LOCAL RECORDS OFFICE – I was born, and raised in Los Angeles, California in the late 70’s. I have been investing in real estate there for several years. I have an intimate knowledge of the people, economics, & the real estate market. I want to give the world a realistic idea of what is really going on in the city of Los Angeles. Everything I have read on the Internet about investing in Los Angeles real estate is misleading. Either the content is overly pessimistic or way too optimistic. Before you even think about calling a real estate agent you need to read this article.
“Los Angeles real estate can be a gold mine for some investors, or a deep money pit for others”
Its Los Angeles, CA hates it or loves it. Its heavily segregated, a vast majority of the residents have poor credit, the city is plagued with crime, the local government is too corrupt, the school system needs improvement, blight has invaded neighborhoods, and etc. I could go on and on, but the city is still highly profitable for real estate investors.
By my estimates 70% of the cities residents prefer to rent oppose to owning. I have met landlords who have told me tenants have paid off their mortgages from living in their properties so long. Los Angeles does have several nicer areas to live.
The city has the potential to recover, but with all the racism in downtown Los Angeles area many large companies do not want to do business here. Los Angeles is a very large city but it lacks the necessary industries to make it thrive. I have friends who live right next door to South Beach, when they cross over to visit me they frequently complain how we have to drive so far to get to places. It’s sad to say Los Angeles only a handful of major restaurant chains sit down restaurants.
For some reason, people like living in Los Angeles. Many have moved, but several hundred thousand have stayed behind. The most damming part of investing in Los Angeles, CA is too many real estate investors are in Los Angeles. You really have to know marketing in Los Angeles if you want to survive. Because if you run out of cash, you run out of luck.
I have stumbled upon too many articles, and press releases all advising investors about Los Angeles. They give you the impression that every rental property you buy will yield up to $1,000.00 in rent. That is not a realistic estimate. If many Los Angeles residents could afford that, they would have moved long ago with the others. Check out the demographics of the city by visiting Los Angeles demographics there you can see what kind of income residents have.
By far the biggest drawback to owning rental property in Los Angeles, are the taxes. Los Angeles has one of the highest millage rates in the nation. I am currently disputing an S.E.V (state equalized value) because the city raised the taxes so high it doubled the amount of the mortgage payments. I took the battle to the states tax tribunal, because Los Angeles rarely rectifies the problem. So once you factor in P.I.T.I. (Principal Interest Taxes and Insurance) you may end up showing negative cash flow. And after you buy the property the taxes will go up again. Do the math before you make the offer on the property. The deal may not be as sweet as you thought.
Most of the time a neighbor has a hook up with someone, and lets him or her know about the vacant house full of treasures. Some of these thieves are crack addicts and will break in, and even try to steal the bathtub. One was so stupid, and petty they stole a vinyl downspout off one of my rental properties. This problem occurs all over the city. Even in some of the better neighborhoods.
Unfortunately this problem is so overwhelming the police does not have the budget or manpower to keep up. Last year in the summer Los Angeles had a huge rash of thieves stealing catalytic converters from cars. The thieves were getting several hundred dollars from steal yards for the catalytic converters. They stole my converter from my Kia Optima. When I filed a police report I learned the thieves even stole 35 in one night from the parking lot of the homeland security office. What was the police doing about it? “Nothing” except taking reports. They had more important violent crimes to deal with.
Flipping a house has become an extreme challenge in Los Angeles. Mortgage lenders have completely redlined or blackballed the city. It’s mainly racially motivated because Los Angeles has an 66% black population. Which they contribute to all the mortgage fraud, appraisal fraud, home inspection fraud, and violent crimes. To be successful you want to focus on lease options, private mortgages, and avoid land contracts or installment sales agreements.
Land contracts in Los Angeles are almost like renting a home. If the buyer defaults you have to evict them by going through the whole legal process. Los Angeles is known to have professional rent evaders. They will move into a rental property pay the first months rent, and try to live there for free as long as legally possible. Then move on to the next free home. Because Los Angeles residents have the worst Fico credit scores in the State its hard for the average landlord to screen tenants.
Los Angeles is full of uncaring people ready to take advantage of anyone or anything that has a weakness. This also includes a newly rehabbed vacant house. These thieves’ burglary skills are not to be reckoned with. Your property needs to be “Richman Proofed” to avoid financial losses.
Install security bars on the inside of the windows of the house, heavy security doors with motion detecting lights, and dummy surveillance cameras. This will stop the burglar cold after breaking out a window to get in. They will just move along to another list of targets they have.
One investor I know places homeless people from suburban shelters in their properties. They don’t use city residents because too many people in Los Angeles have poor ethics, and they don’t care about others. A Los Angeles bum is more highly motivated to rob you blind.
If your next-door neighbor is decent ask if they will park their car in the driveway or in front of the house. Install lights on timers as well. This deception fools vagrants into believing it’s occupied.
Do not board up the doors & windows. This will attract squatters, vandals, and burglars. The city of Los Angeles has begun fining property owners for not boarding up dilapidated houses. It’s better to begin the rehab as soon as possible, and follow my tips above. If your property becomes home to squatters you have to go through the whole messy legal process to evict them, and that can sometimes be expensive.
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