multifamily properties in the Los Angeles area for purchase

[Bill Bruno]

I'm new to real estate investing and would like to find out more about opportunities to purchase multifamily properties in or just outside of the Los Angeles area. I am also interested in learning more about hard money loans.

[Aristotle Kumpis]

Hi Bill. Welcome to BP, and to investing. What are your long term investing goals? I think that's the most important thing when starting out.

[Bill Bruno]

Thanks Aristotle.

My long term goals are to acquire several multifamily properties or apartment buildings to allow for a monthly passive income ($5-6000/month). I currently work as a physician and plan to retire within 15 yrs.

I appreciate your input and any other advice you may have for me to reach my goal.

Thank you

[Larry Fried]

@Bill Bruno

Hi and welcome to BiggerPockets! It’s a great place to learn more about investing and meet the people you want to meet. If you haven't yet, be sure to check out the The Ultimate Beginner's Guide to Real Estate Investing and don't forget to set up your Keyword Alerts!

[Bill Larsen]

@Bill Bruno

Hey Bill!  I'm a Bill as well.  I've been buying in the Long Beach area... We've found it to be a very strong rental market and we try to stay out of rent control areas.  I'd be happy to share our strategy with you if that would be helpful to you at all

[Bill Bruno]

Bill,

Thanks for your response.

I'd love to talk sometime about your experience in Long Beach and with multifamily properties in general.

Any help would be most appreciated as I am just getting started in real estate investing.

Thank you,

Bill Bruno

[Lee L.]

@Bill Bruno Generally, with cap rates the way they are, properties in CA do not cash flow as well as those in other states, unless you put a substantial amount down, northward of 30% - 35%. There are properties that do cash flow ok with the standard 20% - 25% down, but they're generally in C - D neighborhoods such as South LA. There are plenty of people who make a killing by working these neighborhoods. It's just not my cup of tea. 

But in L.A. where rent control depresses rents, you can get properties to cash flow great if you have the cash up front to pay the tenants the relocation, which can range from around $7,800 to as high as $30K+ per unit, depending on whether the tenants are "qualified" or "eligible", and whether they know how much their unit would be worth vacant. Usually, the relocation will be around $10K - $20K per unit. See document this document from city for rules. details: http://lahd.lacity.org/lahdinternet/LinkClick.aspx...  If you're goal is to adjust the rents to market through relocation, you'd want to negotiate "cash-for-keys" and not do it through the city (the document shows you how to do it through the city. However, tenants will generally use the numbers in the document as an anchor point for negotiation). 

Once you pay the relocation, you can put in new tenants and adjust the rents to as high as the market can bear, something on the order of $1,800+ all day for an outdated but functional 2 bedroom. Additionally, you can reposition the unit by adding high-end finishes, laundry machines, dishwashers, private patio areas etc. to make it more appealing, and thus charge even more, something on the order of $2,300 - $2,800 per unit. This strategy works great for gentrifying areas where a slew of high-income people are suddenly finding the area "hip" and willing to pay top dollar even though the schools aren't necessarily nice and there are still bars on windows (East Hollywood, Echo Park, Highland Park for instance). Additionally, much of the existing housing stock has not been updated for a while due to having long-term tenants. Therefore, there are many repositioning opportunities. 

I invested in an income property in Silver Lake last year and have repositioned the main 3-bedroom unit, and have been helping buyers look for similar properties. Numbers look great so far. Get in touch if you need more info!

[Ben Stoodley]

Hi @Bill Bruno,

I'd be happy to share a few tips on finding a HML. Here are a few points I would focus on:

• Origintion Points/Interest: pretty basic here, you can get each lenders basic interest and origination point charges very quickly to begin
• Junk Fees: most lenders charge many extra fees, around $1500-$3000 per deal on average. All these are typically unnecessary. Make sure to ask each lender for ALL fees paid at close (nothing paid up front)
• Prepayment Penalty: be sure to check and confirm there is no prepayment penalty if you were to pay the loan off early. 
• DIRECT: my most important tip would be to use Direct lenders only, not a broker. Sometimes companies will refer to themselves as direct but in reality they need to confirm with their investors before closing the loan. Be sure to ask where the money comes from, who the actual check writer is and how quickly they can close. Closing should be doable within 5 days. 

Hope that helps, good luck!

-Ben

[Dmitriy Fomichenko]

Welcome to BP community @Bill Bruno It is a great place to meet new friends and learn about various aspects of real estate and more. 

Wishing you the best! 

[Brandon Turner]

Hey @Bill Bruno thanks for jumping in and introducing yourself! If you haven't yet- be sure to setup some "Keyword Alerts" to get into conversation in your target area.

Seeya around!