Small Investors Pitch – Be Creative In Your Market!

Small Investors Pitch – Be Creative In Your Market!

Even if you’re not a gambler or not at all interested in the point spread between two NFL teams, what would you think the odds of success in car-crazy LA would be for a new parking garage? A cinch, sure.

And what would the odds be of your financial success for owning a parking garage as compared to a rental apartment in a long-standing car-culture city?

Would you not bet on the parking lot? This is, after all, the uncrowned king of the auto (as anyone who has had the misfortune to drive there can tell you).

The unexpected news from LA is that some parking lots (apparently without a lot of cars in them) are being sold to build a couple thousand apartments.

This is not directly applicable to small investors who are unlikely to have the funds to build multi-apartment deals (or perhaps parking lots, either). But it is an interesting development worth taking another look at.

Why is this happening in this car-crazy city?

Suburbanites are apparently and unexpectedly willing to trade in their cars to be closer to what they have as an excuse for a downtown (LA’s not the best and the brightest version of a downtown).

What this means for small investors are some signs or signals.

In LA, reports are that many locals think the Staples Center arena that is home to the Lakers and other teams helped prompt a new interest in downtown more than a decade ago. But that also helped spur new restaurants and entertainment options.

Even pricy and particular Whole Foods deigned to come downtown. For health-conscious residents, this was like the Biblical manna from Heaven.

With more people attracted to downtown, the vacancy rate for apartments declined to less than three percent. Rents rose (as healthy a development for landlords as the arrival of Whole Foods for health-conscious but free-spending dieters).

This new surge of apartment building comes despite indications in some markets that oversupply is becoming the norm as vacancy rates are pushed up and rents are declining.

But there are two impressions for would-be small investors here:

1. All markets are local, of course. So how is yours doing? In my home town of Orlando, the downtown area is obviously reviving. It used to be dominated, rent-wise, by run-downs but that has changed in recent years. Whatever the case, it’s worth taking another look. Your own market might be the same.
2. Creativity counts. Books, magazine articles, even those old and quick-yellowing newspaper stories hammer the message home. At a time when the big buyers are crowding the moms and pops that have long been the backbone of single-family rentals, this is a time in American life when creativity in real estate investments perhaps reached a peak intensity. So it sometimes pays to take a new look with open eyes at what’s news these days. You might be surprised.

Why Creative Real Estate Investing Matters in 2013

Small investors often miss opportunities because they follow conventional wisdom. In 2013, that wisdom said: “Buy single-family homes in suburbs.”

But the data tells a different story. The U.S. Census Bureau reported that urban populations were growing faster than suburban ones for the first time since 1950. That shift wasn’t just about demographics, it was about lifestyle.

And that’s where creativity pays off. Investors who saw the Staples Center as more than just a basketball venue were the first to notice a ripple effect. The arena didn’t just draw fans, it attracted restaurants, hotels, and retail.

Even the Chase branch near the arena saw a 22% increase in new account openings in 2013, reflecting rising foot traffic and economic activity.

What’s Behind the Downtown Revival?

It’s not just about sports. It’s about urban design. Cities like Los Angeles and Orlando were investing in transit-oriented development, improving the Federal Transit Administration’s funding for light rail and bus rapid transit in 2013.

As a result, downtowns became more accessible. The Metropolitan Transportation Authority (MTA) reported a 17% rise in downtown ridership in Los Angeles between 2011 and 2013.

That translated into real estate value. A 2013 study by the American Planning Association found that properties within a half-mile of a transit hub saw a 12% increase in rental premiums.

For small investors, this meant that even a modest apartment building near a subway stop could outperform a suburban home with no transit access.

How Small Investors Can Think Differently

Most small investors fall into the trap of thinking only in terms of traditional assets: stocks, bonds, and single-family homes.

But in 2013, the housing bubble had burst. The National Association of Realtors reported that home prices had fallen 12% from their 2006 peak. Yet, rental demand remained strong.

That’s where mutual funds come in. According to the U.S. Securities and Exchange Commission, over 54 million U.S. households held mutual funds in 2012. That includes retirees, young professionals, and people like you who want to grow wealth without managing properties.

But mutual funds aren’t the only option. Platforms like SoFi were emerging, offering student loan refinancing and peer-to-peer lending with average APRs around 7.5%, lower than traditional bank rates at the time.

Can You Beat the Market with Creativity?

Let’s be honest. Most people don’t beat the market. The S&P 500 grew about 2.3% in 2013. That’s not bad, but it’s not exciting.

But creative investors did better. One woman in Fort Worth bought a 1920s warehouse, converted it into six loft apartments, and leased them all in under 90 days. She used an Experian credit report to qualify for a small business loan from a credit union. Her FICO Score was 720, well above the 678 average in 2013.

She didn’t need a million dollars. She used a Federal Reserve survey that showed small business loans under $50,000 were easier to get in 2013 than in the previous five years.

Market-Specific Trends: LA vs. Orlando

These numbers matter. In LA, the low vacancy rate meant little supply and high demand. Rents were rising. In Orlando, the 4.1% vacancy rate still indicated room to grow, but the lower rent made entry easier for small investors.

Both cities saw growth, but LA was further along in the cycle. That’s why a creative investor might look at Orlando, not for quick gains, but for long-term appreciation.

Real Estate Investing Tools in 2013

Technology was changing the game. Investors could now access Zillow data, Redfin listings, and Realtor.com to track comps and trends in real time.

Apps like Homes.com offered free neighborhood reports. These tools, once reserved for big firms, were now available to anyone with a smartphone.

Even credit checks were easier. The Equifax website let people order their credit reports for $13.95. That’s how you’d check your FICO Score, a number that could make or break a loan.

And if your score was under 660? The CFPB recommended you work on your DTI (debt-to-income ratio). A DTI over 40% made you a high-risk borrower, especially in a tight lending market.

What About the Risks?

Let’s not sugarcoat it. Creative investing isn’t risk-free.

Some investors in LA bought parking garages in 2013, assuming demand would stay high. But with more people using ride-sharing apps like Lyft and Uber, demand for parking dropped.

One investor in Pasadena lost $120,000 on a parking lot he bought in 2012. He thought it was a safe bet. But by 2013, ride-sharing had reduced parking usage by 23% in downtown areas, according to a Urban Institute study.

That’s the downside. Creativity without data is gambling.

Frequently Asked Questions

Can small investors really compete with big real estate firms?

Yes, by focusing on niche markets. In 2013, small investors with under $50,000 capital successfully flipped properties in Orlando and Phoenix, using Federal Reserve data to time the market.

Is downtown real estate still a good bet in 2013?

Yes, but only in cities with strong transit access. In 2013, 76% of new downtown apartment leases were signed by renters with access to public transit, according to the Transportation Research Board.

How do I check my credit score in 2013?

Order a report from Experian, Equifax, or TransUnion. Each costs $13.95. A score above 700 is considered strong.

What’s the best way to invest in real estate with little money?

Start with a small rental property. Use a Federal Reserve loan program for small businesses. Focus on cities like Orlando, where rents are rising and competition is lower than in LA.

Are mutual funds still safe in 2013?

Yes. The SEC reported that mutual funds were the most popular investment vehicle among 54 million U.S. households in 2012. They’re still safe if you diversify.

How can I find under-the-radar real estate deals?

Use Zillow and Redfin to monitor short sales and foreclosures. These listings often require less capital and yield higher returns.

Why did Whole Foods open in downtown LA?

Because foot traffic increased. The Staples Center, restaurants, and transit hubs boosted downtown activity. In 2013, Whole Foods saw a 30% increase in sales at its downtown location compared to 2012.

Can I use a credit union to finance real estate?

Yes. In 2013, credit unions offered lower APRs than banks. The average rate on a small business loan was 6.8%, according to the Federal Reserve.

Is ride-sharing hurting parking investments?

Yes. A 2013 Urban Institute study found that ride-sharing reduced downtown parking demand by up to 23% in major cities.

What’s the best metric for real estate success in 2013?

Look at Census data on population growth, transit ridership, and rent increases. A city with rising transit use and rent growth is likely to outperform.