Is anyone buying multi-family in Los Angeles or Long Beach?

Question

I'm looking in the Long Beach area of Los Angeles County for a multi-unit apartment. I like Long Beach because there's no rent-control and apartments are more affordable at 125-190k per unit than most areas of Los Angeles.

Are there any investors out there currently looking or have recently purchased a 8-20 unit in LA or LB areas?

It has been hard to find any good value-ad properties in the area.  I've been scouring Loopnet, and the MLS for a multi, but not many have met my criteria.

Does anyone know about the long-term outlook for long beach housing?  It seems to have a lot of apartments, that are definitely lower rent than most areas of Los Angeles.

Does anyone think that Long Beach is over priced already or are there any major issues with Long Beach that long time investors have noticed.

(I've also been looking into Lakewood, Downey, Bellflower, Paramount, and some parts of Northeast LA like highland park, cypress park, chinatown, downtown LA adjacent areas, el sereno, USC area, Boyle Heights and lincoln heights--but the rent control in LA City screws up a lot of those deals.  I've focused my search primarily in Long Beach, but would be willing to venture out)

Thanks.

Ethan Vegas · Answer

@Bhavesh Patel,

Remember that when it comes to multifamily investments (@Will F.is looking for 12-24 unit buildings), "pricing" is a relative term.  It's all about finding value in the Net Operating Income, or the profit that is made each month before you make debt payments.  If through sound management you're able to increase that NOI on a monthly basis (even nominally), it will have a profound impact on value, especially in a low CAP rate area like LA/Long Beach.  For example, if you have a 24 unit building that is under rented by $100/mo/unit, and you could find saving of $50/mo/unit through some kind of operational efficiency (stream lining service calls, renegotiating with vendors, etc.), you would improve annual NOI by $43,200 ($150/unit x 24 units x 12 months).  Assuming a 5% cap rate (not sure if this is accurate), the $43k increase in NOI equates to an increase of $864k in value.  Whether or not it cash flows is another matter.....

Bottom line, low CAP rates are an obstacle when you're buying (especially for the first time), but are your best friend when you're selling or refi-ing!

The underscore to the bottom line is that "good deals" are not found in the asking price, but in the NOI.

Hope that helps!

Ethan Vegas · Answer

@Will F.,

I think that NELA overall has a lot of opportunity.  Areas like Silver Lake and Echo Park will continue improving.  Highland Park and Eagle Rock are a little later to the party, but maybe have more upside to go.  I don't know Atwater or Lincoln Heights block by block, but I've heard good things about both neighborhoods.  I'm most active in Pasadena, which has been improving for a long time.  It has a higher entry price, but there are plenty of multifamilies that are under rented and mismanaged.....lots of opportunity!

Kelly Adcock · Answer

Hi, Everyone:

I am a Realter with Keller Williams, in Long Beach, and would be more than happy to assist with your searches.

Ethan Vegas · Answer

Hi @Will F.,

I'm not as familiar with the Long Beach or SE LA markets, but I'm a property manager in the Glendale/Pasadena area.  I definitely concur that it's worth going outside of the city of LA to avoid rent control unless you find something in the city with a lot of upside....even then, be careful!

I know that there are a ton of apartment units in Glendale/Pasadena with some upside either through improving operations or repositioning.

-Ethan

JASON HURST · Answer

Investing in California right now may be a great idea.  In most states investing in small complexes with purchase costs under $1,000,000 buyers end up with higher interest rates and limited options.  But in California and Florida that's not the case. As a side note though, why do so many investors put so much emphasis on cap rate rather than whether or not an asset cash flows?  Cap rates never remain steady anyway.  They have an importance but won't really be able to be the determining factor of whether or not to purchase.

Jeff B. · Answer

Be sure to review the demographics of ANY location before you jump in. Investors are want to move om good deals (whatever criteria you use), to later discover issues with the quality of tenants in that area, employment issues, and  or crime rates.

Your satisfaction with the deal will be tainted by more than just the deal & the closing.

Jo-Ann Lapin · Answer

Long Beach has always been more of a transitional rental area. Close to OC and close to LA. Things are really different nowdays in Long Beach as the convention center is there the aquarium etc. . I like the fact that there is no rent control. However Long beach can get really dicey in some areas. It all depends on your long term or short term plans. Also keep in mind that you are not competing with a lot of new construction, so this make everything in the neighborhood that is old real attractive to value add as well as Lakewood, Buena park etc. I hope this helps.

Manolo D. · Answer

@Will F. Might be around $90-120/sf fully built plus land.

Will F. · Answer

The multifams that I'm looking at vary from $100k per unit up to $200k per unit depending on area, building, and other factors

Will F. · Answer

I'd consider that @Manolo D.  I'd have no idea if that would make sense as how much they would cost per modular-fully zoned, planned, and built ...what were u thinking off the top of your head?

Is anyone buying multi-family in Los Angeles or Long Beach?

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