4-Plex Coded as SFR - Try To Buy?

[Marie S.]

Hi! I've been 'trying to buy a multi family for the past two years' and a few months ago after being referred to BP I realized what I really want to do is 'invest in real estate'. So now I feel like I'm starting from SCRATCH with my new words like NOI, ROI, COC, etc.

My issue I'm curious about, is I found a GORGEOUS (my price range is normally ghetto to gutted) 4plex for sale at a reasonable price. But it's been on the market forever because it's actually a SFR! The owner was/is a contractor and coded things as part of the main house, or 'laundry room' or 'turkey shed' to get them built, but none of them are honestly coded.

If I can figure out how to get private funding or alternative funding of some sort (price is too high for anyone to loan as a SFR), is it a good idea to buy it? The cash flow numbers are the only positive numbers I see in LA, so I KNOW it'll make money. But will the rents be legal?

CA enacted the Accessory Dwelling Unit law that says any SFR can have a 1200sq/ft building as an ADU, and I called the Assesors office and he said I could most likely get one of the buildings coded as an ADU BUT that may require ripping out the 2nd kitchen in the 'main house', which is a deal breaker. I don't care about the 4th unit because this would cash flow w/ just the main house/duplex and ADU.

I'd offer $850k
rents if legal would be conservatively $7900 minimum, more likely $8500 (plus could AirBnB the 1/1 or have mgr live there rent free)

Income: $7,900 (7426 after vacancy savings)
CapX: $2,952.50
PITI: $3,984.71

Cash flow: $488.79 - $1,168.58 (AND MORE if I Airbnb the 1/1!!)

All professionals I've spoken to say stay away because it's a SFR. But there's literally nothing I can afford that cash flows in LA, and it's so pretty.. Do I need to drop it?

Thank you!!!

[Manolo D.]

Marie S. yep. move along.