On Thursday, Larry R., one of the Kagansblog regulars, taught me a ton about South LA real estate.
Larry’s an LA native who grew up on 111th St, which is a hell of a lot farther south than I’ve been in the city (besides going to the airport). Because he grew up down there and because his parents owned some rental property, he’s not at all afraid of investing. So we drove down looking for deals.
We toured interesting neighborhoods, talked business, ate burn-your-mouth-spicy BBQ at Phillips at 43rd and Leimert, and got propositioned for donations by a Black Muslim brother selling beam pies. It was awesome!
I learned first hand, from Larry, how much money you can make by investing in South LA. It’s often said that you make most of your money in real estate “on the buy”. What this means is, if you buy assets cheaply enough, it’s hard not to make money, even if you’re not great at the other aspects of the game. And boy can you buy stuff cheaply down there. There are honest-to-goodness 10% caps sitting around for anyone with cash and guts to buy.
Now, managing those kinds of properties can be tough. The neighborhoods can be dicey (though it’s important to recognize they’re not all the same at all – the area in the 40’s around Leimert Park is very different from the area around 85th St, for example), the properties can be in rough shape, and obviously you’re dealing with a different tenant base than you would be in NE LA. But Larry’s comfortable with the environment, knows how to renovate cheaply, and has a great system for picking tenants who pay the rent and don’t cause trouble.
I know Larry’s going to read this, so this is my opportunity to say a big, public “Thanks!” for educating me.
Do you know of an undiscovered neighborhood with great deals? Do you have a system for investing that works for you? I would love to learn from you, and I’m sure our fellow real estate enthusiasts would, too. Clue us in in the comments section, or send me an email at firstname.lastname@example.org!