Advice Needed: Cap Rates & GRMs in Los Angeles
Blessed Sunday Morning to My BP Brethren and Sistren.
I am gettting re-started in Real Estate and doing my research to rebuild my empire (dreaming, dreaming). But I digress.
I have gotten my grocery money together, lined up my partners, read and absorbed your sage advice (50% rule, 2% rule, MFR v. SFR advantages, Landlord 101, et al.) and have started looking for properties in Los Angeles, Inland Empire, and San Bernadino Counties in Southern California-my backyard.
What I am perplexed and frustrated with is the ridiculously inflated asking prices and insultingly low capitalization rates and gross rent multipliers that are out there.
This is what I found on loopnet dot com this morning:
It is a 4-plex in Los Angeles, a couple of blocks from Koreatown in the Wilshire Corridor.
Fourplex - Wilshire Center
155 N. Edgemont St., Los Angeles, CA 90004
Price:$538,500
No. Units:4
Building Size:2,682 SF
Price/Unit:$134,625
Property Type:Multifamily
Property Sub-type:Garden/Low-Rise
Property Use Type:Investment
Commission Split:2%
Cap Rate:4.43%
Gross Rent Multiplier:14.63
Occupancy:100%
No. Stories:2
Year Built:1939
Lot Size:5,401 SF
APN / Parcel ID:5518-012-012
Parking Ratio:4 / 1,000 SF
Who buys crap like this, it will cashflow. . . in 2185 AD!
Sheesh!
And furthermore, this is not Brentwood, Hollyweird, or Beverly Hills. This is a terd property in an run of the mill terd street (very little greenery, the urban jungle) in the heart of Los Angeles.
So, you are prolly gearing up to say, well noob, go to the outskirts of the city for normalized prices.
I have looked in Palmdale and Lancaster (1.5 hours commute outside of L.A. proper, and still in LA County) and the cap rates only rise to 5-7.
My question to my wise investor friends:
When you were starting out, where do you put your time and money? I thought we were still in a recovery and it is a buyers market. Am I being naive?
Where are all those distressed properties? Those disaffected out of state landlords begging to not only give the property away, also finance it for us?
I know the previous was a pie in the sky wish; but seriously, stupid top of the market overinflated pricing on unpopular multi family real estate?
I am wise enough to know putting in offer for 50% of asking price is a lesson in futility, or is it?
Also, I have read from you wise BP'ers, if you buy a property too far away from yourself, you are courting disaster attempting to PM it, better to buy local. . .
So what do you do when LOCAL SUCKS? Where do you take your focus?
Thanks for reading this far, and thanks in advance for your thoughtful advice.
Blessings in your walk, be well all!
Tevis