Cash Flow Multi-Family in LA

[Jeremiah Vancans]

I'm trying to find a cash flowing rental property in LA and having a hard time finding one.  Is LA just an appreciation play?  Curious if any of you have rental properties in LA and how much cash flow I should aim for per door.  I would like to invest locally if possible and would even consider buying within a a few hour drive.  In LA I am realizing the following:

-I would have to put a large downpayment to make it work

-Most properties have tenants paying well below market rate and with LA rent control laws it would be expensive to pay cash for keys

[Nadem Mogal]

The challenge of looking for investment property in Los Angeles is the sub-par return. Cap rates typically don't go above 5%. At this rate, you would need to put down 35-40% to break even in terms of monthly cashflow, with a slight cushion for some minor repairs and occasional vacancy.

Another challenge is the acquisition cost: typically $200k per door, which could go up to $300-350k/door in desirable upper-middle-class areas. For this much money, you could get 4-plexes in many major markets of the country.