Purchasing apartment complex
I am looking to purchase an apartment complex in Los Angeles. Target price being around 1 million. Most properties I’ve seen are in bad neighborhoods. Mostly east Los Angeles or Crenshaw area. Wondering if this is a safe place to park an all cash investment. Can’t help but think of detroit and all of the real estate investors that lost big there. Any advice is welcomed.
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Just some of my thoughts,
How many units will you get for $1 million?
How close are current rents to market rent, how much work is needed to bring the units up to market rent. Is Market rent most likely to be Section-8, if so how many bedrooms do these units have?
How close is current vacancy to average vacancy for that area?
Is the area machine gun alley with drive-bys thinning out the population on a regular basis? Call LAPD and ask about the complex and the area.
Has LAPD pulled out of the area and it's now patrolled by the Sheriffs department or State Police due to massive overwhelming crime.
Also are most of the other apartment buildings on the street matchy-matchy, or are the buildings very dissimilar?
Does the street and a few blocks around seem like a residential area or an industrial area (with land use being manufacturing or warehousing, or trash dumps)?
Are you afraid of the people in the general area, or will being there yourself not be a problem?
Can you line up a reliable hard working property manager for the place, or will you have to self manage?
Will workmen go down into the area during daylight hours to do fixups or will you have to do them yourself? (you call Adee Do and find out Adee Don't).
How close is it to the main commercial corridor (in Crenshaw, the Crenshaw business corridor" AKA the heart of African American commerce in Los Angeles").
How familiar are you with the culture of that area (know your customers, and know what they want for their rent money/voucher).
Is the graffiti load mainly tagging or is it gang related? Ask the Police or study up on it yourself online.
Have you ever been down there after dark and heard the level of gunfire in the general area--if any (and does this dissuade you from owning there).
Good Luck!
Before ever investing your hard earned money into real estate, the first thing you need to think about above anything else is:
Location, location, location.
Just some of my thoughts,
How many units will you get for $1 million?
How close are current rents to market rent, how much work is needed to bring the units up to market rent. Is Market rent most likely to be Section-8, if so how many bedrooms do these units have?
How close is current vacancy to average vacancy for that area?
Is the area machine gun alley with drive-bys thinning out the population on a regular basis? Call LAPD and ask about the complex and the area.
Has LAPD pulled out of the area and it's now patrolled by the Sheriffs department or State Police due to massive overwhelming crime.
Also are most of the other apartment buildings on the street matchy-matchy, or are the buildings very dissimilar?
Does the street and a few blocks around seem like a residential area or an industrial area (with land use being manufacturing or warehousing, or trash dumps)?
Are you afraid of the people in the general area, or will being there yourself not be a problem?
Can you line up a reliable hard working property manager for the place, or will you have to self manage?
Will workmen go down into the area during daylight hours to do fixups or will you have to do them yourself? (you call Adee Do and find out Adee Don't).
How close is it to the main commercial corridor (in Crenshaw, the Crenshaw business corridor" AKA the heart of African American commerce in Los Angeles").
How familiar are you with the culture of that area (know your customers, and know what they want for their rent money/voucher).
Is the graffiti load mainly tagging or is it gang related? Ask the Police or study up on it yourself online.
Have you ever been down there after dark and heard the level of gunfire in the general area--if any (and does this dissuade you from owning there).
Good Luck!
In Los Angeles, it seems like section 8 renters give the best returns due to the cities rent control ordinance. The properties I have seen do have a combination of section 8 renters and traditional self-paying renters. The properties I’ve seen are in close proximity to the new Crenshaw train stations. However, there is a lot of crime. Motels that are frequented by troubled people. Some liquor stores have been closed recently, but there are many still open. However, when I drive through these neighborhoods you rarely see “for rent” signs. Street parking is packed and seems like a low-vacany area.
Doesn’t sound like the best neighborhood, but it is Los Angeles. Is investing/owning in an area like this better than investing in a small city in the Midwest, Texas or Florida? The neighborhood may be better in a smaller city, but vacancy rate will probably be a lot higher.
$1 million for an apartment in LA? How many units and what is the average monthly rent? The real question might be why all cash when you could use leverage and move into something bigger?
I have seen money made there, and I have known an owner who made himself rich there, but ended up 6 feet under from random violence.
Hi Frederick, there are a few apartment complexes on the MLS here is Cincinnati right now. I haven't look into them much but they are around 1m. IF not, there is another commercial with 6 units for much less
- Sam McCormack
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You can't let that deter you. People encounter violence just walking down a street (some streets more than others). That said, I would not suggest operating any sort of low income housing and living on site or anywhere near the property just to save cost, keep tabs on things, attempt to effect an eviction personally or just increase interaction or contact with tenants unnecessarily. Some % of the tenants can be volatile, persons with mental issues and any number of other challenges who see or handle things differently.
Hello Frederick, definitely location matters. It's important to have a local Realtor working with you on the best locations for multifamily rental properties in Los Angeles, there are so many mini-cities and neighborhoods that can change drastically a few blocks one direction or the other. I live in Los Angeles (Santa Monica) and I grew up in the suburbs of Detroit, so there you go. It's unfortunate, but besides the crime rate concerns, currently there are so many homeless camps near downtown LA and nearby lower income neighborhoods that even if you have a great property and low crime rates, you may have tenants that don't want to live there because of the homeless population. I can tell you first hand it happened in Venice, CA right here on the coast. Million dollar properties with ocean views have homeless camps right in their backyard. I don't mean to be insensitive, because I feel for those in that situation, but we have to deal in the reality of how it affects real estate. All of these things are factored into the asking price, and if you don't drive around that neighborhood (daytime and nighttime), you may not get the full picture. My suggestion would be to focus on the deal and the ROI rather than the number of units if you're looking to spend around $1M in LA, unless you are locked into that criteria. You can get some really great small multi-family properties in some of the middle class neighborhoods on the westside of Los Angeles, like Inglewood, Hawthorne, Lawndale, Gardena, Torrance, parts of Carson, and other areas. Also, some of these mini cities do not have rent control, and if the property is in Los Angeles proper, it will. My thought is to buy a small multifamily property that needs some TLC with value add opportunity in a good up and coming neighborhood where shopping centers ect. are being built. This way your units will be in high demand and you will also have great tenants that will not only want to stay a long time, but they will take good care of your property. I'm an Agent and I own small multifamily property in Hawthorne. If you'd like to, get in touch with me and I'd be happy to share some of my experience and help you look for a property. Best of luck to you Frederick!
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That is a strong "depends."
Typically the areas you are describing have a better ROI on the surface but you have to think about the if the maintenance is higher because of graffiti, broken items, etc.
By no means am I trying to stereotype or anything of the sort, this is strictly an observation. I manage a FB group for LA/So Cal landlords and we are at about 800 members. Many of the ones with tenant problems are in these types of neighbors. I'm talking about damage, not paying rent milking the system, having illegal pets or occupants, etc.
If I had a $1,000,000 and was interested in Los Angeles, option 1 is I would be looking at single family homes with ADUs and I would get mortgages to be able to buy multiple homes. The homes will typically be in better neighborhoods, the DETACHED ADU is generally not subject to LA rent control, and the property will likely be deliver vacant.
Option 2 would be to find 2-4 units (even if it means getting a loan) and buying where units are either recently rented out (so they can't claim 2020 COVID) and/or have vacant units.
Fred, $1M wont go too far for an apartment complex in LA, but it seems reasonable for a small multifamily property. Parts of LA and Long Beach that have gone through gentrification in recent years might be a good opportunity where you can still find multis for ~$1M. I'm a bit biased living in San Pedro, but SP still has small multi's available under $1M with a bright outlook on the future. Bottom line, you're not going to be in high class areas if you're limited to $1M but you should be able to find a property in a decent working class neighborhood that wont be a nightmare to manage.
For $1 million you can get a duplex in city of Los Angeles, but not more. Better to look in the valley, Orange County instead
@Frederick William San Pedro and parts of Long Beach still have small multi's available for around a million in solid working class rental neighborhoods. Happy to help provide additional info if you'd like.
Right now I would be very leery buying/investing rental units in the city of Los Angeles. Please do your due diligence in rent control Ordinances. The City Council members are very tenant friendly and anti landlord. Especially mom and pop Landlords!
Hello, Frederick. To get a better price for your investment, I recommend looking for a short sale, still residential, up top to 4 units in your budget. During the Covid, many property owners were approved with forbearance, and now most of them expired and will be more witch will be passed soon. My name is Leona; I am an SFR specialist ( Short Sale & Foreclosure)in Los Angeles.