The first Baldwin Village apartment building that business partners Joe Killinger and George Pino considered buying was infested with gangs, and broken bicycles rusted in a swimming pool with stagnant green water.
It was perfect.
The partners were looking for a Petri dish for their new company, Learning Links LLC, to test the idea that landlords in poorer neighborhoods can increase their profits by converting one unit into a learning resource center essentially a mini-library with desks and computers and steeply discounting another unit for a school district teacher.
When Killinger came up with the idea a couple of years ago, he believed residents with children would take greater pride in their buildings and that would result in families staying for longer periods.
He hypothesized that the resulting lower maintenance costs, vacancy rates and turnover would more than make up for the units taken off the market and bring in better returns.
"At first I thought he was off his rocker," Pino said, "but after I started crunching the numbers I found under the right conditions it was possible."
Not only has it worked, but the Learning Links model is shedding 12 percent returns to its investors better than Killinger and Pino had imagined. "Not bad for apartment buildings in L.A.," Pino said.
Maintenance costs, on average, have fallen by 12 percent and average turnover is down to 1 percent compared with a 3 percent average in L.A. County. When there is a vacancy, "we get four applications before it's ever listed," Killinger said. "We get word of mouth, people want to be in our building. Vacancy is not a factor for us."
For decades, public officials and non-profits have grappled with attracting private investment to poorer urban neighborhoods, but there have been few success stories. Even in the last five years of explosive residential real estate development, much of the activity has skipped neighborhoods south of the Santa Monica (10) Freeway.
But if Learning Links can show there is money to be made by investing in these areas, other real estate investment companies may begin buying and renovating dilapidated apartment buildings.
"Once you get one landlord to participate, others see the better area they could live in," said LAPD officer Brian Richardson, who patrols in Baldwin Village. "We hope it will rub off."
For the first apartment complex, Killinger and Pino used their own money to buy the $2 million building, figuring banks wouldn't bet on their experiment. Since then, the company has recruited several private investors, including DBL Realtors founder Alan Long, and it has expanded its holdings considerably.
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