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Nela Real Estate: Does It Pay To Buy A Fixer-upper?
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Northeast Los Angeles is increasingly popular because of the vintage housing stock. Much is already modernized, but some can still be renovated for profit.
There are two ways to look at buying a fixer-upper in Northeast Los Angeles - NELA, as the locals call it. One is as a flipper, another is as a long-term homeowner. The physical outcome might be the same, where a down-at-the-heels existing home is turned into something brighter, more modern, and of higher value. But the path to getting there might be very different, depending on who is doing the work.
Flippers are, as most people know, professionals (or dabblers who watch a lot of real estate shows on television) who buy fixer-uppers with the sole intent of increasing the home’s value as quickly as possible and therefore to sell it at a profit. They can be very successful with the housing stock in NELA: In 2016, brisk sales of homes in Mt. Washington made it the hottest neighborhood in all of Los Angeles, according to the real estate website Redfin, returning an average gain on value of $312,000 to whomever did the buy-fix-resell on the property. Silver Lake and Los Feliz joined Mt. Washington on Redfin’s national list of the top ten neighborhoods for flips.
Flipping homes in hot neighborhoods isn’t new. Homes in Glassell Park, Highland Park, Garvanza, Hermon and, of course, Eagle Rock, has been a high-profit business for investors for the last ten years with relatively low risk. Why? One thing everyone knows is, homebuyers want into these neighborhoods.
What professionals also know is which renovations will be most attractive to buyers. They also recognize where problems might slow the renovation or prevent it from happening altogether.
The long-term owner might still do well with a fixer-upper, but the economics can be quite different:
Long-term ownership, slower renovation: In some cases, the buyer might not have the budget to complete a renovation before moving in, opting in stead to do it gradually.
Beds and baths might matter more than the kitchen: If the buyer has three children with a fourth on the way - the attractiveness of schools in places like Eagle Rock, Glassell Park, Highland Park, Garvanza and Hermon generally draws families - they are thinking more about where everyone sleeps and will do their homework than if the kitchen is brand new. So where a flipper might factor in for a $30,000 or more renovation of a 1980s kitchen, the buyer-occupant might be less concerned about white appliances and an aging Formica countertop.
D-I-Y: Does the homebuyer have carpentry skills? Does he or she at least know how to paint, how to choose finishes, and perhaps even the architectural acumen to reconfigure walls and stairwells that can turn a tired home into something terrific? The homebuyer-occupant can save a bundle on doing some things by themselves.
Some tips from "This Old House," the long-running television and magazine advisors on renovations, include:
• Build in a 20 percent cushion on your budget to cover "nasty surprises."
• Strategic thinking about design, materials and timing "can cut costs without cutting corners."
• A smaller kitchen can be "expanded" with more efficient space use in lieu of moving walls.
• Light tubes can bring in daylight to dark spaces more cheaply than installing windows.
• Recycling center (e.g., Habitat for Humanity's Re-Stores) offer salvaged building materials such as doors and skylights at half price.
• Do your own demolition, even it it's just lifting up old carpet. Books provide advice on how to do it without causing a disaster.
• Renovate in the winter: Contractors are simply busier, and more expensive, in the summer.
Is renovating right for you - or do you prefer for the work to be done before you buy? Consult Tracy King at 626-827-9795, a longtime NELA-based Realtor who has been a vital part of the area’s ascendancy to one of the most desired places to live in Los Angeles.
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