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Southland investors revisit buy and hold strategy

February 24, 2009 |  9:21 am

Hermosa_beach_2"Dealers, dreamers see gold in California housing bust" from Reuters looks at the investment potential of Southland houses:

"This is the buying opportunity of our lifetime," said Bruce Norris, who heads an investment group that expects to purchase about 100 homes this year in Southern California's Inland Empire region....

Norris Investment Group looks for homes built between 1980 and 1990, typically under 2,000 square feet (186 square meters). Older houses come with too many maintenance "surprises," Norris says, and larger places can be tough to sell or rent in hard times.

Last month the group paid $55,000 for a foreclosed home that was worth $360,000 at the top of the market. Norris expects to spend $30,000 on repairs and rent it for $1,200 a month until the market turns around.

The group also hopes to minimize risk by owning the homes free and clear, thus accruing little debt.

"You cannot have this [low] level of pricing be permanent because it costs too much to build a home here," Norris said. "That's how you know you're making a logical decision when everything is falling around you. When you can buy a finished product someone will want to live in for $55,000, that just has to make somebody pretty wealthy someday."

Some investors in previous cycles did find success with the buy and hold. The late David Schumacher, author of the book "Buy & Hold: 7 Steps to a Real Estate Fortune," did well buying in the South Bay. But, he notes in his book, the single most important factor is "finding the right location where it is possible to conservatively predict potential growth." He picked the South Bay decades ago because it was close to an expanding LAX and had a number of engineering jobs when he was shopping. And the Inland Empire...?

-- Lauren Beale

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Photo: Homes in hilly East Hermosa are a distance from the beachfront scene but still have ocean views. Credit: Allen J. Schaben / Los Angeles Times