Who's Buying Multifamily Real Estate in Los Angeles Right Now?
Updated: Mar 10, 2021
Southern California and Los Angeles are constantly changing. Neighborhoods transition, retail, and multifamily development evolves main streets, large corporations and employers move into an area and drive further speculation, demographics shift, and more. The same way that tenant profiles change over time, so do ownership profiles. Smaller, under 50 unit buildings used to be primarily owned in Los Angeles by individuals and families who held assets long term and valued low vacancy and low debt. The demographic and investment goals of the average apartment Buyer today look much different than they did 15 years ago. There has also been a rise in a new type of ownership group. This shift towards investing with OPM (Other People's Money) - coupled with aging housing stock that has been minimally maintained due to rent control, has necessitated a more aggressive Buyer style (depending on the type of Building and location). This has been beneficial for many Sellers who have been able to sell their buildings based on future value rather than current rents. Different types of Buyers aspire to purchase different types of buildings. I have relationships with all types of Buyers and know how to find the Buyer that will pay the most for your property.
REAL ESTATE INVESTMENT FUNDS
Investment funds have become popular in recent years, as they pool investments (usually $100K+) from individuals and purchase mostly "value add" buildings which they reposition, often promising a return of 10%+. This usually involves vacating the building by relocating all tenants, fully rehabbing inside and out, then renting to extremely high paying tenants. Because these groups must have extensive financials and accountability to investors, they do detailed due diligence and obtain multiple inspection reports. Often they ask to negotiate tenant buy-outs during escrow. They have the ability to close all cash but may prefer to finance. They have at least 1-3+ people on full-time staff, so their business plan requires them to purchase 6-24 buildings per year. Hold time varies from 12 months - 5+ years.
(Photo is 1306 Waterloo St, Los Angeles, CA 90026. Sold in March 2020 by Dana Coronado)
FAMILY & INFORMAL INVESTMENT PARTNERS
Often own 2-15 buildings in their portfolio, sometimes they invest within their immediate family, other times they pool money between friends and extended family. They make decisions based on their experience, intuition, and rely less on projections and financial models. Often they like to concentrate their buildings in a geographic area to facilitate easier management and economies of scale. Probably self manage and can pay cash or may finance if costs are low. Plan to build generational wealth and hold long term. Purchases all property types.
(Photo is 1167 Bellevue Ave, Los Angeles, CA 90012. Sold in June 2017 by Dana Coronado)
Similar to family partners. May own 1-10+ properties. Could be buying cash or may need a loan. Level of sophistication as a Buyer will depend on the number of properties owned, other types of investments owned, net worth, source of capital, etc. Can be a "mom & pop" or starting to build a real estate portfolio using cash from non-real estate sources. Purchases all property types.
Have questions? Not sure where your building falls or what type of property is right for your next acquisition? I'd love to chat with you in-depth about it. Give me a call at 310-562-9630.