible. Living in the area and working in the area provides its benefits. I agree with the above, and didn't want to be redundant so just adding something a little different. 

Why do I invest here? I was born here, raised here, know the area and there are unlimited opportunities for real estate investors if you are willing to work hard and work smart.

Beaches, mountains, lakes, great weather, plenty of fun and local destinations, greatest food from around the world, and on and on.

Flipping, buy and hold, lending, notes, you name it, we got it.

That all said, nobody else should invest here, leave it to me, the completion is fierce enough already! Thanks.

I was born and raised in LA so know the good parts of zip codes.

I have never invested in a property with an assumption that appreciation will be a factor in the deal, however, I have been able to pay off all credit debt, school loans, and remodel homes with equity from appreciation. I have used refi's and HELOC's from Los Angeles properties for down payments on future properties. Cashflow does not meet the 2% mark but your cash on cash ROI can be infinite. FHA loans are also an option and I have used it to invest in deals (you have to make one unit your "primary residence")

The cons that I am looking at right now is finding a multi-property deal that makes sense. I am now looking out of state but if a deal makes sense in Los Angeles, I will jump on it. 

@Lauren Hogan good question! I invest here because of what’s been reiterated here already; High values, low stock, but most importantly investing in a hard market gave me a jump start to my own RE education. In one deal I was able to learn a complete picture of what RE investing takes to succeed. I doubt I would have received the same if I invested OOS. This market forced me to learn very quickly and adapt fast to not lose my deal.

Originally posted by @Jamie Garcia :

Really love ADU's! @Jonathan Taylor

What is your experience with ADUs In LA? Im running into trouble getting my plans passed at LADBS in Van Nuys. Detached garage conversion on a MF lot. For some reason I cant get the plan checker to read the laws right. 

 

@Jonathan Taylor We completed 1 ADU at the end of last year and that was for my personal residence here in Northridge. I built the ADU out in the back and live in that. Currently rent out the front for a couple years until I can do a complete remodel and eventually move into the front.

We have another one under construction in Chatsworth with Permits approved.

We have another one in the design phase to go in North Hills but that hasn't made its way to Van Nuys yet for any plan check. 

You know I have a really good architect we use. She's great. Does everything for me as far as dealing with the city. All she has me do is go in and pay after everything's been approved so I can pick up our set of stamped plans. If you DM me privately I can give you her contact info. It really helps when thats a lot of what they do. They build a different rapport with those plan checkers since they see them all the time and know what they like and don't like. I'm sure that really helps in getting things passed when your running into hiccups.

Originally posted by @Jamie Garcia :

Hey @Will Barnard What part of the City are you currently investing in?

 I invest in the SFV (Sherman Oaks, Studio City, Encino, Valley Village, NOHO, and any other local city where the numbers pencil) plus I invest in NELA (Atwater Village, Highland Park, Los Feliz, Echo Park, etc) and then into LA (K-Town, etc).

For my contracting business, anywhere from Culver City to the SFV, to Santa Clarita Valley and then into Ventura area as well.

@Jonathan Taylor You may want to consider reaching out to Estineh Mailian in Planning or Chad Doi in Zoning...they are the people who wrote the latest city memo interpreting the state ADU guidelines : https://planning.lacity.org/odocument/ec892d01-7873-455a-8e15-78a771b2c7ac/ADU_Memo_2020_Final_2.26.20_(1).pdf

I invest in Los Angeles because its 1) a huge diversified economy that's not reliant on any one industry and 2) the large size of LA creates a 'gravity' that attracts people to move here and creates great 'network effects' that causes the formation of many new ideas and new businesses.  New businesses = new jobs = more demand for all types of real estate (housing, office, retail, etc) = increases in rents in the long term.  Plus the weather ain't bad!  


Although i no longer live in Los Angeles, i continue to invest there.  Why? because there are deals to be had that are actually worth your time.  If you find a r/e deal that you can "Add value" you can turn a 3cap to a 7 cap aka instant equity.  its hard to find regions that have that much demand, short housing, and actual opportunity to do real estate deals for beginners as well as experienced pros.

Compared to Houston, where i currently live  - you might get a slightly better cap rate, but the market trades at that cap rate so you wont get the same type of equity build as you would in Los Angeles.  I feel its harder to make money in RE in Houston relative to LA especially when factoring in property tax. Houston is more for builders that fit their economics into a formula and since the market is a more stable environment they can predict their returns a bit more - but its a lengthy process and takes a lot of scale 

Originally posted by @Alex J. :

Although i no longer live in Los Angeles, i continue to invest there.  Why? because there are deals to be had that are actually worth your time.  If you find a r/e deal that you can "Add value" you can turn a 3cap to a 7 cap aka instant equity.  its hard to find regions that have that much demand, short housing, and actual opportunity to do real estate deals for beginners as well as experienced pros.

Compared to Houston, where i currently live  - you might get a slightly better cap rate, but the market trades at that cap rate so you wont get the same type of equity build as you would in Los Angeles.  I feel its harder to make money in RE in Houston relative to LA especially when factoring in property tax. Houston is more for builders that fit their economics into a formula and since the market is a more stable environment they can predict their returns a bit more - but its a lengthy process and takes a lot of scale 

What price range are you buying in the LA area? Are they SFH or 2,3,4 multiunits?

I have found returns in Houston to be really superior compared to LA. In the $200-600k price range , Houston market(everything is cash flowing and appreciating) has dominated for me so far compared to what I've seen in LA traditional neighborhoods... burbank ventura van nuys glendale pasasdena sherman oaks... once COVID dies down I will explore south of downtown in LA , newly gentrifying at a snail's pace but the slightly lower property tax isn't a big enough deal breaker. Cash flowing in LA seems to be viable with a tri or fourplex in an upcoming area that is bought distressed but as you know, there's so much competition and fall throughs for any property like that. I feel you really have to go to the outskirts like Encino, Simi Valley, Santa Clarita which then become your nromal upscale suburbs and not really "LA". But Im open to education and collaboration. 

@john Collins

encino and the valley are definitely not outskirts...it's a huge population and economy

south la, the valley, echo Park all areas.  Sfr adu multi fam all of the above ..I've done deals where I bought a house demo it and sold it.  All areas ..there's plenty of opportunities in Los Angeles.  I've done different types of deals every year since 2009 to 2019...I haven't done a deal this year yet I'm working on an 11 unit build at the moment in the valley 


Originally posted by @Alex J. :

@john Collins

encino and the valley are definitely not outskirts...it's a huge population and economy

south la, the valley, echo Park all areas.  Sfr adu multi fam all of the above ..I've done deals where I bought a house demo it and sold it.  All areas ..there's plenty of opportunities in Los Angeles.  I've done different types of deals every year since 2009 to 2019...I haven't done a deal this year yet I'm working on an 11 unit build at the moment in the valley 

Right, but you flipped it which is not my intention. I'm talking about investing, ie landlording, ie cash flowing while you sleep. It's cannnibalistic when a property with potential goes on the market and the winners don't have great numbers comparatively (unless it's being flipped for sales). 

 Encino is part of it, my mistake, I was thinking Calabasas. Best of luck to you!