I responded to Beth off board.
It's difficult for me to make general comments about real estate because it's such a localized market. I have no idea how the rehabilitation of NO will work; so, it's difficult to have an opinion. One would think existing land with utilities to it, that is not contaminated could be rebuilt first; however, one needs to know what city leadership supports. LA doesn't follow English Common Law; so, the principles of law are substantially different than what you may be used do. What do city and county ordinances say? Will they be changed. For existing homes in good locations where utilities work or will soon and no contamination, demand should be strong, but there is much more to consider.
I'm not an investment advisor!!
In general, one needs to analyse supply and demand. Look at where there will be more future demand than supply for new product. For existing, folks want safety, a well built home, good schools and a neighborhood with good access to employment and shopping (assuming utilities are available). It's usually a pretty simple matter to scout out good existing neighborhoods; then learn as much as you can about that market. After a few houses change hands, you can get a pretty quick feel for value.
All that said, single family housing is a very inefficient manner in which to invest in rental housing. Single family has been good because it's appreciated a lot, not because rents have necessarily risen.
Apartments have much better economics as far a rental. Think about it: common walls and roof means cheaper building costs; no yard to maintain; common amenities a single family home would not have. The problem in my area has been with low mortgage rates, renters that could qualify were lured to purchase homes. That left renters that couldn't qualify or didn't want to own. Rents softened, taxes and maintenance costs increased. Profit got thin or disappeared. So, one could argue single family demand was artificailly increase by lower mortgage rates and multi family suffered.
As far as single family home investment, pick a solid neighborhood renters can afford to be in. School districts are important to young families. How does one get to work and shopping areas? Look for good, construction and low maintenance materials. Let location dictate. Higher crime areas, poorly built neighborhoods, poorly rated schools and many other things can hurt value.
Many markets are ignoring fundamentals. House payments as compared to what a median income owner can afford to pay are way out of wack. It's getting to where fewer and fewer folks can afford home payments. The fewer that can afford them, the fewer you can sell to later. Financing has become very aggressive. Leverage makes a good deal better and a bad deal worse! As folks pay higher and higher investment entry prices, upside will be limited more and more.
There are major economic principles at work and local ones. What will baby boomers want in the future? What will the next generations want? Will long term rates rise (really a matter of when)?
Don't know how much this really helps, but what has made me successful is to have found a niche where homebuilders demand land in good locations; I find the best deals where they want to be and position product for them. I have purchased raw land in the past with seller financing in anticipation of development, but land prices have escalated four or five fold, original owners have sold to intermediaries (aka-speculators); little seller financing is being offered and prices are so high, I see limited upside.
Other telling things here are how unsophisticated folks are making purchases I have passed on and bragging about it!! When I looked into the tract, there were substantive development problems--they didn't care.
It's easy to get into an investment if you have money; the difficult part is getting out in a target time frame with a reasonable profit. Think about how you're going to get out of this investment. Who will buy it? The thinner the universe of purchasers, the more narrow your exit.
Best,
Dave
