All Forum Posts by: KJ L.

Check out properties in Leimert Park, Jefferson Park, West Adams, and Vermont Square area - there's a lot of development and growth happening in those neighborhoods.

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Hi Chris, my husband and I did the FHA 3.5% down to house hack a duplex in South LA (prices are reasonable, zoning is favorable and there is a lot of rejuvenation occurring). We purchased at $400k in 2017 and renovated our property which appraised at $625k last month. We recently took out a HELOC on the property and using it to purchase out of state properties/invest in other RE projects. Ultimately we were able to move our rent payments to a mortgage and gain some equity and tax benefits. Hopefully this helps.

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Send me a PM and I can recommend a couple mortgage brokers that I've used for our property

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Don’t rely on Zillow for your valuation. You can ask title or an agent to provide comps as well. Which neighborhood in south LA is your property located in? West Adams is valued differently than View Park and Watts. There’s been a good amount of appreciation in South LA over the last couple years, you could see if you have enough equity to get a small heloc for repairs.

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I would suggest using cash to cover your expenses. Don't rely on the one quote from the GC as many are over-charging for repairs. HVAC is not a necessity in LA - many rentals do not have AC. Cabinetry can be purchased from IKEA and installed by a handyman (or just get the cabinets painted), get discount flooring and have it installed by handyman, and wait on new windows. Where is your property located? If you're in South LA, you should be able to find some solid handymen who will do work for less than a contractor.

Also, how'd you conclude that your property is worth $580K? If the bank used their evaluation software to make that determination, you can ask them to order you an appraisal to verify the property's value but you will most likely be required to cover the expense of the appraisal.

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Originally posted by @Christina Kim:

Hello everyone! I am pretty new to this real estate thing but have done lots of reading and research.

I was finally able to find a property using an FHA (4-units in Long Beach) and currently in Escrow (should close any day now). I was not aware of this Rent Control Policy until coming across this thread. It was definitely a value add opportunity but not sure if this is still a viable option. Already put a $10K Ernest Money... Not sure what to do now....

Hi Christina,

Long Beach actually implemented their own rules for rent restrictions so you should check with a lawyer to see if the new state rent control laws actually affect your property. The local laws take precedent over the state laws. You're still able to evict to owner-occupy a unit but check with an RE lawyer to see what other options you have.

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Originally posted by @Jack I.:

There are a lot of properties in California that had sub market rate rents that are now capped at 5+inflation rate.

A recent duplex in the sacramento area came to market with this problem. They are asking 400K for this place as it needs a lot of work. It already is rented out ....

A place like this should sell around 400 K before rent control..you would buy it, fix it up a bit, then increase rents to market rate.

Todays rent is 2000 for these units ( total ) and should be 3200 a month. You can only raise it ~ 7.5% a year . Now assume that rent is going up 3 % a year ( on the 3200 base. ) It would take about 14 years to catch up to market rate.

In that time, you would be out 142K worth of rent because you would be below market.

So, anyone with rent control experience .... how much of a discount should this rental sell for ?

One can be very analytical and do a npv analysis on the 142K and lower the offer by that amount ?

The more likely scenario would be the new owner would buy out the old tenants to move..how many months of rent would the new buyer have to pay ? Then you would discount by that amount ?

I guess my fundamental question is, how do you value properties that have rents below market rate...and how would you remedy this problem if you were to buy the place.

Thanks ahead of time

Jack

Hi @Jack
IANAL - My understanding of the new rent control laws are that you can evict to do extensive renovations on a property however you must pay one months rent as relocation fee - consult with a lawyer on this. In LA where we've had rent control for a while, the way I've seen some occupied rent control properties priced is Market Rate for Property Type - (minus) the average cost of removing tenants per unit. Hope this helps

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I read that Dennis Block in Los Angeles is a good landlord friendly lawyer.

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All Forum Posts by: KJ L.

KJ L. has started 2 posts and replied 201 times.

Post: Duplex portfolio in South Los Angeles- Cash Cow!

Post: Philadelphia - Property Manager

Post: New Investor Southern California with Long Distance Plans

Post: New Investor Southern California with Long Distance Plans

Post: Local mortgage brokers

Post: Landlord Assistance Programs - City of Los Angeles

Post: Landlord Assistance Programs - City of Los Angeles

Post: California Rent Control

Post: California Rent Control

Post: Los Angeles Lawyer needed for multifamily and eviction needs