Is South LA a Good Place to Invest in Real Estate?
By Michelle Clardie on 11/22/2023.
Reviewed by Josefin Gatsby
Should you be investing in real estate in South LA? This diverse neighborhood has been generating more interest from buyers and renters in recent years, with new developments and increased employment opportunities revitalizing the area. But what do the market trends indicate for investors?
In this article, we’re evaluating local market conditions to help you decide if South LA is a good place to invest in real estate.
Overview of South LA
Known as a modern, urban manufacturing base, South LA has unlimited job opportunities, bringing droves of new renters to this location.
The vast majority of residents rent, with only 18% of locals owning their homes. The area is home to many residents who were born and raised in the area, but we’re seeing an influx of young adults coming to the area for job opportunities, particularly in sectors like manufacturing and education. Nearly half of area households (45%) have children. The area serves many lower-income families with around 55% of households earning less than $45,000 per year. Just 5% of households currently exceed the $150,000 per year mark.
South LA Real Estate Market Highlights
Here is what you can expect from the South LA housing market.
Affordability. With a median home sales price of $700,000 (as of October 2023), property in South LA is more affordable than in much of the LA area.
Solid Appreciation Rates. The median home price in South LA has increased by 41% over the last five years, with an average appreciation rate of 8.2% per year.
Sustainable Demand. The average home in South LA sells for .5% over the asking price after around seven weeks on the market.
Impressive Rental Rate Growth for Smaller Units. The median rental rate for a one-bedroom in South LA is currently $2,023, up 28% from this time last year. Two bedrooms are up 46% to $3,075. Three bedrooms are holding steady at $3,500.
South LA Amenities
With its rich history and cultural heritage, South LA is home to several important institutions. The University of Southern California, the California Science Center, and the Los Angeles Memorial Coliseum are all located in this sprawling neighborhood. You’ll also find the Natural History Museum of Los Angeles County (the largest museum of its kind in the western United States) right here in South LA.
One of the most important local amenities was just completed in 2020: SoFi Stadium. This exceptional sports and entertainment venue regularly hosts world-class artists, performers, and sports teams. The Los Angeles Rams and Los Angeles Chargers football teams are both based at SoFi. And the stadium has hosted highly diverse musical acts, including Def Leopard, Ed Sheeran, and BTS.
For daily conveniences, South LA is full of local restaurants, coffee shops, and grocery stores. There are also many school options for all ages. Some of the local charter schools are ranked among the best in the county. With parks scattered across the area, you’ll find some green space in this otherwise urban neighborhood. Plus, you can find thriving nightlife among the bars and clubs.
Located near Downtown LA and the City of Commerce, South LA is served by major roads and freeways, as well as public transportation, making it easy for locals to access the rest of the LA metro area.
Real Estate Investment Opportunities in South LA
Based on resident demographics and local market conditions, two investment types are currently performing exceptionally well in South LA:
1. Single-Family Flips, Especially Those with ADUs
Due to deferred maintenance, there are many distressed properties in LA that could use a complete renovation. Fixing and flipping residential properties can still work in the 2020s as the area continues its revitalization.
To add more value and increase profitability potential, some real estate investors are focusing on home flips with ADU additions. ADUs are “accessory dwelling units,” meaning a separate living space in addition to the primary home. Also called guest houses or in-law suites, ADUs can substantially increase the value of the property by adding living space for generational households or serving as a rental unit, which can help the homeowner offset their mortgage expense.
With the streamlined permitting process in California, adding an ADU is manageable for many real estate investors. You just need to find a lot large enough to accommodate the new ADU and plan extra construction time and expense into your project plans.
2. Affordable Rentals
With so many locals qualifying as low-income households, investors have an opportunity to create affordable units for this underserved community.
Affordable housing is in exceedingly high demand in South LA. Through government-assisted programs like Section 8 housing, investors can develop multi-family properties in which tenants’ rents are subsidized by the US Department of Housing and Urban Development. This allows qualified low-income renters to pay just 30% of their housing and utility costs out-of-pocket, while enabling investors to receive reliable market-rate rental income, 70% of which is paid directly by the US government.
Section 8 participants are often model tenants. The program has a long wait list and a strict qualification process, incentivizing participants to carefully adhere to their lease agreement and make timely payments to remain in the program. Investors benefit from quick lease-ups, low turnover, and timely rent collection, while renters get a safe, sanitary home at a rate they can afford.
Summary: Is South LA a Good Place to Invest in Real Estate?
Based on the high demand for local housing and the limited supply of affordable options, South LA is a great place to invest in real estate, particularly at lower price points.
Invest in South LA Real Estate with Gatsby Investment
Buying a property on your own can be daunting. Between the evolving market conditions, zoning, permitting, design, construction, and marketing, there are a lot of moving parts. And the upfront amount required to purchase and renovate/build a property can be a non-starter for many investors.
With Gatsby Investment, you can buy into expertly analyzed South LA real estate deals for as little as $25,000. Our team of experienced project managers, architects, builders, and marketers will professionally handle every detail of your deal, allowing you to benefit from the South LA housing market without the hassle or high upfront investment amount of purchasing property on your own.
We offer a wide range of real estate investment opportunities, including the single-family flips and affordable rentals that are currently performing so well in South LA.
