$2.35 Million Triplex in Los Angeles

[Hassan E.]

Looking for some input on this deal I'm looking at in Central LA.  We've been saving a while to be able to invest in a new construction multi-family.  Plan is to house hack for 2-3 years and then rent for full rents.  Would you do the deal below?

Purchase price:  2.35 Million

Loan: 15%

Rate: 3.375%

Location: Central LA, Picfair.  I'd call this a B area, but let me know your opinion.

Rents: $13,700

This is a new construction triplex, 3 units with 4 beds/4 baths.  Projected rents are $4900 for front unit, and $4400 for the back units.

What's your opinion on this deal?

[Jon Schwartz]

Originally posted by @Hassan E.:

Looking for some input on this deal I'm looking at in Central LA.  We've been saving a while to be able to invest in a new construction multi-family.  Plan is to house hack for 2-3 years and then rent for full rents.  Would you do the deal below?

Purchase price:  2.35 Million

Loan: 15%

Rate: 3.375%

Location: Central LA, Picfair.  I'd call this a B area, but let me know your opinion.

Rents: $13,700

This is a new construction triplex, 3 units with 4 beds/4 baths.  Projected rents are $4900 for front unit, and $4400 for the back units.

What's your opinion on this deal?

Hassan,

Don't listen to the "pure speculation play" talk from out-of-staters. Picfair Village is a rapidly improving part of Los Angeles, and new construction isn't burdened by rent control.

Will you manage the property while living in it? If so, I think it's a fine deal.

While you live in the front unit, the back units will cover your entire mortgage payment. You'll be on the hook for taxes, insurance, maintenance, and vacancy. Maintenance won't be much, and capex should be nonexistent. If you have capital in reserves to survive a month or two of vacancy, I think you'll be in good shape.

In 2-3 years, since this property isn't under rent control, you'll definitely see at least 5% rent appreciation, if not more. When you move out, the property will cashflow.

It's an appreciation play, but it's one that will allow you to live in a 4/4 in a good neighborhood at a good price, then cashflow while the neighborhood continues to improve. For LA, based on what you've shared, it seems good. I'd be curious to know where exactly in Picfair this property is.

FYI, I'm househacking a $2M duplex in Hancock Park right now. Very similar plan: low cost of living while we're here, cashflowing when we move out, and enjoying the slow and steady appreciation over the next decade or two or three.

Best,

Jon