or she would sell two of the three. “I do not see myself buying anything else here in the short term,” she added. The short term is exactly what Greymont finds to be the strongest area of opportunity, however. “The market is not going to cor- rect overnight,” she emphasized, “but there is risk of course! You need to watch your metrics and keep your projects short.” For those who want to keep their time- lines as short as possible, wholesaling in SoCal is a good option. Success here relies on effective lead generation. Dallas-based Wakefield admitted he could not resist wholesaling homes in the area and cited direct mail as one of the most effective ways to reach property owners willing to work with investors looking to buy prop- erties at deep discounts. “We work with owners who have a lot of equity and properties in rough shape,” he said, noting that the deals he did earlier this year “were con- tracted in at $400,000 and resold at $500,000." “They were fast and very easy to sell because they were in areas where homes can be worth $1 million or more when they are fixed up. It was easy to find fix-and-flippers to take those projects on,” he said. Rick Sharga, executive vice president at Carrington Mortgage Holdings, agreed with Sidoti that surrounding “up-and-coming markets” such as the areas around Riverside and San Bernardino counties hold potential for investors with the resources to identify and procure good deals. “As prices and affordability become more and more of an issue in coast- al Southern California, Los Angeles County, Orange County, or San Diego County, we’re starting to see a sort of ‘mini-boom’ in construction in the Inland Empire,” Sharga explained. “You are seeing new homes being built that are essentially bedroom communities for those counties, but we are also see- ing commercial construction in those
markets which suggests that, unlike the last market cycle, there are going to be jobs in those [newly-developed] areas. That is important, because it means the home construction is intended to meet anticipated job creation in these increasingly hot markets, and it means investors need to monitor what is going on in the industrial sector of commer- cial real estate in these areas.” Sharga recommended investors look at development trends to spot opportuni- ties to get in ahead of market heat. “The Inland Empire’s relatively affordable real estate offers really good locations for dis- tribution hubs for online retailers, who are continuing to command a higher and higher share of retail sales and need more locations to warehouse and distrib- ute those goods,” he said. “The people working there will need places to live. As those jobs are created, real estate investors will see opportuni- INLAND EMPIRE: The term is usually used to refer to western Riverside County and southwestern San Bernardino county, but broader definitions include eastern Los Angeles County, the Pomona Valley, desert communities in Palm Springs, and Coachella Valley. The Inland Empire has more room for development than coastal areas of California. BEDROOM COMMUNITY: Residential suburb inhabited mostly by people who commute to a nearby city to work. In California, bedroom communities may be located an hour or more away from the commuter destination.
Imperial, Los Angeles, Orange, Riverside, San Bernardino, San Diego, Santa Barbara,
tional investors. This is important for U.S. investors to remember since foreign in- vestors often have different priorities and more aggressive strategies than investors living in the United States.
HOPE STRATEGY: An investment “strategy” that relies more on an investor hoping that there will be profits rather than strong numerical indications that a deal will succeed. According to ATTOM Data Solutions, nearly one in four California single-family homes and condominiums are purchased with cash, which usually indicates an investor purchase instead of an owner-oc- cupant. Local homebuyers blame this in- fusion of cash-rich investors, many quite possibly from overseas, for skyrocketing home values that are pricing them out of the market. The California Association of Realtors (CAR) estimates roughly five to 10 percent of the state’s single-family housing stock could be owned by interna-
and Ventura Counties, all in light torquoise, comprise
the traditional definition of Southern California. A more extended definition includes Kern and San Luis Obispo Counties (light red). Los
IN SOCAL, REAL ESTATE STRATEGY IS PERSONAL
While most investors and economists agree that the SoCal market is probably heading for a correction in the next 12 to 18 months, active investors are not head- ing for the exits just yet despite a general agreement that change is in the air. “In my opinion, the market has pretty much peaked out, but you can still look in up-and-coming areas,” said Jillian Sidoti, a California attorney, active real estate inves- tor, and crowdfunding expert. Sidoti noted that she owns three properties in SoCal and is in the process of selling one of them. The other two serve as family residences,
Angeles and San Diego, both in SoCal, are the two largest cities in California and among the eight largest cities in the United States.
at Win Win Home Buyers LLC in Dal- las, Texas, says his property acquisitions business in Dallas is swamped with eager California investors seeking more affordable options for rental property and fix-and-flip projects. “We have so many investors who live in SoCal but invest here instead,” he observed. Lee Lanktree, a Florida-based real-
tor with a multi-decade track record of portfolio building for clients all over the country, said of his Southern California clientele, “They believe California real estate has evolved into a situation charac- terized by ‘hope strategy’ instead of hard numbers in too many cases.” Plenty of investors are still dedicated to staying in the SoCal market, however.
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