Small Multi-Family Los Angeles

15 Replies

@Jamie Garcia

I just purchased a fourplex in NELA in January.

It’s a tough market but possible if you aren’t in it for cash flow as a first time buyer. Below are the details of my deal. Feel free to ask any questions.

Property

1 x 3/2.5

2 x 1/1 (I will live in one)

1 x studio

Purchase price $725,000

Closing costs $30,950

Rehab estimated $165,000 (this is wrapped into my financing)

Pro forma rents

3/2.5: 3,000

1/1: 1600

Studio: 1400

Total 6,000

This property was listed on the MLS. I focused on desirable adjacent areas and properties that were on the market more than 100 days. I studies the area I wanted to buy in and looked for properties that were priced too high for flippers but still needed a lot of work. My goal was to find a motivated owner who didn't have the cash to fix the place up.

My loan was NACA (naca.com) which allowed me to buy without 20 down and I did not get PMI. I can go further into that program if you're interested.

My loan rate is 3.375% 30 year fixed.

Good luck and just be persistent.

JT

@Jonathan Taylor thanks for the great post. First time I've heard of the NACA financing. Sounds interesting. What area of NELA did you buy?

To add to the thread:

We purchased a triplex to house hack in North Alamitos Beach, Long Beach in 2017 for $625,000. After going through a 7 month eviction, we've been able to get the rents on the remaining 2 - 1/1 units up to $2600. Market should be closer to $1500 -$1600 / unit or more once renovated. 

@Chad Gaither Anytime, NACA is a non profit that helps new owners purchase SFR or MF (1-4 units) with character based qualifications since it is geared toward low or moderate income folks. They also aid existing single property owners in predatory loan terms to refi into a more sustainable mortgage. I also was able to wrap about 85%of my rehab into the loan. Now this sounds like a sales pitch but there are downsides.

First, you cannot own more than one property to do this program, second, its a huge headache to do. It took me 10 months to be approved to buy through them with constant emails, calling, paperwork due to over worked staff and under developed systems. It was a 10-15 hr a week job for the better part of a year and then I had to find a buyer willing to work with this program and because of that, my escrow was 4 months long on a fourplex... so ... tread wisely but it is a good program if, keyword IF, you can close. 

That said, I bought in Glassell park and should have two of the three units online end of July. 

Why did your eviction take 7 months? How id you find your triplex?

@Jonathan Taylor wow sounds like an interesting program. amazed you were able to find a seller to accept it but kudos to you for getting through all of that and I imagine no PMI feels great. We went with the Feddie Mac Home Possible, conventional with 5% down, no headaches like with FHA but there's still PMI.

Glassell Park is a great area. Nice choice. The eviction took us 7 months because we live in California, and tenants can basically go online and find a playbook to extend an eviction indefinitely and there's very little you can do if they know how to play the game. This was an inherited tenant but we will definitely be screening our next tenants very carefully.

@Chad Gaither amen to the CA tenant BS that seems to suck the investment out from under you. I had an adopted tenant who thankfully took the extortion-level HCIDLA  'minimum' buyout agreement but in the end it will payoff. Im now studying all the screening tactics to avoid this in the future, what tactics will you incorporate in your future screening?

We went looking for a MFR in LA and instead found a "highly motivated" seller on a SFR (10% CoC) in Studio City. So now we're back looking for MFR's. I've learned a couple important things about LA Real Estate (I live in SF Bay Area.)

1) The vacancy rate is insanely low. For those people who refuse to invest in LA because "it's expensive," I offer that it's also expensive in Bumblewick, USA to not have a tenant.

2) Studio City attracts a lot of wealthy people. While I'm quite happy with my sexy rent, these people move around a lot: their show ends, they buy a house, their company strikes it rich and they're out. Going forward, I'm looking for a MFR in an area where people have "lived for a long time." Even if that means sacrificing some rent. Transitions are expensive and stressful....

Back to the MFR - We're looking for something in the $1.5-2.8 range. I need doors (trying to get REPS status despite another career,) so West Hollywood etc are out.... Any advice appreciated!

@Carla Carvalho curious why you’re not looking in the Bay Area, maybe San Jose, etc. Closer to home is always easier to manage and understand. And LA is an expensive market too, so it can’t be the cheap price per unit!

@Amit M. Thanks for the insight.

The numbers in LA have been better for us. I'm getting 9% CoC for a SFR in Studio City. No chance for that anywhere (safe) in Bay Area. San Jose is not cheap either. Approaching $2mil for a nice area.

@Amit M. Good point about distance. In lieu of my 25% referral fee (I'm a licensed RE,) my LA agent set me up with the whole enchilada of service providers and is comping annual open houses when needed. That's the only way, I agree. We also ran rentals in Chicago and NY with "the right people" in place. Tricky but possible.

@Carla Carvalho I'm assuming that the agents open houses are to help with future tenant showings? If the agent is also helping manage the property, then yes I see the value in that when buying out of area. That's a good leverage to make out of area RE work, and more people on BP should explore it.