Why the zoning matters, even if you’re not building

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Have been spending some time looking at new neighborhoods around LA for possible investments.

Many of the areas I’m reviewing were developed later than the areas in which we’ve traditionally done business.

Because they were developed later, when zoning codes were better established and enforced, the apartment buildings I’m reviewing tend to be grouped near other apartment buildings.

This is not great, from my perspective. Why?

Well, if you’re looking to turn around an apartment building, you want your prospective tenants to feel like your units are rare. That’s part of how you convince them to pay top dollar (along with making your units really nice and providing high quality service!).

If you’re in a mostly single family area, then your units are, by definition, unusual.

If, on the other hand, you’re surrounded by other apartment buildings, you will have lots of competition for tenants. Any time they come to see your units, they’ll also see your neighbors’. And, even if your neighbors’ units are not as nice as yours, their lower pricing is going to serve as a kind of “anchor”… one which holds down your potential rents.

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