Multifamily in Los Angeles - Bad timing? Should I look elsewhere?
Mechanical Engineer · Gardena, CA · Member since 2015 · 21 posts · 4 votes
Hello All,
I've been lurking here for a few months now, mostly saving, reading, and absorbing. I finally have some cash to start investing, but the problem is every property I analyze in the area does not cash flow at all. How do these sellers expect to sell a negative cash flowing property to an investor? Are these signs we're in a bubble here?
The original game plan was to purchase the MFR, live in 1 of the units for a few years and rent out the remaining units. I don't necessarily expect to cash flow while I'm IN the property. But if i were to move out in the next 2-3 years, I expect it to cash flow then. So I've been analyzing each deal as if I'm not going to live in it.
Should i give up my MFR idea here in Los Angeles (Preferably Culver City, Marina Del Rey, Van Nuys) really any decent area of LA north of the 105 and west of the 110 and look out of state instead?
How does one pick a market when investing out of state? I'd like to be relatively close by, How does one pick between WA (Washington), OR (Oregon) , AZ (Arizona), NV (Nevada)?
Thanks in advance!
See the agents BiggerPockets members work with in Los Angeles, CA.
See agentsAgree with many on here that Los Angeles is great for price and rent increases, but you need to play the long game to make the returns. That means that whatever you buy, make sure that you are willing and able to hold it long term, no matter what happens in the economy or your personal life. My favorite way to do this is to have a really good equity position, and this comes from putting some money down (instant equity, but you pay for it), buying a great deal (instant equity from buying below market), and doing some value add to force appreciation (fairly quick equity, you work for it). With these 3 sources of short term equity in place, you can hold long term from a position of financial strength, or worse case sell at a profit if you need or choose to. Once you get to a cash flow positive position, then you can turn it to a pure rental and buy your next place. I also actually agree that we are likely closer to the top than the bottom for this cycle, which means that it will be harder to find a deal as mentioned above ... doesn't mean you stop looking, but it does mean it will be difficult and I would not recommend laxing on these investment standards just to get into your 1st place. I was actually in a similar position as you looking for property at the height of the last cycle (2006ish) ... fortunately I did NOT relax my investment standards and as result did NOT buy at that time ... when the market crashed, though, I was already educated on both REI and the local market from my search, and I happened to be sitting on a pile of cash that I'd been saving to invest. The acts of saving for investment and searching in 2006 was NOT wasted effort and my patience was rewarded. Now, after holding for a bit, my properties cash flow like crazy even after several cash out refis. It can work out great, you just need to keep your eye on the long game.
No idea. The minute it crashes though, if it does, I'll definitely buy!
Ultimately, as far as your question about which to do... my only advice would be to not do nothing while you wait on things. If you do that, who knows how long you could end up waiting and all the while your money is sitting around doing nothing for you.
If you feel comfortable thinking there is enough appreciation potential available now out here, you could go ahead and buy here. If you don't, one option would be to buy one or two cash-flowers out east and then if the market crashes here, buy for appreciation. That way your money isn't sitting around now doing nothing while you wait, and you end up with diversified strategies. Or some combination like that.
P.S. This year, thus far, we have Doug Duncan returning and John Burns. Very excited because these two have so much wonderful knowledge. John, in particular, does a ton of consulting in the building industry and hedge fund world. Should be a very interesting night.
Hi Aimen,
Cash flowing properties are extremely difficult to find especially if you have less than 25% for the down. But for an O/O rent one and live in the other I have found two - One in Whittier, and one in Long Beach, that are both great O/O opportunities with 3.5% down. Five six two three two eight eight eight seven eight
Eric Espinoza
Aimen,
I would shy away from the LA City stuff. I have a good friend who owns a lot in the city of LA and he always gets burned on the rental inspections. I would recommend staying more into Glendae/Burbank or towards the east into Whittier/Montebello/La Habra....If you need a RE broker, I am happy to help and do give a buyer rebate. I own rentals myself and know the business in and out, and am CEO of a flip company....Message me anytime.
I live in Los Angeles and the market is pretty hot. I bought my house in late-2012 and could now sell it for almost double (but I will simply rent it out when I move).
At this point buying land and building an investment property could well be a better option.
I don't see the prices dropping, especially once minimum wage goes from $9 per hour to $15 per hour = more disposable income = higher rents.
In the webinars Brandon talks about going the extra mile and doing what most investors simply won't to find a great deal such as driving for dollars and sending mailers. If you do the things he mentions then sooner or later I'm sure you can find a great deal - maybe not as good as the prices from three years ago but it's worth trying!
Hello All,
I've been lurking here for a few months now, mostly saving, reading, and absorbing. I finally have some cash to start investing, but the problem is every property I analyze in the area does not cash flow at all. How do these sellers expect to sell a negative cash flowing property to an investor? Are these signs we're in a bubble here?
The original game plan was to purchase the MFR, live in 1 of the units for a few years and rent out the remaining units. I don't necessarily expect to cash flow while I'm IN the property. But if i were to move out in the next 2-3 years, I expect it to cash flow then. So I've been analyzing each deal as if I'm not going to live in it.
Should i give up my MFR idea here in Los Angeles (Preferably Culver City, Marina Del Rey, Van Nuys) really any decent area of LA north of the 105 and west of the 110 and look out of state instead?
How does one pick a market when investing out of state? I'd like to be relatively close by, How does one pick between WA (Washington), OR (Oregon) , AZ (Arizona), NV (Nevada)?
Thanks in advance!
@Aimen Shawki If you can pull off the plex deal in LA I think that would be your wisest long term move. LA is number in the nation for total returns since 2000. There are many underlining reasons for this and they all revolve around one word...location. Good luck with your search!
Haven’t seen you around for awhile bud. Glad to see you active.
Aimen,
I would shy away from the LA City stuff. I have a good friend who owns a lot in the city of LA and he always gets burned on the rental inspections. I would recommend staying more into Glendae/Burbank or towards the east into Whittier/Montebello/La Habra....If you need a RE broker, I am happy to help and do give a buyer rebate. I own rentals myself and know the business in and out, and am CEO of a flip company....Message me anytime.
As a broker myself, I can say that he’s completely priced out of Glendale/Burbank. He can possibly find something more inland that may pencil out.
Obviously rent controlled areas are never the most desirable for an investor, but some pockets of LA do provide higher yields, especially if you can recognize the gentrification.
Aimen, welcome to the California Conundrum! I gave up trying to buy cash flow properties here in 2008. Been buying out of state ever since. The criteria you need to be looking for is 1. where can you buy with positive cash flow OOS, and 2. Where is there a market that is poised for growth. The criteria of "close states to Calif" should not be a criteria. A flight of an hour or two further will make no difference. If you don't fly and only drive, then you will have a problem investing out of state. Contrary to what I often read here on BP, it is not hard to find cash flowing properties. You just need to go to where they are. But remember, cash flow is not enough, we have to expect appreciation also, and we can. DM if you want to talk more about this. We are local to each other.
Hello All,
I've been lurking here for a few months now, mostly saving, reading, and absorbing. I finally have some cash to start investing, but the problem is every property I analyze in the area does not cash flow at all. How do these sellers expect to sell a negative cash flowing property to an investor? Are these signs we're in a bubble here?
The original game plan was to purchase the MFR, live in 1 of the units for a few years and rent out the remaining units. I don't necessarily expect to cash flow while I'm IN the property. But if i were to move out in the next 2-3 years, I expect it to cash flow then. So I've been analyzing each deal as if I'm not going to live in it.
Should i give up my MFR idea here in Los Angeles (Preferably Culver City, Marina Del Rey, Van Nuys) really any decent area of LA north of the 105 and west of the 110 and look out of state instead?
How does one pick a market when investing out of state? I'd like to be relatively close by, How does one pick between WA (Washington), OR (Oregon) , AZ (Arizona), NV (Nevada)?
Thanks in advance!
Do you think this applies in 2024 as well? I been looking at multi-family and want to do the owner-occupant route but I am wondering if prices will stabilize for the next 3-5 years and not go up at all since prices have run up 30-40% in Los Angeles area. Then with no cash flow and no immediate appreciation, and on top of that rent control is this a good time to get in?
Hello All,
I've been lurking here for a few months now, mostly saving, reading, and absorbing. I finally have some cash to start investing, but the problem is every property I analyze in the area does not cash flow at all. How do these sellers expect to sell a negative cash flowing property to an investor? Are these signs we're in a bubble here?
The original game plan was to purchase the MFR, live in 1 of the units for a few years and rent out the remaining units. I don't necessarily expect to cash flow while I'm IN the property. But if i were to move out in the next 2-3 years, I expect it to cash flow then. So I've been analyzing each deal as if I'm not going to live in it.
Should i give up my MFR idea here in Los Angeles (Preferably Culver City, Marina Del Rey, Van Nuys) really any decent area of LA north of the 105 and west of the 110 and look out of state instead?
How does one pick a market when investing out of state? I'd like to be relatively close by, How does one pick between WA (Washington), OR (Oregon) , AZ (Arizona), NV (Nevada)?
Thanks in advance!
Do you think this applies in 2024 as well? I been looking at multi-family and want to do the owner-occupant route but I am wondering if prices will stabilize for the next 3-5 years and not go up at all since prices have run up 30-40% in Los Angeles area. Then with no cash flow and no immediate appreciation, and on top of that rent control is this a good time to get in?
Right now is ALWAYS the best time to buy real estate if you can qualify.