Please rate my deal- 8 units in Long Beach 4.8% CAP

[DongHui Patel]

$2.415M Purchase Price

Down Payment: $750k (including closing costs)

70% LTV

Area: C  but gentrifying 

Condition: B- 

Potentially subject to LA COUNTY RENT CONTROL 3% cap. But historically raising 6-10% annually. 

Rental Revenue (At Market)= $195k Annual (excluding vacancies/bad debt/concessions)

              Vacancies: 5%

              Bad Debt assumption: 1%

             Concessions: 0.5%

I am assuming that expenses are running: 

12k for property management

30k for taxes

10k for maintenance and repairs

6k for insurance

7k for utilities (not reimbursed)

4k reserves

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69k total expenses

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Net operating income: 116k

After debt service and capex reserves, I am assuming net income would be around 5k annual for the first year. Going up thereafter.

I am concerned with 

1) Do these cash flows make sense at all? Considering it is in CA. CoC = 1-2% to start with with a conservative Pro-Forma.

2) The minute the rent control comes into place the deal starts to make no sense. 

3) There is a value add play to create 2 new studio's here- ADU's in garages. Additional $1600 per month rent per ADU. I dont know if the city will ever block these.