Buying a House in South LA. Part 1: How It Came About

As we get older, my husband and I start to worry about whether we've saved enough to send our daughters to college, and whether our investments for retirement and for current use is diversified enough.  We've owned our current small house (about 1600 sq. ft.) in West Los Angeles since 1993. We bought the house when I first got out of graduate school.  The house was only about 900 sq. ft. back then, but it was our home.  We loved it.

Over the years, after we had two kids, we were outgrowing the house, but instead of moving, we added another 800 sq. ft. to the house to make it the current 1600 sq. ft. It's still small by some standards, but we love it since we designed and oversaw the construction of the addition with a lot of love and attention to details that fit our meager budget and lifestyle at the time, and it would be emotionally difficult for us to sell it and move on. However, having forgone the "trade up" and or cash out opportunities over the years when we had chances to, we feel that we've missed many opportunities to diversify our investments to include real estate.

An opportunity came about a year ago.  Our accountant informs us that he has a client who needs to move into a senior citizens living facility and needs a down payment to move in.  He doesn't have any assets besides the house in South LA where he lived for over 40 years.  The house is worth about $270,000 per Zillow, but it needs some work.  A contractor quoted him $60,000

for a complete makeover. However, he cannot afford to spend money to renovate the house for sale, or to pay a broker to sell the house for him without eating into the proceeds he needs to move into the retirement home, he was hoping to sell it as at a discount for $200,000 to quickly raise the necessary money to help him move into the senior center.

Our accountant asked us if we are interested in purchasing the house, fix it up for rental income, or, if we don't want to be landlords, we can flip and sell it. This helps his client, and may help us start our real estate investment portfolio.

When we expressed concerns about the South LA neighborhood and its reputation for crime, our Chinese accountant told us that he grew up in South LA. Apparently, back in the 50s and 60s, there was quite a large community of Asian Americans who lived in the South LA, USC area.  As the children of these Asian Americans moved on to the suburbs over the decades, some of their older parents remained. Our accountant, his wife, his childhood friend Alan who is also a friend of ours, all came from the South LA neighborhood. Alan's parents ran a grocery store in South LA back in the day.  Our accountant's wife grew up with the children of the Japanese American gentleman who is selling the house. We decided to check out the area.

South LA seems to be the last area in LA with somewhat affordable housing. People are generally put off by the high crime rate in the area. The gang reputation doesn't help even though that blight has diminished, but the lack of amenities still discourage people who want to raise a family there.  Lack of parks, walkable streets, shops, restaurants other than fast food restaurants are all negatives.  However, as you drive east along Slauson Ave from Culver City, you notice some beautiful neighborhoods: Baldwin Hills, View Park, Ladera Heights, Leimert Park, which are all rapidly gentrifying with home prices often well over $700,000 for large homes in original Mid Century, Modern, Craftsman styles.  These are still good deals compared to what one would get in North East LA, Hollywood, or West LA. African Americans lived there after white flight in the 60's, but diverse buyers are now rediscovering these areas and moving in.

Then you reach the less beautiful Park Mesa Heights, and the definitely grittier areas of Hyde park, USC, Huntington Park, etc.  The house we were looking at is in Hyde Park. It is just over 1000 square feet.  Built in 1923, it has two beds one bath, a large garage, storage room, and a decent sized yard with a mature persimmon tree.  The house needed work. It is packed with belongings collected over a lifetime. The garage is falling apart and piled with tools and junk owned by the Japanese gentleman who apparently made a living fixing things.  However, as we drew the blinds and let the light in, we saw the potential in the house. It's got good bones, a newer kitchen, and nice windows with original details and french doors. The immediate neighbors include the sister of the Japanese American gentleman who lives next door, a German minister and his family on the other side, and an African American old couple who lives across the street.  I like the diversity of the neighborhood and the pride of home ownership of the people who live there.

We researched the area over and over by driving in the neighborhood at all hours of the day and week. Using the real estate website Trulia, we checked out the crime statistics of the area.   While it is not great, the immediate streets where the house is on is "all green," indicating a low crime rate. There is a wonderful Hyde Park Public Library on Van Ness and 51st street.  In the morning, you see lots of Latino and African American families walking their children to the beautiful 59th Street Elementary School. There is a Ralph's Supermarket a few blocks away, as well as Popeye's, Burger King, a taco joint, a liquor store, a tobacco joint, a Chinese restaurant, but mostly industrial/manufacturing businesses along 8th Ave, Southwest Ave and Slauson Ave, and plenty of not very attractive commercial businesses along Crenshaw Blvd.



However, looking at the fact that LA has slated for the Crenshaw light rail line coming through the neighborhood by 2019, as well as the projected conversion of the blighted unused rail road down Slauson and Southwest Ave. into what is dubbed the "Rail to River" bike path, and the potential of a football stadium being built in Inglewood just south of this area, there appears to be enough development potential for something good coming to this community.  We were sold.  We bought the house.

Since we purchased the house the end of 2015, we've seen definite signs of the Crenshaw rail line under construction.  The NFL also approved the Ram's move to Los Angeles at the soon to be constructed flagship NFL Ram's Stadium in Inglewood which is close to our house.  Just this week, the wildly successful Snapchat IPO maybe another catalyst that might create the next boom in the Los Angeles real estate.  The property is only nine miles (or twenty five minutes drive) away from Snapchat's headquarters in Venice, California.  I think we made a good real estate investment which a lot of upside potential.

In a future blog, I will write about what I did with my house in South LA. Please feel free to comment with your input, strategies and insights!

The takeaway from this experience I'd like write about in a future blog is the astronomical expense of long term care for seniors. I am not quite at that age yet, but my parents who are in their 70's and 80's are faced with precisely that dilemma and how to find skilled care for them in their old age without the fear of depleting everything they have saved for a life time.