What are some "deal-breakers" for you when purchasing an MFR?

4 Replies

Amateur investor here that will hopefully soon be buying my first MFR. I live in Los Angeles and have been quietly searching for the past month or two, and I think I'm starting to find a few that I like.

I wanted to ask though, to the more experienced MFR owners out there.... what are some absolute deal-breakers for you when purchasing an MFR?

Like for example... I can't purchase anything under Rent Control (not experienced enough or ready for potential headaches). 

What about you?

For me, it'll all about the rent it will command. Even if the numbers work out, I try to stay away from very low cost rentals ($450/month and below) because of the typical headaches the renters bring. I've had a few and it always seems like a renter in a $450/month rental wants the until to be brought up to the $700/month range yet still pay $450.

If you are looking for non-rent controlled property in LA, expect to pay a huge premium (on top of the premium one pays in Los Angeles, anyway).  Also the supply of non-rent controlled properties is very small compared to rent controlled. 

Anyhow, to answer your question, obviously depending on price and other factors, I will never say never, but generally speaking, I would not purchase anything that had bedbugs.  I also would not purchase anything that had a tenant who was making frequent complaints to the housing department, and finally I would need to do a lot of research to purchase anything that had illegal units on it.  I had one property with a bootleg unit (from decades ago) and it was a real hassle to get it cleared up.

...check with the zoning office that the building is zoned for the number of units that the seller is claiming on their proforma

Originally posted by @Daigo Kurosaki :

Amateur investor here that will hopefully soon be buying my first MFR. I live in Los Angeles and have been quietly searching for the past month or two, and I think I'm starting to find a few that I like.

I wanted to ask though, to the more experienced MFR owners out there.... what are some absolute deal-breakers for you when purchasing an MFR?

Like for example... I can't purchase anything under Rent Control (not experienced enough or ready for potential headaches). 

What about you?

If it's in an area that I (and/or my property manager that I trust) don't feel comfortable managing it then it's a deal breaker.

Rent Control - (state / city specific) - there are ways to work with it (e.g. increase rent due to hardship) - that can be fixed.

House condition - roof leaking, oil tank, house needs renovation - again, that can be fixed.

Neighborhood - you can't really fix it by yourself, so either it's already a YES or a NO as-is. 

You can't really turn this from a NO to a YES yourself.  

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