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Updated over 8 years ago, 04/04/2016
Is Now a Good Time To Invest? (First Time Buyer in LA, CA)
I have looked at 50-100 deals in my area of West Los Angeles. It is difficult to find properties that are cash flow positive after expenses and debt service. Basically, the deals do not look very attractive. I am curious to know what experienced investors think of today's markets and whether or not now is a good time to buy. It worries me that we have had years of quantitative easing and low interest rates. I don't want to be the fool who buys at the wrong time when attractive opportunities could be around the corner.
Thank you for the help!! - Lance
I would love to close all these Cali deals! I have investors statewide and if an end-buyer fails to perform, I am usually able to save the deal by pulling performing investor I work with into the deal. When permitted, I also share deals on Facebook to the 1,000's of groups and friends I have.
I shop for "crap" when driving too and hand off what I find to people I know in the area. :)
Lance Knapp and all of those who posted as well. check out the following zip codes: inglewood (90302), ladera heights (90056), baldwin hills (90008), viewpark (90043)
These areas are in the beginning stages of gentrification due to the new stadium being built for the L.A. Rams football team. I'm in he areas and have friends in the area and we are seeing it happen.
Best,
Jorge
Originally posted by @Jake Knight:
@Account Closed thank you for sharing your story. Though demand is still very strong here in the Bay Area, it may very well let up in the next couple years. It's smart to be cognizant of that and stress test your portfolio. We cannot have short-term memory and forget how markets have cycled in the past.
Thanks for spending the time reading my story. As I said in another thread, I'm preparing myself for the next downturn. I'll make good money if my predictions turn out to be correct. I'll make more money if I'm wrong and the housing market has another leg up. If you have a choice, would you rather be rich, or would you rather be right? I'm preparing myself to come out ahead either way.
My properties are in Atlanta but I don't recommend that market anymore. I'm not buying right this second but have been working with buyers buying in Philly, Chicago, KC, and Indy lately. The markets are always changing, but those four are holding steady right now.
I'm curious what Bay Area and LA investors experiences are with rent controls?
The current battle rages in Mountain View:
http://www.bizjournals.com/sanjose/news/2016/04/01/mountain-view-rent-control-fight-headed-for-ballot.html
Originally posted by @James B.:
I'm curious what Bay Area and LA investors experiences are with rent controls?
The current battle rages in Mountain View:
I have 7 units under LA City rent stabilization, which allows for a 3% increase yearly or more if inflation is above that amount for existing tenants. I am no fan of the law but decided I could still underwrite effective returns with a 3% increase with no turnover. I only have 1 tenant who is materially below market, which is key. At some point I may buy out the tenant and renovate the unit if the neighborhood continues to really turn around.
I don't think I'd be too excited about more stringent rent control like Santa Monica or San Francisco where they have had increases of 1% or even less. Nevertheless, for my next building I am looking at newer properties that don't fall under the ordinance.
Lance, I see a couple things here - first allow me to explain. Analyst is one of my keywords to be alerted on.
So, with an analytical view, I see you say you looked at 50 - 100 prospects in West LA. And with this, I would say, that from what I know, LA itself is a highly competitive market. My mind is churning @ a million miles per second here. A small guy wants to go up to bat with the big guys. Seems to me you painted yourself into a very small box.
Looking @ where you live (I assume) to where you work, Santa Monica - it is @ least a 24 minute drive. Jumping outside your box, say for instance, West of Santa Monica or North or South, 24 minutes, my question would be, are deals better there? Another is, would this reasonably be the way to start out investing rather than trying to jump into a ring, with well seasoned investors?
To answer part of your question, "is now the time to invest in Real Estate?" According to the Pros, there is no bad time to invest in Real Estate. Now, it appears you want to "house hack", live in one side or on one floor while renting out the other. One factor to consider, alongside your income. The neighborhood, another. Etc., etc.
Your payback period - how long have you forecast it? Your stay in the house you wanna start with - how long? Are there other houses in the area, you can jump on once you get started, etc.?
Like I said, my mind is churning @ a million miles per second. But these are the things you need to consider and look strongly @, before jumping into a deal that may falter.
None of the above is extended as advice, just some thoughts to consider! Good Luck!
One other note: You haven't mentioned whether you were looking for a fixer upper or full priced property.
According to RealtyTrac and quoted here on BP, the Single Family Rental Returns in LA are a meager .9% hardly a return an unseasoned investor would look for or want to have. At least in my opinion. And I would guess this is @ full price purchases.
rent control? Although I didn't choose it, I learned to love it! Why? Gotta think counter intuitively.
SF's harsh rent control laws create all sorts of distortions in the rental marketplace:
- As people hoard cheap RC units, that restricts supply to new comers. So when you get a vacancy, your new rent is a lot higher than the old.
- opens up all sorts of possibilities to buy out tenants with low rent, renovate their unit and re rent at top dollar.
- allows one to "get creative" operating between the letters of the law.
- personally I acquired 2 non RC buildings, which is basically like buying a money printing machine (hard to find them, and acquire them, but that's my secret sauce).
- many other LL's are scared sh*tless by RC, so creates opportunity for us bold enough (and knowledgeable enough) to deal with it.
- allows one to finely hone their skills at dealing with tenants. I fancy myself the tenant whisperer.
Look, not for the faint of heart. And If you don't know what you're doing you're likey to get your *** handed to you. It's complicated, has some risks, and is very counter intuitive in nature, especially for Americans (a socialist microcosm in a capitalist country.) But the distortions it creates in the market provide for ample opportunities to benefit.
@Arlen Chou did you get a load of this?
http://www.bizjournals.com/sanjose/news/2016/04/01...
Looks like you may be joining us in the RC club!
Btw, if the Bay Area economy continues to roar like it has for the next 3-4 years, expect many more cities to try and pass local laws like this. Potential game changer.
So much good content in this thread! Really changing the way I think about my investment strategy.
@Amit M. RC in MV has been brewing for a long time. That is part of the reason, jumped into Oakland. I figured it was better to get some practice on a lower tier market, before having to deal with it here. My rentals in MV are all close to market now, so I am not to worried. Also the asset class that I am focusing on right now, tends to have a more transient tenant base so the overall effect should not be very bad for me personally.
I agree with your observations in your post. RC is actually a very short sighted action. The politicians like it because it gets them votes. It might protect some existing rental voters, but over time it drives up rents because units become even more scarce for future renters.
Originally posted by @James B.:
I'm curious what Bay Area and LA investors experiences are with rent controls?
The current battle rages in Mountain View:
James,
As Amit and Arlen alluded, rent control is shorted sighted, but the politicians get their votes at someone else's expense. They don't work for the people, but only looking out for their own best interests. If you look at the case study in Massachusetts in the mid 90's, the average rent actually dropped when they abolished rent control. Rent control is the wrong medicine for the wrong patient, but it sounds good in theory and it gets them votes.
Rent control is actually rewarding for brave and studios investors. We spend the time to examine the rent control ordinance and work the loopholes. It's just like taxes. In fact, I would argue it's the path less traveled. That's where you reap the rewards. It's comforting to be with the 99%er, but it's rewarding to be the 1%er. Try it sometime. You may get addicted. :>)
Best of luck.
@Arlen Chou It might protect some existing rental voters, but over time it drives up rents because units become even more scarce for future renters.
Yep. Rent control is exactly what's keeping me in my current apartment, removing it from the market entirely even though I'd think about changing. I would at least double (probably 4x) my monthly payment if I bought a place, and my rents would go up about 100% if I moved to another rental. When I was living in NYC (rent control there is a bit less prevalent, since there's a rate when it disappears), I moved every year-ish...as rents went up I found a new place that was in line with what I wanted to spend.
I'm going to make a comment in hopes that I don't get destroyed.
@Lance Knapp, sounds like a lot of people are giving you advice, but I'm still not exactly sure of your situation. How much are you looking to invest? What type of risk are you willing to take on? And what how long do you want to hold on to these properties?
I got about 5 minutes into this thread and my head HURT from all the math. I believe in simple calculations. What's the rent? What's the PITI? Is the rent larger than PITI to make money and run your business? If you have to do more than 6th grade math, I would advise against buying it.