Buying a multifamily in socal anyone?

[Arvin T.]

Did anyone ever bought a multifamily in southern California as their first investment? 

[Matt Mason]

I actually purchased my first rental property, a 4-plex in Koreatown in 2011.  This was right about the time I started logging into Biggerpockets.  Most people would have told me not to buy it, but I am glad I did as I don't have time to deal with properties not near me and I felt LA properties were kind of a bargain at the time even though they were comparatively expensive to places in the middle of the country.  It did cash flow immediately after accounting for capital reserves, management fee, repairs and vacancy and so forth, but barely.  However, rents have soared and the place was previously mismanaged some.  I ended up buying another triplex in 2013 and did some rehab work that added quite a bit of rental income and value.

SoCal properties, especially those in LA have some pros and some cons.  The pros are:

1.  There are quite a few 4-plexes as much of LA was developed in the 20's when these were popular to build.

2.  There is basically no vacancy if you are a decent manager

3.  You often get good professional tenants, because in LA people with even very good jobs can't easily buy a house.

4.  The mild weather takes a smaller toll on roofs and property and you don't need big HVAC systems.  Most of my units do not have A/C and only basic heating units, which is common.

5.  Lots of opportunities and ways to increase rents.  If you do nice renovations you generally get paid for it if you are in the right neighborhoods.

6.  It is easy to sell your property when you need to exit.  Tons of buyers unless you overprice.

7.  Prop 13 is a huge benefit that few people really appreciate.

Cons are:

1.  It is hard to get in as you need a lot of money, especially considering that you need big money to renovate to.

2.  It is harder to score a great deal and competition is fierce for properties.

3.  Properties tend to be older, so when you do a rehab you often need to replace electrical, piping, etc...

I think newbies look too much at the current rent ratios cash flow and not enough on the vision for adding value and increasing rents.  It is like buying a stock solely on the basis of its dividend yield.  You gotta dig a lot more to really see if it is a good investment.

If you buy well located CA property in a downturn you will do very well.  I grew up in a nice  middle class area but it was near a very wealthy area.   Many of the people here had made their money in real estate.  I wanted to be more like them and not so much like my Dad who was the last one in the neighborhood to come back home from work every night.  Many people say that was a product of the 70's and 80's and can't happen again, but they are proven wrong again and again from people who bought during the downturns of the 90's and 2009-2013.