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Turning the Corner on the Pandemic: A Retrospective Look at Multifamily Apartments in South LA

By
Julian Bloch
 | 
May 26, 2021

What Was the Concern at the Beginning?

Back in the early days of the pandemic in May/June, my clients were very concerned about unemployment due to COVID business lockdowns. Their largest concern was that middle to low-income jobs would go away indefinitely, and that their tenants would stop paying rent.

The other big concern from landlords was that they would not be able to pay their mortgages. Landlords were concerned that tenants would not pay. If they could not evict those tenants, they would struggle to pay the bank, and surely the bank would show them no mercy.

What Actually Happened?

The concerns of massive unemployment and COVID lockdowns came to fruition but many tenants still found a way to pay their rent on time. In South LA specifically, a great percentage are subsidized Section-8 tenants who fared well. In some instances, those tenants failed to pay their portion of the rent, but the other portion (significantly larger) covered expenses for landlords.

That being said, there were a few buildings in the market that did see significant losses through the pandemic. Usually these landlords were a) either charging too much for rent in the first place, or b) small mom-and-pop operators that were taken advantage of by tenants.

How Did It Affect the Market Overall?

To be honest, the appetite for multifamily properties is just as high as it has ever been. In South Los Angeles where the purchase prices are still relatively low, there are a lot of buyers but they are more price sensitive.

The price sensitivity is twofold, firstly, the 3-4% CAP rate properties that were selling (before the pandemic) are no longer investable. Secondly, the idea of an unpredictable event like COVID is fresh in peoples’ minds.

The runup to COVID was rosy, but now buyers are acutely aware of the unpredictability in any market cycle.

Who Is Selling Now and Why?

Currently I am I seeing many baby boomers selling on behalf of their aging parents (in their late 80’s), or boomers themselves who are transitioning into retirement after a long year.

These types of sellers are pursuing other safer and less management heavy annuity investments like bonds or Tax Deferred Trusts.

If you want an Opinion of Value on your property – please give our team a call and we will have our agents put one together for you.

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