All Forum Posts by: Eyal B.

Hi Tim, welcome to the site.

@Adam Tompkins

That area is neighborhood by neighborhood. Is it north south east or west of USC?

I wouldn't count on student housing as a great option since USC is building massive student housing and dorms that will bring student renters back to campus.

That said, I would put money in those areas for the right returns, but I haven't done it yet. (I don't watch that area as closely)

Section 8 tenants are a great option for that area. The rent is government guaranteed to show up on the first of every month, and the tenants aren't likely to make waves because they don't want to face eviction and a loss of their voucher, which would be devastating for them. You'll deal with the added annual section 8 inspections, but keep the units reasonable and you have nothing to worry about.

@Adam Tompkins

It sounds like you plan to live in one unit? You should be able to handle 3 tenants that are steps away, especially if the building is well maintained and you take the time to learn how to do this. Take the added cash-flow right now. Save more, build a reserve fund faster, buy another sooner.

I manage 12 units with a demanding full time job. I think I can probably double that before hiring help.

@Joshua McGinnis

No tenant under market that understands rent control will let a place go over something like this. The lease will reflect the same rent, rules etc. You'd be beyond lucky to get someone out on this as under market tenants are typically in it for the long haul.

As long as the lease terms aren't violated and the rent check keeps coming in, that tenant cannot be evicted.

@Vinny Giglio This may turn out to be difficult. She knows she'll never find a 2 bed for that price, and she's protected by rent control (assuming this building is pre-1979). You'll likely have to cough up quite a bit of money to get her to consider leaving her comfortable 2 bed unit and looking for a (cheap) 1 bed.

You can request a rent increase from section 8 once the lease is up: http://www.hacla.org/owner-info/ however you'll be bound by the rent control increase amounts. (3% this year)

Welcome @Dale Shin

Do you typically manage strip malls in LA/California, or do you handle any remote management?

Some investors will buy the property, and offer the tenants money to leave. This is called cash-for-keys.

Lets say a tenant is paying $1000 a month, but the unit could be getting $2000 a month. An owner negotiates to pay $20,000 to the tenant to leave, then rents it for $2000. This is an gross increase of $12,000 a year. 12,000/20,000 = 60% Cash on Cash return.

Some Investors will also look at the cap rate of the building. Lets run those numbers. Investors will assume anywhere between 30%-40% expenses. Lets use 30%. So 12K*.7= $8,400. Lets see how much value this adds to the building at a 6 cap: 8,400/.06= $140,000. 7 cap? 8,400/.07=$120,000

This is a bit over simplified as its really not looking at remodel work you'd likely want to do and other expenses, but I'm illustrating why investors care about upside in rents. The building becomes worth more when you increase rents.

Obviously deals where you can double rent are hard to come by. You really have to know the market the building is in, what you can get for that unit, and have plenty of cash. You also have to be comfortable with the risk that the tenant could say FU I want 100K...

That said, I could care less what a listing agent thinks about what the unit could rent for. Do your due diligence. You should generally know this rental market already to get to a ballpark, but run comps in the area. Craigslist, HotPads, WSR, etc.

For that matter, @Reuben Stewart I'm not ready to jump on all cash deals, but I'd love to stay in touch. When the time is right I'd love to get on your buyers list. This may be as soon as Q3 or Q4 this year.

@Reuben Stewart is doing it right. It takes a ton of work and creativity.

Many wholesalers just aren't putting the effort in or targeting the right people. I get quite a few yellow letters. This means wholesalers in LA (at least the ones using lists that I appear on) have terrible perimeters. Most of my deals are 1-2 years old. I just got a yellow letter on a building I closed 5 months ago. Why would there be a deal on a multi-family purchased 5 MONTHS AGO! That's not nearly enough time to get into trouble, or get tired of owning... I like to call yellow letter senders to network with whoever is sending them out, and potentially get on their buyers list, but this one wont even get that call.

There are so many rent controlled buildings that generate such little rent, with owners that paid 50-200K in the 70's that should be easy to turn into deals now. Go target those! Tons of decrepit houses in WeHo, Melrose area, mid wilshire etc with ramps in front that have elderly inhabitants. Thats a good target. A good wholesaler should be able to put deals together around these.

Maybe I should start wholesaling...

@Michael Lemieux

Thanks! I didn't mean to post too much about the plane or a photo, but Ali got me excited.

@Ali Boone

It has a Garmin 196 mounted to the controls, but when I start flying regularly I'll probably upgrade to something better.

If you offered a good enough rate for me, I could just tie it down at Santa Monica or VNY for a couple months until I get current.

Maybe we could scope potential RE deals from the air, or a new type of yellow letter marketing: Tow a banner that says "call xxx-xxx-xxxx to sell your home today!"