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Multi-Family and Apartment Investing

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Marx A
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Los Angeles:Investing in Real state multi-unit building

Marx A
Posted Jul 11 2011, 19:48

We are a working couple first time buyers in Los Angeles,California. We have 300K$ down and were preapproved for 900K loan.
We never owned property before so we are seeking expertise advice and answers to these questions
1. We were wondering about what people who have gone this route have to say or give advice on that.
2. Is this the right way to go?
3. As we understand how important location can be, we are debating whether we buy it in Burbank N Hollywood Sherman oaks, La near USC or West Hollywood? Investment wise what would make the most sense?
4. Also for maximizing investments and cash flow what’s best 2, 3, 4 units or more is best?
5. What things do we look for when we go see the apartment?
6. What questions should we ask the seller?
7. What to look for in the surrounding? Besides school public transportation and safety obviously?
Any comment and/or advice is greatly appreciated!

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Steve L.
  • Investor
  • Rancho Cucamonga, CA
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Steve L.
  • Investor
  • Rancho Cucamonga, CA
Replied Jul 11 2011, 22:15

Marx-

As a disclosure, I am not an apartment owner currently. I own single family rentals. But I have looked at many apartments and here is what I look at.

Price per unit and the CAP rate is the two starting points. In the areas you mentioned you are probably going to pay over 100,000 per unit and the "true" cap rate will be under 7%.

If you find better numbers it probably is a deal relative to other deals in the area. I am not real excited about owning multi-family in those areas as the return is really low.

4-units or less you can qualify for the easiest financing. I would try to buy a 4-units or more if you can.

You should look for deferred maintenance, things you can improve to increase revenue and the caliber of tenants when doing inspections.

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Loc R.
  • Note Investor
  • Pasadena, CA
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Loc R.
  • Note Investor
  • Pasadena, CA
Replied Jul 11 2011, 22:28

2. It is up to you. You need to figure out for yourself what your strengths & weaknesses are, and what your short-, medium-, and long-term goals are.

3. Stay away from rent-controlled areas.

4. A good deal on a 2-unit building is better than a bad deal on a 4-unit building.

5. Look for upside. If the rents are maxed out given the neighborhood, then there's no upside.

6. You probably won't be meeting with the seller face-to-face, but if you are, I'd find out his motivation(s).

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Matthew Paetz
  • Real Estate Investor
  • Los Angeles, CA
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Matthew Paetz
  • Real Estate Investor
  • Los Angeles, CA
Replied Jan 17 2012, 13:06

Marx,

I wanted to follow up with this post and see if you have found the advice and or property you're looking for?