All Forum Posts by: Israel Tabi

 My strategy has always been to improve a property and maximize net income to create equity. Once you do that you aren't going to make much money on cash flow. Most wealth created through real estate isn't cash flow its equity growth. You have two choices, wait for the market to do it for you or create it on your own. I always choose the later. The properties I sell have great cash flow even at the inflated prices I sell them at. For buyers just looking to sit on a turnkey property, its perfect, for me its like a squeezed lemon with no juice left to give. I hope this helps, KEEP ROCKIN BP-ERS!

JrT.,

As many fine BP-ers have mentioned there are a host of reasons NOT to take a hands off approach. The biggest reason is you would be exposing yourself to a multimillion dollar lawsuit. For example a vacationing AirBnB tenant comes home a little tipsy one night, trips and falls down a flight of stairs and injures himself. He doesn't have insurance and he needs surgery. In addition to his injuries, he is claiming the lighting in the stairwell was poor and its all your fault. Your liability insurance investigates and quickly finds out that he was a AirBnB renter and NOT your tenant and they say they will not pay a dime as its illegal for the tenant to rent on AirBnB in your state. Now you are facing a $500,000.00 lawsuit in the face because you took the attitude of "hey, he's paying his rent on time, why should I care if he rents on AirBnB". 

In addition most buildings are not separately metered for water or trash. YOU will incur these extra costs of having extra people using those utilities and the wear and tear on your building. Most tenants don't care to take care of their units the way owners do. Can you imagine how little someone who doesn't live there does??? Think about how WE act when WE go to a hotel. WE use exorbitant amounts of water, towels, sheets, HVAC, and electricity. The AirBnB renter treats your rental apartment the same way. 

I have added a rule to my rule list that tenants sign along with their lease, forbidding short term vacation rentals. It specifically names AirBnB and others. I do this despite the fact that the CAR lease forbids it, becauseI know that most tenants don't read the lease in great detail. However everyone reads the rule list throughly. I hope this helps, KEEP ROCKIN BP-ERS!

Spot on roy!

Jim,

In my experience of buying and selling large and small multi unit buildings in Los Angeles, I have never heard of a buildings reserve account being transferred in a sale. However as is true of most things the local custom will determine the terms of the transaction. I hope this helps! Good luck!

I just completed a 1031 exchange. I sold a six unit for over 3M and split my exchange. I bought a 6 unit and an 8 unit building. 1031 buyers drive the market forward. They are willing to overpay a little to get a listing and avoid getting overtaxed. The constant talk by Democrats about abolishing the 1031 is absolute suicide for the economy. It would boost federal tax revenue in the short term then cause a major shock to the market. Most commercial investors would look elsewhere (other countries) to invest thier money with more favorable tax policies. 

Matt,

Thanx for the welcome!! 

LA needs 25K units to be built annually just to maintain a steady supply. There are only 6000 units being built a year. About 2000 of these are high end luxury units because they can Ellis Act the building without paying relocation fees and don't have to deal with CRAZY building requirements for rental units. 

Joshua,

The mayor may be interested in doing something. However the City Council members have to run for re-election every two years. If they don't vote for strict rent control laws they will be out of a job. All it takes for them to lose is one TV ad saying that they voted against creating more rent controlled units. The real tragedy is that these council members know that these laws actually driver rents HIGHER (by limiting supply of new units being built), but know that their voters are too ignorant or uninterested to understand the macro economics of the LA real estate market, and only vote based on who voted for strict rent control ordinances. 

Hello all! I am a builder in Los Angeles. In my opinion the city of LA is at least partially responsible for the housing shortage. LA City Council members (who are the highest paid in the country - $187K a year) voted to pass even stricter building requirements. As of January 1, 2015 if you take down rent control units and apply for a density bonus, you are required to match the rent controlled units in your new construction. For example: If you take down 5 rent controlled units, and the zoning and SF of the lot will allow you to build 10 units. If I apply for a density bonus the city may allow me to build 13 units however 5 out of the 13 units will now be rent controlled including the density units. In total 8 out of 13 new units will be rent controlled. Why does this matter? Because in general, non-rent-controlled units will sell for a 20% premium over rent-controlled units. In effect you have bitten about 20% of potential profit away from the developer. In addition LADBS draconian parking requirements have driven many big time developers out of LA. I am in and out of LADBS in 20 minutes this year when I typically waited over an hour to speak to anyone last year. Its a ghost town. Most of the permits being issues are for high end luxury condos or SFR, not regular rentals. Many monster developers who I have done work with in the past have flat out told me they don't build in LA anymore. They have moved on to Glendale, Passadena, and Burbank where they don't have to deal with all this garbage, and they are actually get incentives to build there. The City Council is destroying this city. Take a look at Culver City which has NO RENT CONTROL, it has the most stable rent market in the area. Rents have risen 30% in the past 5 years in LA city. In Culver City its only risen by 12%. Over-regulation destroys markets. I myself no longer invest in LA city for that reason as well. Let me know what YOU think.