4-Plex in Compton, CA

[Max Valdes]

Hello - currently me and a partner are having discussions over a property that is for sale in the area of Compton, CA.

I will provide the numbers about as accurate as I have them. 

The units are on a main street, sits on about .5 an acre.

Asking price is 575,000 

4 units

Unit A: 3 bedroom/1bath -- Rent is 1400 per month

Unit B: 2 bedroom/1bath -- Rent is 1150 per month

Unit C: 1 bedroom/1bath -- Rent is 840 per month

Unit D: Studio w/kitchen & Bath -- Rent is 675 per month

all units have their own gas/electric meter.

Additional costs:

Insurance per year ~ 1200 per year

Trash per year ~ 4300 per year

Water ~ 4300 per year

Taxes ~ 7000 per year 

Gross income: 4065 per month

insurance + trash + water+ taxes ~ 1400 per month

gross income - (insurance + trash + water + taxes) ~ 2665$ left over per month. 

Assuming we do 20% down (115,000$) - principal and interest come out to be ~ 2300 per month.

So assuming no repairs, no vacancy 2665 - 2300 = 365 left over. ( Yes, assuming no vacancy, no repairs is outright stupid).  

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Now, doing conventional 20% down is absurd. 

FHA 3.5% down -- number looks as follows. If we were to get it, we would likely get the 2 bedroom 1 bathroom spot delivered vacant ( Lets assume for arguments sake that the place passed FHA inspection)

Principal + Interest + PMI ~ 3100 per month

Since we would occupy the 2bedroom/1 bathroom spot...

Gross income would be ~2915

Gross income - (Principal + Interest + PMI) = -185$ Since we are each living in one bedroom this cost would be split 50/50. No problem there. 

Now, we also have to cover insurance + trash + water + taxes -- which from before is about 1400 per month.  Now we have to cover ~1600 per month. Same as before, this would be split between both of us, 800 each. 

( Yes, I know, this also assumes all tenants never vacate, always pay -- and this situation does not occur.)

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Intangibles: 

Just some things to note, both the property on the left and right ( east and west) are same/similar sized lots that are apartment complexes. In the future, this property could be torn down and eventually build a 10 unit complex in its place. (Just an observation)

Very close to public transportation light rail line. 

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My partner and myself have completely different views on this property. One of us believes this is a deal. The other believes that this is a pass. 

I am curious to see what fellow BP people think about this. I would like to give my impression of the property and I will give my partners impression of the property - but I do not want either of our views to influence your thoughts. (EDIT) We have walked the property, but did not see the inside of the units.Will gladly provide his and my opinion on it once this post gets some traction.Will gladly provide his and my opinion on it once this post gets some traction. 

Thank you very much! 

( and if you are in the south bay, LA area -- Private message me, we would love to pick your brain/have a coffee/drink)