Cash flowing SFH in Los Angeles

[Richard Mercado]

Investment Info:

Single-family residence buy & hold investment.

Purchase price: $600,000
Cash invested: $5,000

Purchased this 3/2 SFH in 2014 as our Primary residence. 7 1/2 years later the value had doubled and we were ready to relocate. Fortunately having great tenants and low maintenance costs has allowed It to stay cashflow positive, which in CA can be a real challenge.

What made you interested in investing in this type of deal?

This was originally purchased as our Primary residence.

How did you find this deal and how did you negotiate it?

Our Real Estate agent found this as a pocket listing fro a prior seller She had worked with. This allowed us to avoid having to compete with other offers.

How did you finance this deal?

Conventional financing.

How did you add value to the deal?

Time. 7 1/2 years of appreciation and regular maintenance added tons of value to this property.

What was the outcome?

Being that rents had increased greatly over time and interest rates were at an all time low we decided to refi and keep this as a cash flowing rental property.

Lessons learned? Challenges?

The challenge was in relocating and finding a quality tenant quickly, to be able to use the new lease as income towards my DTI ratio. The timing was tricky on this one but it all worked out in the end.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

My Realtor Brad Gilboe at BWG in Los Angeles did a tremendous job of pulling it all together for us.

[Steven S.]

Brad Gilboe didn't rep you on the buy or sale on this one, the listing agent Jayme Colon repped the seller and you. Why mention Brad on a deal he didn't partake in?

https://www.zillow.com/homedetails/5907-Yarmouth-Ave-Encino-...

Anyways, yes you got great appreciation on this one! But so did everyone who bought in the 2010's... As for how it currently performs as a rental, I ran my numbers for fun:

With my estimated $4,200/mo rent, you seem to be holding this at a 5% cap, but your Cash-on-Cash is rather low, only 2.6% CoC return after paying your mortgage (doesn't beat current inflation).

Looks like you should capture the appreciation now by selling it, and either 1031 those funds into a more-profitable project (something 5%+ CoC), or just put the money in a 5%-yielding money market account because values are basically at their all-time peak:

Are you yielding much more than $400-500/mo in CF after paying the mortgage, taxes, insurance, & utilities/maintenance? Curious why you'd hold this when you can capture the value from the appreciation and use those funds to make 2x as much CF return. Heck even $190k (your equity-in) in a 5% Money market account would yield you ~$800/mo without any work or risk on your end.