By SHELLY GARCIA

Staff Reporter

A little over a year ago, Joseph Shayfar acquired a 96-unit apartment building on Valerio Street in Van Nuys.

The building had been in foreclosure and the price was right under $3 million. It looked like a good investment, but with only two years’ experience in buying properties, Shayfar was still a novice.

A few months later, he found out why he got such a good deal. A 17-year-old boy was shot around the beginning of the year on the building grounds. As it turned out, gangs were living in the property.

Shayfar’s efforts to clean up the building are a lesson in why even the most responsible landlords find coping with the gang problem to be a Herculean task.

The scenario is not uncommon for C-class apartment buildings in neighborhoods where crime continues to be commonplace. There are no statistics on the number of buildings that house gang members, but recent efforts have been made to organize groups of landlords facing the problem. One recent session drew about 10 landlords representing some 400 units in North Hills alone.

Some landlords simply don’t care. Even with gang problems, there are enough tenants with limited incomes to keep these buildings fully occupied and provide the owner with a steady stream of revenue. Those like Shayfar, who want to turn their buildings around, soon learn that it can be costly.

Instituting security measures can run from $50,000 to $100,000. It costs upwards of $5,000 to refurbish each unit that has housed gang members because of the destruction they wreak on everything from carpets to appliances. The renovated units can take twice as long to rent because the market of people willing to pay the higher price for a renovated apartment is smaller.

Ridding a building of gang members can also be dangerous.

When Shayfar’s property manager first began trying to clear gang members from the building, he received death threats. “They broke into the office looking for his home address, and he was followed,” Shayfar said. “They told the employees (in the office) that they were looking for him and they wanted to kill him. They tried to run him over with a car.”

Bottom fishing

Shayfar began investing in apartment buildings just two or three years ago when he saw how low property prices had become. All told, he has acquired 14 properties in the L.A. area.

The Valerio Street building had been in foreclosure twice before Shayfar acquired it both times because gang-related problems led prior landlords to walk away from the investment. At the time he bought the building, Shayfar had no idea of its history.

He had visited the building and inspected it but he did so during the day. Most gang activity takes place after dark. He thought the foreclosures stemmed from the soft economy that prevailed for most of the ’90s. Priced under $3 million, Shayfar figured that the property was already undervalued, and with the economy improving, his investment would be secure.

But it was gangs, not the economy, that kept the building’s vacancy rate at about 20 percent. At least 10 of the units housed gang members, and after the shooting, residents in 15 other units vacated, spiking the vacancy rate to 35 percent. What once looked like a sound real estate investment had become a serious liability.

Shayfar’s trial-and-error strategies early on did little to help the problem. His property manager, who took to wearing a bullet-proof vest, refused to go inside. Shayfar took over personally. He hired armed security guards to watch the building 20 hours a day, but the officers were outnumbered and outgunned. There was little they could do.

He hired a maintenance worker to wash the graffiti off the building walls daily. But the following morning, the graffiti was back.

He began questioning the residents to try to find out where the gang members were living, but he didn’t get any answers.

Finally, Shayfar contacted the office of Los Angeles City Councilman Joel Wachs and was put in touch with the Los Angeles Police Department’s CRASH unit Community Resources Against Street Hoodlums.

With their help, Shayfar began securing the building, the first step in figuring out whether gang members actually lived there or were just using the premises.

“We recommend re-plastering, repainting, lighting and security gates installed so people who live there are the only ones who can come in,” said Val Paniccia, assistant commanding officer of operations for LAPD’s Valley bureau, who oversees the CRASH unit. “If the gang members are still coming there, someone has to be letting them in. Then we can find out if the gang members are actually dwellers or it’s a friend, and we can go after them.”

Weeding out gangs

As it turned out, the most difficult part of the process was identifying the apartments in which gang members were residing. They typically lived with parents or others who by all accounts were law-abiding people, and caused most of the property damage in vacant apartments, which they took over during night-time hours.

But a landlord can’t evict individuals from an apartment, so Shayfar had to evict the entire family.

With police assistance, Shayfar was able to determine which units housed gang members, and he began eviction proceedings. “There are parents who are the loveliest persons you would ever meet,” he said. “But we went to them and said, ‘You have a gang member in the family, and you’re not welcome anymore. You have 30 days to move out.’ ”

For the most part, the tenants did not resist.

It took about 60 days to complete the evictions. Then Shayfar had to begin the renovations. Gang members had taken over the vacant apartments in the building, using them for parties and drug dealing. The carpets were burned. Appliances, windows and closet doors were broken.

It took about $50,000 to finance the security guards, install new lighting and clean the exterior of the building. Each unit cost another $4,000 to $5,000 to repair and renovate. And while Shayfar was going through the process, rental income, due to the vacancies, was reduced considerably.

Shayfar is confident that his efforts will pay off, and at least one other apartment investor agrees. But he adds that it takes time and money.

“It’s all expensive,” said Richard Burns, co-owner of Rancho Equities LLC, a company that has acquired eight troubled North Hills apartment buildings in the past year and a half. “It’s a matter of putting up the investment necessary to accomplish these goals.”

Burns bought one building recently for $745,000, and he invested another $280,000 to upgrade it. He figures it will take about five years to recoup his costs, but he intends to hold onto the properties. “Everything we bought, we’re buying for long-term investment,” he said. “From a business point of view, if it’s possible to acquire properties and then the area improves, the clear fallout is that property values will go up.”

Too costly to renovate?

Many other landlords don’t have the financial wherewithal to ride out the time needed, said Kinga Lovasz, the owner of Maximum Property Management Inc., which manages a building notorious for its history of gang problems on Orion Street in North Hills.

The building was just acquired by a new owner who has put $2,000 to $3,000 per unit into renovations, but Lovasz said most landlords don’t make that kind of investment because the income they generate without improvements outweighs the cost of making changes.

There is a ready market of tenants for C-class buildings that rent for $400 to $500 a month, Lovasz said, and these buildings are typically fully occupied. But when a landlord renovates, and rents are raised to cover the expenses, it can often take longer to find tenants able to pay the higher prices. “Even $20 (a month) is a big difference,” said Lovasz. “People aren’t willing to pay the price.”

Pressure to keep the units rented often gets in the way of treating the problems, said the LAPD’s Paniccia. “Every landlord wants to have a full apartment building. Because of that, there’s an incentive to take the first person who walks through the door because his hair is cut and his fingernails are clean.”

Paniccia, who organized an all-day seminar for landlords in North Hills when he first assumed his current post about a year ago, said recruitment strategies are key to keeping buildings gang free. “Once you get it cleaned up, you can’t relax your recruitment standards.”

Shayfar has taken that advice to heart. Currently in the process of renting his newly renovated units, he is carefully scrutinizing applications. “We go through them with a microscope,” he said.

In addition to the customary credit and employment reference checks, his property manager actually visits the current homes of potential tenants, and asks to see the children “to see if they’re dressed nicely or if they have a (gang) tattoo,” Shayfar said. “Cleaning up a building is not that difficult, if you have the help of the police.”