All Forum Posts by: Allan Glass

Hi @Anthony Caleca

Many of the local, regional banks have re-entered the construction loan market. Try East West Bank, City National Bank, Farmers and Merchants, or even Wells Fargo. 

My quick observation, unless you're a GC building on flat land I think you're $100-$150 Psf low on your hard construction costs for your expected price range; and that's before architectural, engineering, or other soft costs.

The only part of town (LA region) that's achieving $1400 psf and has flat lots would be the flats of Beverly Hills, maybe ocean view portions of Pacific Palisades...

Good luck. Keep us posted on your progress

Allan

@Will F.

Just to clarify...you cannot force the tenants to agree to relocate if they provide a valid lease, proof of rent payments, etc.  there are prescribed and limited reasons why a landlord can evict a rent controlled tenant in LA.  Those will be outlined here:

https://lahd.lacity.org/lahdinternet/LinkClick.asp...

However, if the existing tenants voluntarily agree to relocate b/c you've paid them relocation assistance, my experience has been that after tenants voluntarily vacate you can re-establish market rents.

Hi again @Will F.,

The foreclosed owner does not have any tenants rights and their eviction would not be restricted under rent control.  If you decide for some reason to keep them as a tenant and create new lease, then they would become rent controlled tenants (from that point forward), assuming the building falls under the rent control ordinance.  He may also fight an eviction and require you to take it all the way to a Sherriff lockout, so build in that extra cost and time into your proforma.

The other tenants will have to prove a prior rental arrangement in order to be protected.  If they are actually paying below market, they make every effort to show a rental agreement, cancelled checks, receipts from a landlord, cashiers check receipts, etc.  If they can't then, my understanding is that you can re-establish rent a current market and require they sign a new lease agreement.

You seem to realize your risk here is the landlord.  If he's losing the house and wants to undermine the bank, new owners, or just wants to help the tenants, he could sign low value rental agreements prior to foreclosure.  If he does, it could protect those tenants at that agreed rent amount.  

Most of us who buy at foreclosure auctions or from lenders without tenant information will assume that we will want to relocate the tenants and build in worst case scenario relocation costs.

...or the more industrious investors will find a way to contact tenants prior to spending our money at auction.

a final note to remember, don't assume they'll tell you the truth even if you're able to get information prior to the sale.  Plan for the worst case scenario.

Hi @Will F.

Here's the link to what you need to know about relocating tenants in rent control properties in city of Los Angeles

http://www.cesinaction.org/Portals/0/Relocation_As...

Also, for more general tenants rights issues in California after foreclosure make sure you're familiar with the Foreclosure Act of 2009

http://www.occ.gov/publications/publications-by-ty...

That should answer many/most of your questions

Best,

A

hey there @Humberto Campos,

Welcome.  The SFV is a great place to start since it will be a bit less competitive and less expensive than West Los Angeles, etc.

Keep asking questions, there are lots of helpful people in LA, on the BP website.  As a future grad student I'll assume you'll do your research before spending your money.  Happy hunting and feel free to reach out if you have questions.

Best,

A

Hi again @A Bee,

It's not uncommon for commercial listings over the magic $10 million price point to only have a buyer side commission, which the listing broker does not split with a buyer's agent. I'm only speaking about Los Angeles real estate here, so outside of LA or Orange County this may not be the case.

So it goes in a market where supply is hard to come by and buyers are plenty. To the first part of your question, no that is not surprising or low for a split fee to a buyer's broker on a deal this size in LA.

To the second part of your question, how much you should take from the buyer's broker to whom you handed off the deal??  

First, can he ask his buyer for a fee?  Again not uncommon in LA commercial real estate. He'll likely be doing all the normal work, so I'd expect it's fair to ask his buyer to make up the difference to pay a "normal" fee.  I'd estimate normal side of a commission to fall between 1-2 points.

Finally, what is it worth for you to hand off a deal?  I'm assuming that you are forwarding a deal via email to a broker who has forged a relationship with a buyer.  A deal that was listed by another broker who worked the seller to get the listing, analyzed the market value and brought it to market.  Assuming this is the case, getting paid $12,500 to forward an email is pretty darn good in my opinion.

If you are doing more work for that paycheck, like securing/contracting for the deal prior to sharing, underwriting the deal prior to forwarding, finding something that is off market or unattainable unless it's through a relationship you've forged with a seller or listing broker, well.. that's a whole different discussion. 

Best of luck

A

Hi @A Bee,

You seem to already have some guidance on where to find rent statistics for Section 8 tenants above.  I can speak to the practical knowledge having owned and managed Section 8 tenants in both neighborhoods you discussed.  

Both areas, in fact most, moderately priced and/or up and coming neighborhoods, will have a stronger demand from section 8 tenants than there is supply of willing landlords.  Like non subsidized tenants, the unfortunate reality for landlords is that it requires diligent screening to find a "good" tenant.  There are some truly exceptional and responsible tenants who use Section 8 vouchers and you will find them eager and/or willing to live in most areas of Los Angeles.

The bigger question for you as it relates to which of your two properties could be the better investment should be about the building itself.  

First consider the structure of your acquisition.  A four unit property will have more financing options (see better leverage) and allow for cheaper borrowing than a 5+ unit apartment building.  It you measure the better investment by returns on your money, It seems out the gate the four unit would have a leg up in the competition.

Next, which building is better suited to attract the tenants you are seeking? In my experience the "better" (read more responsible, more stable) tenants in the Section 8 world are those with families to support and care for.  These tenants will need more bedrooms in their units; the more the better.  If you buy single, one or even two bedroom units you may find yourself at a disadvantage vs. the landlords offering three or more bedroom units.  So consider which of your two buildings allow you to offer the best choices to your tenant pool.

Finally, building condition and surroundings.  I've found two things to be very true about renting to section 8 tenants (actually to most tenants, but i'll stay on topic).  First, the better a landlord maintains his building and the unit he delivers to a new tenant, the better a tenant will treat their rented home.  Second, the more the area surrounding your tenants home has to offer the longer they want to stay put.  So, as it relates to comparing your two buildings, consider how much investment it will take to bring each building to a quality that exceeds the other rental options in the area and factor that into your proforma.  Also, research the schools in each area, the shopping options, the public transportation options, and the proximity to social services.  The more community services around your building, especially if in walking distance to your rental units, the more appealing it will be to tenants and easier it will be for them to stay.

Best of luck and keep us posted on your choice.

Allan

Hi @Alma Mills 

there are a plethora of attorneys on bigger pockets, i'm surprised someone hasn't chimed in...  try starting a post requesting the help of a Los Angeles area attorney.

best of luck

A

Hi Alma,

Step1:  hire an attorney who can properly draw your promissory note and trust deed

Step2: call and hire your title company to ensure that it is properly recorded (and insured) at the County Recorder's office in Norwalk.

that simple...

@Bob Malecki most all of us use the Daily Journal / Daily Commerce to publish foreclosure notices.  Call and ask them for publishing rates and you should get your answer.  I included a rate sheet for you below...

http://adtech.dailyjournal.com/Public/Publications/Legalads/fees.htm