All Forum Posts by: Max Ball

@Marjeanne Fields Likewise, Marjeanne! I always look at the economy of the area first THEN dive into what value add opportunities exist in those areas.

@Gwyeth Smith Gotcha. I agree that for value-add properties you've always had more control by being able to predict increased revenues & streamlined expenses. Emerging markets have been harder to quantify in terms of % appreciation gains in the future. I'm curious, if there was a way to accurately predict that appreciation in an emerging market YOY, would you consider purchasing property with no value add component?

@Lee Ripma Totally agree about El Sereno, it's right by USC's medical school and has had a solid increase in activity over the past 4 months, with CBRE purchasing a couple acres right in the center. I went and walked around there a couple months back and there are some very interesting signs of growth.

Boyle Heights has had some issues gentrifying, because anytime people come in and open these new-age millennial shops, the citizens react defiantly, sometimes even violently. The city tends to back these citizens as well. We've noticed that Boyle Heights hasn't had as much growth activity as many people think, and the migration seems to be actually moving south from the Arts District instead of East towards Boyle Heights.

@Omar Khan It used to be a total cr*pshoot, but with advances in AI over the last couple of years, it's become possible to actually track these indicators of gentrification in real-time. If you look back at how almost every area has gentrified in the past, they all start the same way with 'artists' migrating from an overpriced neighborhood into a new low-income neighborhood, and opening up coffee shops & other millennial-esque stores.

@Lee Ripma Got it! Appreciate your input, Lee.

Migration areas are key for predicting gentrification. Koreatown is a great example as you mentioned, as well as the Arts District, directly south-east, which became the migration area after Koreatown became overpriced. Now the question is... now that the average price for a condo in the Arts District is $1M+, will the next migration area be Boyle Heights or South of the Arts District 🤔

You are 100% correct, if you're going to get free market appreciation, why wouldn't you add value as well!

@Ed Matson Thanks for your input, Ed! Agreed that it's much easier to project cash flows via value-add properties and maintain that control you mentioned. I also think that those "outside factors you have no control over" that contribute to a neighborhood improving have been a guessing game, but are actually able to be tracked because of advances in technology over the past couple of years. It's become less risky with a shorter time horizon since AI has really started to come into play.

@Omar Khan Thanks for your feedback, Omar! I agree it's the holy grail to get in on a gentrifying area before the trend catches on and ride out the increased rents without technically doing any value-add. How are you currently finding these gentrifying areas?

I always used to hear people in the real estate industry say, "Follow the artists to find the next hot neighborhood."

In 2018, these "artists" can be replaced by millennial hipsters that open coffee shops, juice bars, and hot yoga studios in low income areas subsequently causing the area to get increasingly better over time.

Has anyone else noticed this trend?

@Joshua D. Thanks for your feedback, Josh! We're definitely seeing the millennial generation wait a lot longer to purchase homes than previous generations. The main reason being, they prefer to be where the action is, in urban areas close to the hottest juice bar or aqua-yoga studio. I'm curious, have you noticed any differences between your millennial tenants compared to the rest of your tenants?

When determining a potential real estate investment, which is more important: 

1. Purchasing a value-add property

OR

2. Purchasing a property in an area that is about to grow/gentrify exponentially?