All Forum Posts by: Jonathan Taylor

@Jamie Garcia

I just purchased a fourplex in NELA in January.

It’s a tough market but possible if you aren’t in it for cash flow as a first time buyer. Below are the details of my deal. Feel free to ask any questions.

Property

1 x 3/2.5

2 x 1/1 (I will live in one)

1 x studio

Purchase price $725,000

Closing costs $30,950

Rehab estimated $165,000 (this is wrapped into my financing)

Pro forma rents

3/2.5: 3,000

1/1: 1600

Studio: 1400

Total 6,000

This property was listed on the MLS. I focused on desirable adjacent areas and properties that were on the market more than 100 days. I studies the area I wanted to buy in and looked for properties that were priced too high for flippers but still needed a lot of work. My goal was to find a motivated owner who didn't have the cash to fix the place up.

My loan was NACA (naca.com) which allowed me to buy without 20 down and I did not get PMI. I can go further into that program if you're interested.

My loan rate is 3.375% 30 year fixed.

Good luck and just be persistent.

JT

@Matthew Ryan

Thank you for the response and my questions about OZ are because I’ll be purchasing my next property in Q2-3 of 2020. I’ve read brief summaries about OZ and feel that where I’m based in La, these zones may be a good move. What kind of OZ projects are you putting together?

@KJ L. Yeah it is BS, through and through. I had a city official tell me that if he arrives at my property, it is the beginning of a bad day for me. Most of the folks working at the office say a variation of 'Its a bad town to be a small landlord' due to their relentless protection of tenants. Such is life though and makes me study even harder for screening criteria to avoid an eviction down the road. Like you said, if you have thick skin you can make it in this market. 

I was originally looking in that area but was not able to find a deal that fit my parameters. I may be heading down there on my next one. 

Thank you for the tip, Ill ask my accountant about it and hopefully can get something for it. 

Now that your tenant is out, how is your process coming along? What are you next investment moves?

Hello BP folks,

I am starting the rehab on my first property but am looking ahead on my next one and have been hearing a lot about opportunity zones. I cannot find much pertinent info about them. Im specifically in the LA market but am really curious about what others experience with this is. Could anyone help shine light on this?

Thanks

JT

@KJ L. 

Before we closed on the property we spent a good amount of time at HCIDLA because of the horror stories we read here and talking to long time landlords. There was a cash for keys paper that we had to legally give the tenant when we presented cash for keys. Funny part is as a small time owner (less than 5 units) I can give 15,900 per the city but they did not print it on the sheet I had to legally give so I was stuck with 20,450. If I would have had to evict Im sure my story would have been similar to yours.

The tenant I bought out was a head case and would flip from a nice accommodating lady to spewing balls of hate at me and my wife so we limited out contact with her. Once we both signed the move out documents, which gives them 30 days to reconsider if they change their mind, we gave her the check and she left. We did not want to bother with the W-9. Sure we could write it off but the hit I will take on that is worth her out of my life. 

HCIDLA has 3 tiers of buyouts. 

First is less than 3 years non protected tenant is 7900

second is over three years 10,450

Last is protected and its 20,450 

You are correct that it is a suggested price but the doc they sign has these 'Suggested' prices printed right on the form so no tenant would take less. It is a dumb system but that is LA landlording for you. 

I purchased in Glassell Park

I had a vacancy contingency but the tenant that I bought out wouldn't leave so I was able to get 3 of the 4 units vacant at close ( one was the owners unit) 

Now onto the rehab which will be a good 4-6 months depending on what we find behind the walls....

How is your process going?

As hard as the cost of an eviction and relocation in LA is, @KL J is right. LA is very very tough cashflow market for new investors. Deals have to be made. 

I just bought a fourplex in rent control and the MINIMUM amount to relocate a tenant in rent control who is protected (over 62, disabled or single mother over 3 years tenancy) is $20,450. That is a number set by HCIDLA, the oversight committee in LA for all Rent controlled areas. I just paid out a tenant last week and she was happy to get a small payday. But she was paying 824 and her unit would go for 1500-1600 in my area. After rehab I will make that back in 27 months so the first few years are tough and new LA investors need cash to get things going and stable. But being that I got the property for 725,000, when nearby fourplexes are 900-1.1, Ill get it in appreciation and market rents. 

There is truth to that but he can claim residency if he is in a RSO for more than 30 days, lease or not. If he is living there for 30 consecutive days, you have a problem on your hand. Thats why most air BNBs in RSOs have a 21 day limit. My advice is to remove him or do a background check and put him on a lease. Doing nothing with only put you at bigger risk.

@Vincent Ludegna You seem to be in the same boat I was in two years ago. Look into the NACA program, It can help you get your minimum purchase price up and it does not have mortgage insurance. I now have a fourplex that will break even when the reno is complete. Check it out, naca.com

Im dealing with this now as I just purchased in RSO. First things to know are the tenants that live there. If you have a protected tenant (over the age of 62, disabled, etc) you cannot move them unless they want to go. Also, put a good 30-50K for relocation since RSO has a suggested price of $10,750- 20,450 to relocate a tenant that has been there for over 3 years. Minimum cost is 7900 for an able bodied tenant less than three years. 

If you are adopting a tenant and they aren't moving make sure you see all the lease agreements because a RSO tenant without a lease is the most difficult to move. 

Basically, know as much as you can about the tenants' leases and put a good reserve for buyout options. 

Good luck

@Josh W.

Sounds like you and I are in the same boat. I just closed on a four unit with a hefty 150K rehab budget. My advive is to mirror a few others here. Do as much of the shopping as you can, appliances, tile, flooring, paint, etc. Things that are inconvenient but saves you the 40% or so upcharge contractors add. 

My two cents are to make sure the bones of the property are in good shape. Do a CCTV sewer inspection to make sure you dont have pipe separation or deterioration. Go over the scope of work at least 5 times to fully grasp what needs to be done and then be ready for plenty of sleepless nights! (itll be worth it when its over)

JT