Los Angeles, Exposition Park area, market trends?

Question

We're considering an off-market single-family house in Exposition Park neighborhood of Los Angeles.  It's a 1400 square foot 3+2 Spanish-style home built in 1935.  It needs a lot of work.  A burst water pipe under the house warped the wood flooring, so it needs all new floors.  With that amount of water damage, we are aware of the possibility of mold.  In addition the home is needing a new kitchen, bathrooms, electrical, plumbing, paint, landscape, etc. etc....  The detached garage in back has been converted to a crude, un permitted living area.

We haven't presented an offer yet.  We feel this house needs a minimum of $80K (and possibly more) to renovate it.  We are trying to estimate a valid ARV.  Around the corner, there's a smaller (1062 sq ft, 2 + 1) yet completely renovated (to a very high standard) that's just gone on the market for $649K... but that's just the asking price.  We're keeping an eye on this one.

We realize that the West Adams neighborhood is very hot right now, and Jefferson Park is turning, but we're not quite seeing that in the Exposition Park neighborhood.  The rest of this street has some decent homes and some not so great ones.

We think we might (might, might) be able to get this for $475K, though the owner said he already turned down a "soft offer" at that price.  Maybe a solid offer will motivate him.  Of course, we'd want a full inspection of the foundation and potential mold issue.  We could easily be int this property for $575K-$600K.  Is there enough room in this market to make a decent profit on this?

What's the consensus on market trends in this area?  Any thoughts on ARV for this size house in this neighborhood?

Account Closed · Answer

Hi Trevor,

Welcome to South LA =) my fiance and I recently bought a duplex in the neighborhood near 43rd & vermont in June 2017 and since then, we have seen sooo many changes in the area.

1. There is a lot of commercial development occurring in that expo/usc neighborhood- they broke ground on the George Lucas Museum, the LA Football Club, renovations to the Coliseum has begun, Honda is moving in a dealership on King, and the opening of USC Village (which includes Trader Joes and Target).

2. There is a lot of movement of demographics in the areas. What has historically been considered impoverished, dangerous, and blue collar areas is now turning into a place where young white collar/creative couples are buying homes. The closer to property is to USC and Expo Park, the more desirable it is. I've been organizing a community safety (police) meeting with our community on the NextDoor app and there were MANY new, young individuals who recently purchased (within the last year) a property in the South LA community.

3. There are a few flippers in the area who have done quite a few SFR flips that you can use as estimates for your project. The most notable are @Shawn Ward and @Meredith M. . You can find Shawn's flip posts on biggerpockets. There was one (I think it's on La Salle) near King blvd, where Shawn bought the property for about $400K, put in about $100K and sold it for about $660k (check his story for exact numbers) and we're seeing some lovely flips pop up all over South LA.

4. I dont mean to be speculative, but property values have also seen quite a bit of appreciation in our area. We closed on our duplex for $400K in June (each unit has 2bed/1bath) and at time of financing, the property appraised for about $415K. When I checked the Zillow Estimate last month, the property value was estimated at about $472K (of course it's zillow but it's a rough estimate).

I think there's a lot of opportunity in south LA and as people keep moving to Los Angeles from other states, they may not be able to buy a $1 million house in the westside or midwilshire but they can afford a $400k-$700k property near a major university and 15 minutes from downtown.

Also another thing to consider is the 2028 Olympics and what will that do to the value of the properties in the area? Homeowners in our neighborhood charge $40+ for parking during USC and LA Rams games.

Hope this helps, let me know if you have any additional questions. We also have a facebook group South Los Angeles Bigger Pockets where we share information about local events, meetings, and RE news articles regarding South Los Angeles.

Account Closed · Answer

I forgot to mention ... There are a few really large transactions occurring near/on Expo. A Korean couple bought multiple (I heard 7) apartment buildings on Expo to convert into really nice USC student housing. There is also one currently being built next to where the Korean couple bought those buildings. There's a mixed use/apt building going up on King next to McD's. Hotels are planning to be built near the LA Football Stadium. I recommend going to the local banks in the area (Broadway bank/USC Credit Union/etc) and talking to the bankers to see if they know any additional projects occurring in the neighborhood.

Aaron Pfeffer · Answer

I could see you getting around $700,000 ARV for this deal, but at your numbers, no, I would not say it's a good deal.  Not after purchasing/holding/final sales costs.  You'd need to be at $750,000 ARV comfortably and hope this comp you are watching explodes in price first.  Then again, in this insane market that all may happen, but you're also talking about a burst water pipe that may have affected more then just the flooring -- maybe even the sub flooring.  Dry rot and mold would balloon your budget.  Also, I believe the southern part of Expo Park is HPOZ, so triple check that first, because this deal is 100% a no go if that's the case.  Lastly, $80,000 for 1,400 Sq Ft sounds light, especially if you are already putting in all new floors.  You could certainly do it for that cost (or less if you wanted), but it won't get you the ARV you need.

Trevor Baker · Answer

@Rory Kinnear Thanks for your input.  We have put some thought into the buy/ renovate/ rent/ refi idea as a possibility.  Maybe do a rental-style renovation, which should be less expensive.  Then, wait for the market to turn in a few years.  Gotta look at current rental rates.

Rory Kinnear · Answer

The neighborhood is tough as it has resisted gentrification for some time. The University location might imply solid rental demand, but with such a huge amount of student housing, that demand (I have heard) doesn't actually leak out into the neighborhood like you would expect. That said, with the expo line, proximity to downtown and freeways, plus the coming Inglewood Stadium, and later olympics, leads me to think that an ARV of 650k is not unreasonable, but I would expect it to be a better hold than flip.

Los Angeles, Exposition Park area, market trends?

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