LA Housing Scarcity: Opportunities for Investors Explained

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In this episode of the Investor Fuel podcast, host Skyler Byrd interviews Mark Walker, a seasoned real estate agent with over 20 years of experience in the LA market. Mark shares his journey from the entertainment industry to real estate, discussing the significant changes in the LA housing market, the challenges of affordability, and the opportunities presented by probate properties. He emphasizes the importance of strategic investment in a market characterized by scarcity and offers insights into tenant screening and property management. Mark concludes by inviting listeners to connect with him for real estate inquiries.

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Investor Fuel Show Transcript:

Mark Walker (00:00)
The very first home I ever held open was a little casita in a neighborhood called Atwater Village, right off of Los Feliz. $273,000. It was 768 square feet on like a 5,000 square foot lot. And I was holding this sucker open every weekend and people were coming by and they were saying, where are we? I don’t know where this is. 273, that’s so expensive. Those homes in that neighborhood are now selling for $1.2 million.

had I known then what I know now, I would have bought everyone I could have found in the the in the neighborhood, right? So so the prices here, LA real estate is about a couple of things. Because the way that I look at it, LA is kind of full, there are no big swaths now of new construction, where hey, there’s 50 new homes being built over here and 30 new homes being built over there, a new development of 260, whatever it’s not, you know, that’s that’s not our

Skyler (00:35)
yeah.

Mark Walker (01:00)
area. However, what that means is the LA market is about scarcity, right? There’s a lack of inventory and it’s about appreciation. So the prices you have to to to fight with the multiple buyers in order to get your property. And, you know, once you have it and hold it,

Skyler (02:57)
everybody, welcome again to the Investor Fuel podcast. I am your host Skyler Byrd and I am joined today by Mark Walker. I’m incredibly excited to speak with him because he is a real estate agent with over 20 years ⁓ as an agent, but also working exclusively in the LA area. So I’ve got a ton of questions for him and I know you’re all going to get a lot out of this. So Mark, thank you very much for joining the podcast.

Mark Walker (03:21)
Skyler, thanks for having me, man. It’s great to be here.

Skyler (03:24)
Absolutely,

absolutely. So before we get diving into everything that’s going on now, can you give our listeners a little bit about your background, how you got into real estate, and when it all started for you?

Mark Walker (03:35)
Sure, I got licensed in 2001. I was in the entertainment industry. was, well, going show to show to show. And it was kind of crazy because I was getting married and, you know, we were having our first child. And I was realizing that…

my time was taken by this industry that I was in. I wanted to be not travel as much. I wanted to be home. I wanted something that could provide great income. And the reality is I was actually looking to buy a four unit building and the agent that was showing me around ⁓

I’m not going to name names, but ⁓ he kept getting these calls while he was showing us around. And the calls were, hey, I didn’t know I was going to have to pay this or I didn’t know I was going to have to bring in that. And I didn’t know what am I supposed to do now? Right. So, so, you know, my wife and I had the conversation of, hey, if we stay with this guy and I know what I know now, I’m going to be on the other end of that phone calling that guy.

Skyler (04:41)
Yeah.

Mark Walker (04:41)
So I started taking real estate classes so that I could understand what it was I was getting into. The real estate school I went to got bought by Coldwell Banker. So when I got licensed, Coldwell Bankers had come to work with us. And I worked eight years Coldwell Banker Los Feliz and then on to Normand & Associates where I am now two years in the middle doing ⁓ short sales and foreclosures during the housing crisis.

But 16 years with the company I’m at now. Yeah.

Skyler (06:00)
That’s awesome, man.

what did you do in the entertainment industry before you got into real estate? Okay.

Mark Walker (06:06)
Everything, everything, you know, I’m

I, so before reality television, there was variety television, right? And ⁓ world so so we were doing magic shows, world group most dangerous magic five, world’s greatest magic three.

Skyler (06:25)
I remember those type of shows, yeah.

⁓

Mark Walker (06:28)
Yeah, Lance

Burton secret magician. I’ve chained more magicians to walls. I’ve, you know, teleported magicians across the Grand Canyon. Like we were doing all of that. It was a blast, but it was a very time consuming endeavor.

Skyler (06:41)
Yeah.

I would think so. No, that’s

really interesting right there. That’s awesome. ⁓

Mark Walker (06:52)
Yeah, no. ⁓

Yeah, it was was a lot of fun. But ⁓ yeah, I like to do that, we would end up going to Vegas for 30 days or six weeks. And so I’d be completely removed from family and social life and stuff like that. And I was like, I need something that’s more grounded, right?

And the nice thing about real estate, I haven’t ever really had to miss a kid’s performance. I’ve never had to miss anything at the schools. I’ve never had to miss anything. And I’ve still been able to run my business pretty well.

Skyler (07:31)
There you go. It’s nice being able to work

for yourself and not be tied to just, you know, one location and having to be there, yeah. Yeah, you didn’t happen to have anything to do with the Masked Magician, right? Where they’re giving away all sorts of secrets and things like that? Okay. Okay. ⁓

Mark Walker (07:39)
Exactly.

No, he was the other side, man. That was the op.

We definitely didn’t do any of the secrets revealed shows. Yeah.

Skyler (07:52)
Okay, all right. That’s I remembered specifically.

awesome. So Mark, you’ve had a lot of experience over 20 years in the LA area. What are some of the biggest changes that you’ve seen in the market there from when you started, home prices, what the market was doing to today? And tell me about that.

Mark Walker (08:14)
So

the very first home I ever held open was a little casita in a neighborhood called Atwater Village, right off of Los Feliz. $273,000. It was 768 square feet on like a 5,000 square foot lot. And I was holding this sucker open every weekend and people were coming by and they were saying, where are we? I don’t know where this is. 273, that’s so expensive. Those homes in that neighborhood are now selling for $1.2 million.

had I known then what I know now, I would have bought everyone I could have found in the the in the neighborhood, right? So so the prices here, LA real estate is about a couple of things. Because the way that I look at it, LA is kind of full, there are no big swaths now of new construction, where hey, there’s 50 new homes being built over here and 30 new homes being built over there, a new development of 260, whatever it’s not, you know, that’s that’s not our

Skyler (08:50)
yeah.

Mark Walker (09:15)
area. However, what that means is the LA market is about scarcity, right? There’s a lack of inventory and it’s about appreciation. So the prices you have to to to fight with the multiple buyers in order to get your property. And, you know, once you have it and hold it,

you know in the time that I’ve been doing this there was the dip of the housing crisis in 2008 2009 but other than that the appreciation has been incredible for folks and what that means is for the first time buyer who gets in the market and this has been you know especially in the beginning you could buy that FHA approved condo right

Skyler (09:51)
Okay.

Mark Walker (10:05)
to get in the market. And I’ve seen and I’ve helped clients who’ve struggled their way into the market and struggled their way to make those payments for two years, five years, know, struggled to come up with that. You know, back then it was 3 % down. Now they get an FHA loans three and a half percent, right? ⁓ Struggled to get that in.

And then be able to sell that unit three, five years later and walk away with the $250,000 in tax free game, right? Because it was their primary residence. And now they’re a player in the game, right? Now they have this equity that they didn’t have before. And now they’re like, okay, what do we do with this? How can I reinvest this and grow it? So it’s, you know, my business is focused on finding the strategies to help people get into the market, right?

in order to take advantage of the market. How to best position yourself in order to get that appreciation and take advantage of that appreciation. For a lot of my clients now it’s buying a two to four unit property, right? Because ⁓ you can use single family financing to get in and you have the tenants pay the mortgage and let the property appreciate.

while it’s paying for itself. So a lot of times the investors here are not getting a huge monthly return. Right? The prices are not so and I have clients and family and other parts of the country who are like, Hey, I’m getting $1,000 a month positive cash flow. Hey, I’m positive cash flow 2500 or whatever. Right? Here, it’s not so much the positive cash flow that’s going to get you that that that’s going to be the focus. It’s going to be

Skyler (12:04)
Okay, yep.

I would imagine just due to the price

of the real estate itself.

Mark Walker (12:25)
that that’s exactly it.

But if we can find the right property that’s at least breaking even for you, let LA’s appreciation let’s saw that the appreciation of Southern California work for you, right. And so at the end of your two year five year, whatever that timing is, you’ll see that your equity is built up in that property a lot faster than a lot of other investments.

Skyler (12:36)
Yep.

Mark Walker (12:49)
So that’s kind of what we focus on and how to beat that sort of affordability gap here.

Skyler (12:55)
Sure. No, that makes sense. And Mark, you work primarily with investors, correct? You don’t do a lot of ⁓ just regular families looking for a home, is that correct?

Mark Walker (13:06)
Well, it’s kind of balanced. I do work with a lot of families who are, you know, but typically, even the families that I work with end up becoming investors. Because once they get in and they start seeing their appreciation, they’re like, ⁓ wait a minute, this is going pretty well. This is going better than my job. Like, okay, now I have this equity, what do I do with it? Right? And they become investors in that.

Skyler (13:21)
Yeah.

There you go.

Mark Walker (13:31)
at that point. even if and so it’s interesting because you look at the work, you know, maybe they’re not full time, this is their life as a real estate investor, right? They still carry their other businesses, they still carry their life, they still work in the entertainment industry or work wherever they were going to work. But

in terms of where they’re putting their money for that investment and that appreciation. A lot of them do get into LA real estate because you know, they’ve seen it and they’re experiencing it as their home is appreciating in value, right? So they’re like, okay, I can park money over here. I could, I could do this, you know. ⁓ So, so that’s it. And, and a growing portion of my business is having to deal with probate. ⁓

Skyler (14:07)
Okay.

Yeah.

Absolutely. Yeah.

Tell everybody a little bit about that because as we were talking before the podcast, that’s something that’s really interesting in an area of the business I haven’t really dug into or heard much about yet.

Mark Walker (14:29)
Got it. So yeah, there are quite a few homes in LA. LA has this great tax situation for property tax for homeowners where your property tax is tied to your purchase price.

So even as the property around you is rising in value, the assessor doesn’t come knocking on the door and reassessing the value of your home. Your property taxes remain tied to your original purchase price. What that means is once you’re in a house,

a lot of times people don’t want to sell. They don’t want to move because if they step up, their property taxes are going to go up. Right. So we have a lot of people in LA who have been here since the seventies and eighties who are like, this is my home.

Skyler (15:50)
Yeah.

Mark Walker (15:58)
I love it. I’ve raised my family here, etc. And, you know, that is a growing portion of the business as those folks, you know, either retire out of state or pass away. ⁓

those properties are coming on the market in various states of repair and disrepair. And there’s a lot of opportunity for investors to come in and, you know, make the family whole like, hey, you can finally cash out on grandma’s investment. She did really well when she bought this house for $35,000 back in 1978. Now the family gets the benefit of liquidating that property, right? There’s a

you know, sort of a stigma that, it’s so complicated and you have to deal with family issues and you have to deal with and it is it’s it’s hard for the administrators and executors, right? But it’s for the investor. It’s actually an opportunity for them to come in and solve a family’s problems, right? I have investors who will say, Hey,

Skyler (16:59)
Yeah, absolutely.

Mark Walker (17:04)
you guys come in, take everything out of the house that you need, we’ll dispose of the rest, right? Or we will handle the rest, we’ll make sure it gets donated, we’ll make sure it gets, you know, we’ll do an estate sale, etc. But here is the value, you know, so that the family can just take what they need and move on. So it’s a blessing on the family. And it’s one way that my investor clients are finding value here.

and there’s not a lot of competition in that space. ⁓

because people are so afraid of, it has to go to court and this and that. And a lot of times it doesn’t, you know, if the, if the administrator gets full authority, if the family’s all on board, then there is not really a court component. It’s only if there’s contention within the family that it ends up, you know, for the most part, going to court and being, you know, contested and having to go to the overbid process and all that kind of stuff. But, um,

Skyler (17:43)
Okay.

Mark Walker (18:06)
That’s actually rare in the families that I’ve dealt with.

Skyler (18:10)
And that’s really interesting because I didn’t realize that the tax base or the tax assessment in California stays with your purchase price. And that makes a lot of sense because I keep hearing over and over that people are not, know, especially in California, they’re not, they don’t want to leave their homes. you know, even though, yeah, they’re going to get, you know, they’re going to be able to sell it for just multiples and multiples of what they paid for it. Now it’s like, well, what do I do with that money?

Mark Walker (18:20)
stays with your purchase price. goes up. Yeah.

Skyler (18:39)
Like I’m going to go somewhere I could buy another property, but I’m going to pay all this in taxes. I didn’t realize they don’t get a step up in property tax every year as it gets reassessed. So that makes sense.

Mark Walker (18:49)
So,

yeah, there is a new proposition that was just passed, I want to say two years ago, that allows an elderly citizen to sell their home and port their taxes to a new property, but not many people are taking advantage of it ⁓ because for so long it was…

and still is tied to the purchase price. And they’re just living in that, know, hey, I bought this house for $78,000. My tax basis is based on that. You know, why?

Skyler (19:18)
Yeah, yeah, yeah, I don’t have,

yeah, I’m retired, I don’t have the income, I’m living off of Social Security, and it seems like that kind of has a trundled out effect, like leading to some of the housing crisis where, yeah, people could get out, but it’s not advantageous for them, and they’re not in a position in life where it’ll make sense to do it.

Mark Walker (19:27)
Exactly.

Exactly. That’s exactly it. And that is leading to the lack of, you know, new inventory, plus the fact that again, LA is pretty full. So we don’t have big swaths of vacant land where you can say, we’re going to build a whole new tract, right. ⁓ So it is just a matter of what is making people move. You know what I mean? Yeah.

Skyler (19:42)
Yeah.

Yeah, absolutely.

Absolutely. And so what’s a big area of the business where you’re at in the LA area? What are the opportunities that you see for the next 10 years?

Mark Walker (20:14)
So like I said, LA is about scarcity ⁓ when it comes to housing, when it comes to real estate. ⁓ So the two to four unit, the buying a single family home, adding an ADU, an accessory dwelling unit in the back for extra income, turning a single family into an investment property by doing that, ⁓ that’s a big area of growth. ⁓

The rental market in LA has been pretty tight for a while. The city was, you know, handing out permits to build apartment buildings like candy to try to help solve the ⁓ housing crisis. Hey, that’s one way we can build our way out of this, right? Let’s build apartments. ⁓ Even with that, the rental market has held steady over the years.

So getting in as an investor and getting rental property, the rental market has held steady and has appreciated really nicely. ⁓ One of the challenges with that, with the rental market coming in, ⁓

There is always the concern that the new apartments are going to start pushing down on rental prices, but that hasn’t been the case. know, rental prices have held pretty well.

Skyler (21:40)
Yeah. Wow. Yeah,

even with everybody that you hear moving out of California in one way or another, those rental prices are still holding steady. Okay? Wow.

Mark Walker (21:50)
The rental prices are still holding steady. Because

there just aren’t enough spaces for folks, especially in LA. So there is investment opportunity. There is ⁓ the opportunity for growth. It just has to be managed properly. And one of the things, like when it comes to investment property,

It’s about screening and finding the right tenants. You know, that’s what it really boils down to, especially when you’re a small property owner, right? You buy a two to four unit because you can buy that with the same financing as you would for a single family home. So you can buy a two to four unit building with 5 % down, three and half percent down. You don’t have to come in as an investor, you know, like you’re buying an apartment building 25 % down, et cetera. For the folks who can

Skyler (22:40)
Yeah. Sure.

Mark Walker (22:44)
owner occupied one of the units right and then let the Tenants pay the mortgage for you while that appreciation happens and there you go. You’re now in the market You’re actually getting getting that appreciation, right? ⁓ The challenge and what it comes down to is screening the tenants to make sure you get the right tenants in the property, right? because on a small

Skyler (22:58)
Yep, absolutely.

Mark Walker (23:11)
number of doors, if you only have two units, and you’re relying on ⁓ one of your tenants for 50 % of your success or failure as an investor, then you better screen the heck out of that you better get the right person in that unit, right? Because if something happens, there goes, you know, you’re out. what I do when I help someone purchase a property is I help them fill all their vacancies.

Skyler (23:20)
Yeah.

Hey

Absolutely.

Mark Walker (23:40)
I help them ⁓ screen. do the showings. I make sure I meet all the tenants in person. I screen and then I present to the investor owner. Hey, this is the tenant. This is the applicant. This is everything that I can find out about the tenant. So then the investor owner can give their response based on as much information as we can find out about the tenant. know? Yeah.

Skyler (24:05)
That’s really cool. ⁓ I haven’t

heard too many people come on and say they actually provide that type of service. So I like hearing that. That’s excellent.

Mark Walker (24:13)
Well,

man, that’s, that’s what it boils down to. I don’t want to get the call a year from now. I don’t want to get to get the call six months from now. Hey, exactly. ⁓ this guy. ⁓ you know, they stopped paying after month two and ⁓ you know, so, so. Right. Right. Exactly. So we look for places that have been recently renovated or new construction and.

Skyler (24:25)
Yeah, what’d you get me into? Yeah. Yeah. Yeah, and they broke the washer and the dryer somehow. What happened? Yeah, of course.

Mark Walker (24:43)
We look for places that have vacancies so that we can screen our tenants and put the tenants in that will work best for the investor. And that’s kind of how we try to solve that problem. Cause you know, LA is pretty strong rent control. The tenants are protected once they’re in the place for the most part. If the building is older than, so they change the rules so that basically new construction, you get 15 years of

of free use of the building without having rental restrictions on it. At the end of 15 years, it is no longer considered new construction and then rent control applies for most properties. There are exceptions, but that’s a general rule, right?

So we look when I’m when I’m working with investors, we look for those buildings that don’t have the rent control restrictions for as long as possible so that they can get market rent right away. We look for vacant units so that we can fill them with the tenants that we want and not inherit a problem tenant from a previous owner. Right. Because a lot of times they’re supposed to disclose, but you may not get everything if there’s a tenant that you’re inheriting. Right. ⁓ So so we look for those. And because

Skyler (25:46)
Makes sense. Sure. Yeah. ⁓

Mark Walker (25:57)
time and time again, I found myself in a position where, you know, yes, I’m still going to be doing this business. I’m still going to be in this business six months from now, a year from now. So if you have a problem as my investor who bought this building and I’ve helped you find these tenants, who are you going to call? You’re going to call me to say, Hey, Mark, there’s a problem. exactly.

Skyler (26:08)
Yep.

Yeah, yeah, you’re gonna have a ton of headaches coming down the road.

Mark Walker (26:24)
So

so I’m not just looking out for my investors when I do that, you know, I would love to say, I’m totally altruistic. And I do this because, you know, I want to make sure that they are so set up and so happy. And that’s true. However, I also want to keep my headache stress level low, right? ⁓

Skyler (26:28)
Yeah. ⁓

Mm-hmm.

Gotta worry about the mental health, that is for sure.

Well, Mark, hey, we’re kinda coming up on time here and I gotta thank you for hopping on. I I got a ton out of this podcast. You brought a lot of great information and again, I learned a lot and before we go, yeah, if somebody’s in the LA area interested in working with you, if they’re an investor, if they’re just looking to purchase their first home, you’ve got a ton of experience, how can they get ahold of you?

Mark Walker (27:09)
Well, thanks for having me. This has been so much fun. You are an awesome host. ⁓ If you’re in LA and you’re looking for me, look me up. I’m everywhere. Just Mark Walker, Realtor, Normand & Associates. Just Google that. I’m everywhere. I’m on Yelp. I’m the property guy LA on Facebook. I’m Mark the Realtor LA on Instagram. ⁓ You know, I’m everywhere.

Skyler (27:14)
Thank you.

There you go. If in the LA area, guys,

you can’t miss them. That’s for sure. All right. Well, Mark, again, thank you very much for your time here. And for all of our listeners out there, if you’ve got any value from this podcast, please make sure you are subscribing. We have got a lot more conversations with real estate experts just like Mark coming down the road. So we will see you on the next episode here. Thank you.

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Investor Fuel

LA Housing Scarcity: Opportunities for Investors Explained

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