Triplex Investment in South Central, Los Angeles Analysis / Advice
Hello BP! I have entered into contract for a Triplex in South Central LA for $345,000 and would like to get your advice on whether I should go forward with this deal. Here are the numbers:
Basic Information:
- Built in 1925
- Triplex with 3 separate units (2BD / 1BA each unit)
- Landlord pays trash/water, tenant pay all other utilities
Terms:
- Contract Price: $345,000
- Down payment: 25% ($86,250)
- Mortgage payment at 4.25% ($1,273)
- Improvement: $2,500 (Cosmetic)
- Lease at $3,000 total
- Closing cost: 2.5% of Purchase price ($8,625)
Financials – Annual Number:
- Annual Rental Income: $36,000
- Annual Expenses: $16,810 (w/ Property tax, Vacancy, Repairs, Utilities, PM and Insurance)
- Net Operating Income $19,430
- Mortgage: $15,275
- Total Cash Flow: $4,155
- Total Equity Accrued: $4,362
- Total Cash ROI: 4.27%
- Total ROI w/ accrued equity: 8.75%
Other:
- For anyone not familiar with Los Angeles, this is in a B/C class neighborhood
- Rental market is hot in this area of town, normally there are no vacancy (I have estimate a one month vacancy/loss rate)
- Rent control area
- I am familiar with this area, have bought other properties a few blocks from this triplex
- I self-manage all my properties and will continue to do so for the next few years till I get to 20 units+. This increase the return to 6.98% and 11.46% w/ equity accrued.
- Investment goal: Being in LA, I will never meet the 2% rule. However, I am just more comfortable investing in the same city I live. The goal is to hold for the next 5-10 years while generating cash flow and sell when the market is great.
- Exit strategy, will do full rehab when it is time to sell to generate forced appreciation and take advantage of the LA/California market appreciation (sensitive topic)
Thank you very much