I am currently in escrow on a 106-year-old 4-plex in Long Beach CA Historic District. I need help on deciding if the deferred maintenance from previous owners is outweighed by the potential for appreciation in the next few years. Those are that knowledgeable of the owning property in Long Beach, please weigh in with your experience, reason’s why you choose to stay in Long Beach, and any other help you are willing to give.
The numbers at a glance:
- Purchasing price: $860K
- Down: $44,350 (5%)
- Interest: 4.375% (high due to lender credit to buyout Mortgage Insurance at closing)
- Op In: $74,364/yr
- Op Ex: $17,870/yr
- NOI: $56,494/yr
- Mortgage: $48,869/yr
- Cash Flow: $7,625
- GRM: 11.56
- Cap Rate: 6.6%
- Lot sqft: 2,988
- Sqft: 3,656
The property is within blocks or so from the all the new construction the city of Long Beach is doing on Pacific between Broadway and 4th street. The property is on the edge of the St. Mary and downtown Long Beach neighborhoods. This area is coming up (gentrification is kicking in), but might take a few years. My strategy for this property (my first property) is hold on it for 2-3 years until the City renovations are completed and sell it. I am not looking or have the capital to upgrade all the work that has been deferred for years.
Property Cons:
The property has original knob & tube electrical wiring, cast iron plumbing, needs a new roof (estimated at $18K), major work to the original wood siding & windows (estimated at $40K – need to stay within Historic District requires), and extermination of pests (estimated at $5K). The seller did a shotty job at moving the in-unit water heater out to the yard of one of the lower units, which required boarding up that unit’s back window. I do not have the capital to upgrade the existing electrical and plumbing, but can put on a new roof and eradicate all the pests (roaches and rats).
Property Pros:
Location, location, location. In non-rent control area (all Long Beach is non-rent control) and three of the four units are on month to month leases, so rent can be increased. All four units are 2 bed / 1 bath with washer/drier in units, but only street parking (1 block from metro). The two top units have a small pouch, while the bottom two have a small cement back yard. All four units have fake fireplaces features, built in bay windows in living room and master bed rooms. The top units have built in “hutch” in living room and large walk in closet in master.
