Is it possible to get cash flow in West Side LA?

Question

I was phoning a commercial broker who deals with West Side properties, and the CAP was disturbingly low at 2-3% average. Is it just a money dump for cash heavy investors who just want a safe bet or are there any opportunities for a commercial mortgage backed investor in that kind of area?

I really wanted to invest in the West Side because it's so in-demand, but I suppose if I want actual cash flow, I have to venture out into "riskier" areas... But just wanted to see possible options in the West Side, if any...

Ali Boone · Answer

Nope, not really an option over here. Most of LA will have the same problem, not even just the west side. I live in Venice and only buy out-of-state to get cash flow. Appreciation plays are nice here, and as long as you buy outside of Santa Monica you can do some pretty good AirBnB-ing, but you'll still be low to negative on monthly cash flow.

Peter Li · Answer

Hey @Joseph Gozlan, thanks for the reply.

Yeah, I agree. Since posting, I've done quite a bit more research and realized I might have to go further out of my hot-spot to find better deals and cash flow + value add opportunities. I'll just keep a look out and make offers to land lords themselves whenever a west side opportunity presents itself, but it seems tough for cash flow especially after debt and interest on loan.

I definitely want to stick with places where I can physically drive to, so that's why I've been focusing on Los Angeles. Unfortunately, it's a brutal market over here. But from what I hear there's some great deals outside of the West Side, so I just need to expand my horizon a bit.

Joseph Gozlan · Answer

First I'll address your question: Yes, there are always deals. Even at hotter markets. It just takes a lot more work and efforts to find them. The question is do you want to do the work?

Strategies such as direct mailing, probate, driving for dollars, networking, etc. will eventually yield off market deals and these are the only deals you could find that will cash-flow in a super hot market.

Second, I'd like to share a thought that is true to any type of investing, real estate, stocks etc. and that is: "the masses are assess" if EVERYONE go to the west side why would you want to go there too?  2-3% cap rate means the prices are over inflated and WHEN the market turns it will be the first place to get hit hard.

at 2-3% this this probably running a negative cash-flow. Will you be able to dump money into the money pit in time when the economy is not as strong as today?

For the above reason, I personally look at secondary and tertiary markets in Texas. they are way more stable and granted I will probably never see 40%-60% appreciation I will just as much likely not to see 40%-60% drop in value. What I WILL see is steady cash-flow in both good and bad times..

Guy Olds · Answer

@Peter Li If you want to find cash flow properties in California you might have to look in the central valley like Fresno, or Bakersfield or the Antelope Valley or out to the east in the Inland Empire which is where I do my marketing and wholesaling. I find cash flow SFH's and occasionally multi family houses. Prices are going up in the Inland Empire - it's just not West LA.

Rick H. · Answer

There are too many people chasing too few listings in the hot West LA market.

If you look at your watch, you missed the low hanging fruit in 2010 - 2011

Consequently, most of the deals are going to cash heavy investors and those who see a value-add opportunity and know how to exploit it (scape and rebuild bigger, add rooms, build up, redesign, aggregate property, etc.).

Suggest you go to the Los Angeles and Asian REIA that meets monthly in Arcadis and rub shoulders with players. Bill Tan rubs the meeting.

Is it possible to get cash flow in West Side LA?

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