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Yep, here is a Los Angeles deal for you to take a look at. I know LA is a crazy expensive place, but I might be crazy enough to even look at deals here. So advice is welcome! What am I missing here?
@Vanessa Ganaden Vacancy of 3%, maybe ,highly localized. Only 1 of your units can be vacant per year. Repairs at 5% look good. Capex at 3% looks low. Since I don't know the size of your units i will assume their is a total of 3000 sf of flooring. In my area it costs $6 sf to replace. 3000 sf*$6 sf=$18000/8year life span/12 months in a year=$188 per month for 1 item. I don't know if the garages are separate so you might have to budget for 2 roofs 25 life span (unless flat then only 15 years), appliances and hot water heater 12 years, hvac 20 years, and I could give you more that you need to budget. Garbage for 3 units and only $50 per. Insurance on $800 k for $100 per. Management for 5% is unheard of more like 10% or more. Since you don't list water and sewer I assume there are separate meters and lines. No utility expense, No lawn or groundskeeping expense. You might want to rerun the numbers again.
Realtor · Los Angeles, CA · Member since 2018 · 952 posts · 1k+ votes
6y
@Vanessa Ganaden, as a fellow Angelino, I know any deal in LA that cashflows in a decent deal!
The 5% property management fee is low; are you getting a deal because you're a broker? Have you considered managing yourself?
Also, where's the unit? $1600 for a 3/2 unit seems really low, even in East LA. Is it a longterm tenant? Have you exploring relocating?
As you know, appreciation in LA is a lot higher than in other parts of the country. Historically over the last 40-some years, LA has *averaged* 4.2% annual appreciation. That's what makes investments in LA good -- the appreciation!
Yes, I'm planning to manage the property myself. And the $1600 is what the current tenant is paying for. The pro-forma rents are a lot higher than that. I've re-ran my numbers based on @Tim Herman suggestions, basically being very liberal with my capex, vacancy rates (although LA sits the lowest in the country for 3.3% vacancy rates), maintenance, and utilities. After modifying it with really high expenses, I will still be cash flowing at $250/month. But any cashflowing property in LA, like you said, is a good deal. But also hard to come by. So I'm becoming suspect if I actually found a good deal, or just missed something here. The latter might be more likely though as I'm a brand newbie at this :p
Realtor · Los Angeles, CA · Member since 2019 · 26 posts · 14 votes
6y
@Account Closed Really good points. Thank you for pointing them out. I didn't even think about the rent controls. The more I dug about it, the more horrifying the rent control caps are here in LA. I mean, good for tenants, terrible for us. This deal will be pass for me.