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Investment Opportunities Outside the South Bay

I work with many investors, developers, and investment-minded home buyers on a daily basis. One of the top questions I get asked is, “The South Bay is too expensive, where else can I buy for good future appreciation?”

First off, you should never buy on appreciation unless you are an experienced investor and have capital that can handle speculation. One should always buy on cash flow for the purest form of investment real estate.

That being said, here is your answer…

NOT Inglewood

The city we get asked about most is Inglewood. I subscribe to the old Warren Buffet quote, “…be fearful when others are greedy and greedy only when others are fearful.” If you are thinking about Inglewood…unfortunately, you missed the boat.

Right now investors are gobbling up Inglewood and prices have been driving higher for the last few years. Before the Rams announcement, developers had already announced the redevelopment of the Hollywood Park Racetrack in May of 2013. The smartest investors were purchasing at that time until the end of 2014. When the city of Inglewood approved the stadium in February of 2015 those smart investors bought even more!

The stadium is still two years away and developers will be adding 3,000 new residential units that will surely saturate the market. The entire project will not be completed until 2023. There was also a piece in L.A. Weekly with data showing that housing appreciation around new stadiums has been underwhelming. Take a look here.

In my opinion, prices have run up so quickly without substantial rent growth that it is tough for prices to go much higher. I believe there are better places to invest for appreciation.

Westchester

For the investment minded home buyer, I love Westchester. It has already had a massive run, but I believe it is due to economic forces that will keep on rolling.

Westchester is strategically placed near Silicon Beach which really bodes well for price increases. With the emergence of Snap, Inc. (parent company of Snap Chat) in Venice and their coming IPO, along with Google, Facebook, and Yahoo! coming into the Playa Vista area, the economics for more deep-pocketed home buyers will continue to grow at a rapid pace.

If home buying tech families do not want the quirkiness of Venice, the expense of Santa Monica, or the condo lifestyle of Playa Vista, then Westchester is the logical choice.

If you have not been through Westchester, it can easily be compared to the Liberty Village area in Manhattan Beach. A lot of 5,000 to 6,000 square foot lots with cute three bedroom homes and a fantastic neighborhood feel. The median price single-family home is around $1.1 million, but you can find fixers for under $1 million. This is considered affordable for what you get around the tech hub of L.A., and there are new constructions homes popping up that are selling for over $2 million.

My advice? Buy a smaller 3-bedroom home (or units) in Westchester and wait. This area will continue to run.

West Adams and Its Adjacent Los Angeles Neighborhoods

West Adams is a neighborhood within the city of Los Angeles. It is sandwiched between the 10 freeway and the Exposition Light Rail. To the west is Culver City and heading east out of the neighborhood is USC. It was ranked as the 9th most competitive market according to Redfin this past year.

West Adams, along with Leimert Park and Jefferson Park, is really starting to surge due to extremely affordable homes along with easy access to the light rail for commuters wishing to get to Downtown, Culver City, and Santa Monica. The neighborhood is so charming with gorgeous 1920s craftsman-style mansions that are historically protected.

The buzz in West Adams began after the Expo Light Rail began operation in 2012 thanks to Measure R sales tax dollars. Ever since that moment, West Adams has been on its way to massive gentrification and price gains. To give you an idea of what is happening in the area, single-family median home prices have surged from $230,000 in 2012 to $545,000 in 2016. That is a whopping 137% increase in just four years!

I personally raised money back in 2009 during the financial downturn to build an over-sized duplex in West Adams. We overpaid for the lot due to the charming neighborhood and our speculation that the light rail would be a game changer. Luckily, it was a game changer and our rents have surged 50% higher since then.

This area still has the momentum and developments to further drive growth. In 2019, the LAX/Crenshaw Light Rail is set to be completed which will open up an even larger demographic of transportation-minded home buyers and renters…and that begins right at the foot West Adams at the Crenshaw station of the Expo Light Rail. In addition, there are bold new developments around the area like Ivy Station, the stalled “District Square,” and massive private speculation of retail/industrial buildings for hipster restaurants, marijuana growers, and Silicon Beach start-ups.

It is happening in West Adams and adjacent neighborhoods. I do not believe it will slow down anytime soon and have put my money where my mouth is by personally buying a duplex for future development at the border of West Adams in Leimert Park. I closed just last week in the mid $400s, directly across the street from a new family purchased a rehabbed home for $715,000. There are still plenty of opportunities in this area.

Other Areas to Consider

Highland Park around York Blvd

North Hollywood

Frog Town

Glassell Park