Duplex portfolio in South Los Angeles- Cash Cow!

[Melissa Johnson]

Investment Info:

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

Purchase price: $4,640,000
Cash invested: $1,431,244
Sale price: $6,200,000

Purchased a portfolio of 8 duplexes in South Central Los Angeles (each unit was 5 beds/3 baths). Rented to Section 8 and transitional housing tenants - CASH COW. Cash flow was about $220k per year, sold for a massive profit 4 years later.

My investors needed to cash out, so we sold in 2019.

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

We were investing for cash flow in the tight Los Angeles market, and it delivered! The appreciation was the icing on the cake.

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

I worked with an agent who found this deal through their Commercial contacts.

How did you finance this deal?

Investor money and a loan from Umpqua Bank. My investor had an existing relationship with Umpqua.

How did you add value to the deal?

These were all turnkey. We used a property manager who was VERY familiar with working with the type of tenants that come with owning property in South LA.

What was the outcome?

Massive profit from appreciation, great cash flow in the time we owned them.

Lessons learned? Challenges?

Transitional housing tenants are RISKY. We ended up having to evict the tenants of one of the duplexes, vagrants moved in, and it was a night mare. We ended up having to spend $200k for rehab because they destroyed the house and we had to have 24 hour security to keep them out. Luckily insurance covered almost all of the cost, but it was a giant time suck for me. Tenant screening and a good PM is KEY in investing in riskier markets.