“I think the big thing we did is get all the big (repairs) done up front,” he said. “The roof and the flooring, all that stuff. Get that done upfront, kind of bite the bullet and it will definitely save you money down the road.” Risk of Break-Ins During Rehab But property rehab can prove challenging in high-crime neighborhoods, noted Cisterna of Investability. Cisterna recounted a personal experience where some investment properties he purchased in Memphis were broken into repeatedly during rehab. “I tried boarding them up,” he said, adding that did not completely prevent the break-ins. “On a couple of properties I just had to dump than … and sold them for next to nothing.” Cisterna noted that while there are examples of down-and-out neighborhoods experiencing a strong turnaround — including some in his hometown of Denver thanks to their proximity to downtown and the high-tech jobs available there — that is not a guaranteed trajectory for every low- value neighborhood. “The neighborhood’s not going to turn a corner because you happen to own an investment property there now,” he said. “If you are banking on appreciation it is just a speculative investment. If it doesn’t happen are you able to weather that storm?” How a $6 Million Sale Impacts Compton Bartlett, the Southern California flipper, differentiated between neighborhoods turning around because of underlying

City of Compton, CA

The neighborhood’s not going to turn a corner because you happen to own an investment property there now.”

Dennis Cisterna | Chief revenue officer at Investability Real Estate Denver, CO

structural shifts and those turning around solely on the coattails of an upward real estate cycle. Investing in the latter is more risky, and Bartlett said investors in those neighborhoods should keep a close eye on the high end of the market to help them know when to exit. With the high end of the market starting to cool in Los Angeles thanks in part to a pullback in purchases by wealthy foreign buyers, investors in lower-end markets prone to bigger cyclical shifts should be

looking for an escape hatch sooner rather than later, according to Bartlett.

“Understanding the real estate cycle is not just about understanding the local economy; it’s understanding the global economy,” he said. “It seems strange to say that $9 million properties are now going for $6 million so I

should worry about my property in Compton … but news travels fast.”


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