Investing in commercial real estate in Los Angeles

[Ejy Mirjan]

I’m looking to invest in commercial residential real estate in Los Angeles. Basically looking for apartment buildings of nine units or more. But, I am priced out of most investments, considering that I am looking to invest in the LA market. 

I would love to hear about strategies and advice that you might have for me. Thank you!

[Rick Albert]

You have two challenges with commercial real estate in Los Angeles. The biggest challenge is rent control. You could be acquiring a property where tenants are paying grossly below market rents and eventually you will only be able to raise rent based on the Consumer Price Index (typically 3%-4%). This can prove to be challenging. 

The second concern is financing. Right now if you read the news you will notice that many of these commercial owners are going to be in hot water because they have to refi every 5 or so years. This means you have to go with the new interest rates, but the rents may not have caught up.

If it were me and I really wanted to invest in LA Commercial, I would be digging into Seller financing.