2017 Los Angeles Duplex Case Study

[Chase Alison Matthews]

Investment Info:

Small multi-family (2-4 units) buy & hold investment.

Purchase price: $550,000
Cash invested: $185,000

Owner-occupied duplex. Would cash flow $1800-$2000/mo if we rented out the owner's unit. As is, rents cover 82% of the mortgage, limiting our cost of living expenses significantly.

Because we occupy one unit, we improved the property differently than if it were a straight up rental. We've added solar to the whole property, whole house water filtration system, drought tolerant landscaping and tankless water heaters.

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

We are performers, and performers have very irregular income. We wanted to limit our cost of living expenses to mitigate this issue, and the best way we found to do that in LA was to buy a multi-family property and live in one of the units. Our ideal property was one with at least 1 vacant unit.

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

In 2017, South Central LA was only just starting to get hot. We found this property doing our own legwork and were able to make an offer that got accepted. Though we found the property on our own, we did have an agent negotiate the deal and were able to close in 30 days. This property had just been rehabbed by a flipper and was totally vacant, allowing us to occupy one side and find the perfect tenants at market rates for the other side.

How did you finance this deal?

30-year conventional financing.

How did you add value to the deal?

We improved the property as an owner-occupied, not a straight rental, so we did spend more. Total improvements were $80,000.

What was the outcome?

Our property just appraised for $770,000, more than $200k over what we bought it for 2 years ago.