CA prop 10 opinions

[Jonathan Taylor]

Hi BP folks, I live in Los Angeles and have been putting offers in for fourplexes but prop 10 has me wondering if I SHOULD by as big as I planned. For those who don’t know, prop 10 would limit landlords ability to raise under market rents and basically cut landlords at their knees. So my questions are: 1. For existing socal landlords, what is your opinion on this bill and what are you doing to mitigate risk IF it passes? 2. Should I stay small, buy a duplex and move my money OOS or continue and hopefully close before/if it passes? Any and all thoughts are welcomed. Thanks JT

[Mike D'Arrigo]

Not only will Prop 10 effect rents and cash flow, it's going to effect property values. Multi family properties are valued on their cash flow. When rents are held down, property values will be deflated also. 

[Jonathan Taylor]

All great points made here. Worst case scenario, if Prop 10 Passes it wont take effect until July 2019. This is from other investors in LA who have ridden out other laws that affect landlords abilities. So basically if you can get something under contract and up to market before then, hopefully you can ride it out. 

Im currently under contract on a four plex and planned rehab will take me until April. Fingers crossed Prop 10 does not pass.

[Bobby Nilsen]

@Ali Boone @Justin R.

This property cash flowed for us after stabilizing it, never mentioned it cash flowing after being sold for $2m. We purchased it for $1.2m and with those crazy rents it’s tough to see how it couldn’t cash flow. Ali asked about a property that cash flows in CA and I said it would have if we kept it, I actually think it cash flowed on hard money. 

[Justin R.]

Originally posted by @Bobby Nilsen:

@Ali Boone @Justin R.

This property cash flowed for us after stabilizing it, never mentioned it cash flowing after being sold for $2m. We purchased it for $1.2m and with those crazy rents it’s tough to see how it couldn’t cash flow. Ali asked about a property that cash flows in CA and I said it would have if we kept it, I actually think it cash flowed on hard money. 

In that case, I agree.  Free cash flow in urban California has to be earned, not bought.

[Ali Boone]

Originally posted by @Deshawn Aaron:

@Ali Boone hey Ali I hope all is well. Do you mind sharing why you purchased the duplex for other reasons than cash flow?

Sure. The plan is to hopefully get to a cash flow point with it as soon as possible, but it's a long-term investment and I plan to eventually live in one of the units. So it's a long-term home for me and with where it is in Venice, there are a million exit strategies for it and lots of rental options if need be.

[Deshawn Aaron]

Great thanks! 

[Ali Boone]

Originally posted by @Bobby Nilsen:

@Ali Boone @Justin R.

This property cash flowed for us after stabilizing it, never mentioned it cash flowing after being sold for $2m. We purchased it for $1.2m and with those crazy rents it’s tough to see how it couldn’t cash flow. Ali asked about a property that cash flows in CA and I said it would have if we kept it, I actually think it cash flowed on hard money. 

 You didn't give any numbers with the link, so all I saw was the $2M tag.

[Amit M.]

@Ali Boone hope that Venice investment works out for you, and that you don’t regret it years from now ;)

(Crazy costal California investors)

[Ali Boone]

Originally posted by @Amit M.:

@Ali Boone hope that Venice investment works out for you, and that you don’t regret it years from now ;)

(Crazy costal California investors)

Lol. I agree on the crazy part! But no, I won't regret it. Too in love with it (I mean, not that I as an investor would ever put emotions into an investment property...) ;) And lots of exit strategies should I need one.