All Forum Posts by: A Bee

Hello BiggerPockets members!  Thanks for reading this post, very much appreciated.  If you're able to give advice on this subject, thank you!  So I am in escrow on an 18 unit apartment building in the City of Los Angeles.  The building is rent controlled (RSO).  The on site manager, who I met and am not so fond of continuing with, occupies a 2 bedroom/1 Bath unit and according to him, does not pay rent in exchange for his onsite management "services".  The apartment building was not managed that good and there is no contract between the onsite manager and the current owner.  Since the building is 18 units, I would be required to put an onsite manager at the property.  I would prefer have the onsite manager vacate, and then I would rent out that 2 Bedroom/1 Bath at market rents and then move a new onsite manager into a currently vacant studio and ask them to pay 2/3 of market rent and I would pay them an hourly wage for whatever work they do at the property.

So... any way /advice as to how to have him vacate his unit?  Since there is no contract, does he have any rights or is it possible to terminate his employment whenever?  Also, he has no rental agreement either, any further suggestions on how to have him fill out his estoppel in order to be able to vacate his unit?

Thank you very much for reading this.  Last time I asked a questions you guys were awesome, thanks again.

A

Bigger Pockets Community!

Hello once again. I purchased a 4 unit apartment building a few years ago in Los Angeles. All four units are 2 bedroom and 1 bath, and in good condition. Three of the tenants are around market rents however one unit, is paying about $300 - $400 below market a month (market rent being approximately $1,550).

The tenants in the below market rented unit have been there for over 5 years and have a senior citizen (I believe) and young child living in the unit.

I am considering offering them cash to vacate their unit in order for me to rent it out at market rents, after probably making about $2,000 - $3,000 worth of improvements to the unit.

I am wondering what do you deem is the right offer in terms of the amount I should offer them considering how much they're paying now and the general apartment rental market in Los Angeles.

And what are some strategies/explanations/rationale to mention to the tenant as the reason why we are offering cash for them to vacate?

Thank you very much!!

A

Gentlemen,

Yes this is in the City of LA and the property is under rent control, so I would be able to raise the rent by 3%, not more this year.  

What do you think I should say when I offer them some money as the reason I'm asking them to move?

Thanks,

A

Bigger Pockets Community!

Hello once again.  I purchased a 4 unit apartment building a few years ago in Los Angeles.  All four units are 2 bedroom and 1 bath, and in good condition.  Three of the tenants are around market rents however one unit, is paying about $300 - $400 below market a month (market rent being approximately $1,550).

The tenants in the below market rented unit have been there for over 5 years and have a senior citizen (I believe) and young child living in the unit.

I am considering offering them cash to vacate their unit in order for me to rent it out at market rents, after probably making about $2,000 - $3,000 worth of improvements to the unit.

I am wondering what do you deem is the right offer in terms of the amount I should offer them considering how much they're paying now and the general apartment rental market in Los Angeles.  

And what are some strategies/explanations/rationale to mention to the tenant as the reason why we are offering cash for them to vacate?

Thank you very much!!

A

Hello BP community!

I was hoping to hear some feedback and opinions on this question.  

I currently own a fourplex in the city of Los Angeles that I purchased about 3 years ago.  It is in a nice part of town, all four units are rented.  The land is about 7,000 SF, zoned R3. 

There is now the possibility to purchase the adjacent duplex which is fully rented, but at about 40% below market rents, the land there is about 7,500 SF, zoned R3.

I am interested in purchasing the adjacent duplex not necessary for immediate cash flow but potential development in the future (with combining the fourplex). However, I'm not sure if the numbers make sense as the duplex has an asking price of $600K (2.50% CAP rate). I would be OK with just breaking even with 25% down and holding onto the property but at the current rent controlled rents and that asking price I would be about negative $1,397 a month.

- Does anyone in the biggerpockets community have experience with R3 zoned apartment developments? 

- How would I ask the tenants to leave their units if I wanted to demolish and build new apartments (I believe with both lots, approximately 14,500 SF, I would be able to build 18 units total)?

- What does R3 zoned land in LA sell for? I looked at some comps but they didn't make sense...

- Or do developers price the land by how many units they are able to build, any idea what price per unit developers usually pay for in a not great but not horrible, up and coming neighborhood?

- Is construction costs (soft and hard) of $175 PSF for a new apartment building sound reasonable?  On grade parking.

THANK YOU for reading this and any feedback is appreciate.

BP readers,

Thank you for reading! I recently presented a shopping center deal ($10,000,000 in South Los Angeles) to a broker friend who has an investor interested in the deal. They will put in an offer on the property. The confidentiality agreement from the selling brokers states that buyers broker would receive 0.50% of sales price (is it me or is that relatively low?).

My broker friend mentioned that he usually pays 15% of buyer's broker commission for the finder's fee, if there is one, but because we are friends he would do 25% (or $12,500 = $10,000,000 X 0.50% X 25%).

What do you think I should ask for in this deal?

And if this goes on what are your thoughts on a sliding scale finder's fee, how would you say that would look like?

Thank you in advance!!

A

Thank you all for your replies.  Here is a link I thought would be helpful to determining Section 8 rents in different MSA's:

http://www.huduser.org/portal/datasets/fmr/fmrs/do...

Thanks again.

Esteemed BP readers,

I recently posted my first question and was happy to read everyone's posts, thank you very much :)

My question has to do with a potential cash out refinance on a 4 unit building in Los Angeles.  Should I refinance and take some money out or keep the current loan?

If I leave the current loan in place I net cash flow $1,800 a month.  If I cash out refinance the net cash flow drops to $1,050 a month, but get to cash out approximately $140,000.  Both loans are 30 year amortizations. 

The difference in net cash flow would be $9,000 annually ($750 difference X 12 months).  To breakeven, theoretically I would have to put the cash out proceeds, or $140,000 into something to yield 6.4% ($9,000 difference in annual cash flow / $140,000).   And finding an LA apartment deal that yields at least 6.4% is not "market" at the moment.

Also:  The existing loan has a 3.75% interest rate fixed and the new loan would be at 4.125% fixed, both 30 year amortizations.  In addition, adding the extra debt with the refinance would not limit me for buying another property per my lender.  Also, the refinance loan would result in a loan to value of 65% on the property.

What do you think should be the move, cash out refinance or leave as-is? Assuming the cash out proceeds would, if taken, be used to purchase another building.

Thank you in advance!

Esteemed fellow BP readers,

I am considering between purchasing either a 4 unit apartment building in the Watts neighborhood of Los Angeles or a 6 unit apartment building in the Mid City neighborhood of Los Angeles.  My business plan is to rent out the units to Section 8 tenants as both the areas in which the apartment buildings are located have higher Section 8 rents compared to market rents for those areas.  

In order to understand better each investment opportunity though I wanted to reach out to and see if any readers had an idea or experience as to where I could go or who I may speak to or where I may research to get an idea of the Section 8 tenant rental demand in the two areas I am considering.  Basically, to help answer the question, how much rental demand is there from Section 8 tenants in these areas (or other areas in Los Angeles)

Any ideas would be appreciated.

Thank you in advance :)

A