Closed My First Buy & Hold in Los Angeles

[Ryan Rodriguez]

BiggerPockets Family, 

I want to share with you all a quadplex deal I closed back earlier this year in East Los Angeles.

About the Deal:

Property was listed on the MLS for $615k. Each Unit was 700Sqft with 1 bed/bath. The property also had a detached 4-car garage and a laundry room. I initially put in a offer for $630k, but was outbid by another all cash buyer and placed as back-up offer. A week later, the first offer fell through and they accepted my offer! When I first visited the property, I can tell the owner had neglected to keep the property updated and let the tenants run things. The owner was 80 years-old and had the property all paid off(dealing with a very motivated seller). All units were rented well below market rent and I realized this would be a great value-add opportunity. I ended up negotiation the purchase price to $595,000.

The next day, I went knocking on each of the tenants door notifying them I was the new owner and giving them a 60-day notice for an increase in rent. I ended up having one tenant leave one month at a time. This was great for me since it allowed to renovate each unit one at a time without making me pay the entire mortgage payment each month. Overall, I spent about $40k in renovations and have brought all units to market rent. All the tenants now living at the property have been screened by me and are absolutely wonderful. I am now collecting $5k in rents per month ($1350,$1350,$1100,$1200). Currently cash-flowing $1,645 a month with a 20% down payment. My cash-on-cash return is 11.2% (which I believe is great in the LA area). I hope this deal show folks that it is possible to invest LA. I bought this property at 23 years-old working as a full-time financial analyst in Santa Monica. I also have my real estate license. Please reach out to discuss more!

Please see below the property analysis:  

[Ray Lai]

@Ryan Rodriguez
Welcome to BP!

Awesome breakdown of the numbers, those are sexy. Getting 11.2% COCR is outstanding in LA... doublecheck the numbers though. It's great seeing real estate change hands from a motivated 80 year old to a 23 year old hustling in the city. Nice job getting that real estate license. I'm guessing you bought MLS? Any plans on keeping the pipeline flowing to add more to your portfolio?

Couple of ways to improve the accuracy of your numbers:
Consider adding vacancy as a % (typically 5-10%) because it's impossible to keep all unit 100% rented
Need to add CapEx for your future big costs (roof, HVAC, etc)
Considering adding a reserve for any other unexpected expenses.

Keep up the good work!