All
Members
Companies
Blog
Forums
Podcast
Webinars
    User Log in  /  Sign up
  • Forums
    Newest Posts Trending Discussions Followed Forums Real Estate News & Current Events General Landlording & Rental Properties Buying & Selling Real Estate Deal Analysis See All
  • Education

    Read

    BiggerPockets Blog BPInsights: Expert Analysis Guides Glossary Reviews Member Blogs

    Watch

    Webinars Video Library Financial Independence Blueprint Intro to Real Estate: Rentals

    Listen

    BiggerPockets Real Estate Podcast BiggerPockets Money Podcast BiggerPockets Business Podcast Real Estate Rookie Podcast Daily Podcast (Audio Blog)

    Topics

    Business Operations Finance Finding Deals Property Management Property Types Strategy
  • Network

    Recommended Vendors

    Real Estate Agents Mortgage Lenders Hard Money Lenders Insurance Contractors Investment Companies Build Your Team

    Search

    Members Events Jobs
  • Tools

    Calculators

    Rental Property Fix and Flip BRRRR Rehab Estimator
    Wholesaling Mortgage Payment 70% Rule Airbnb

    Services

    BPInsights: Property Insights Tenant Screening Property Management Lease Agreement Packages

    New Feature

    BPInsights (beta)

    Quickly analyze a property address or ZIP Code to compare your rent in your neighborhood.

    Analyze a property
  • Find Deals
    Real Estate Listings Find Foreclosures External Link Ads, Jobs, and Other
  • Bookstore

    Real Estate Books

    Profit Like The Pros Bidding to Buy See all books

    Featured Book

    BiggerPockets Wealth Magazine book cover
    BiggerPockets Wealth Magazine

    Written by financial journalists and data scientists, get 60+ pages of newsworthy content, expert-driven advice, and data-backed research written in a clear way to help you navigate your tough investment decisions in an ever-changing financial climate! Subscribe today and get the Oct/Nov issue delivered to your door!

    Get the Magazine
  • Pricing
Log In Sign up
User
Quick search links
Podcast Hard Money Lenders Books Washington
ForumsArrowGeneral Real Estate InvestingArrowIs it really not possible to cash flow in the Los Angeles area?
  • Newest Posts
    • Newest Posts
    • Unanswered Discussions
  • Trending
    • Top Discussions
    • Trending Discussions
  • Browse Forums
Search Nova
Create post

Is it really not possible to cash flow in the Los Angeles area?

10 Replies

  • Share on Facebook
  • Share on Twitter
  • Share on LinkedIn
Rotate Log in or sign up to reply
user profile avatar
  • Posts 40
  • Votes 4

Jacob Barnhart
from Durant, Oklahoma

posted over 3 years ago

First, it has always been my dream to be able to move my family out to Santa Monica. Our family has always loved the area. Which is why it concerns me when I read how its impossible to cash flow in that given area.

I've heard from many places that it's just about impossible to cash flow in the very populated California cities. I did a little looking through zillow and rental websites to determine market rents in the area and I found this triplex that seems to cash flow from year one. ( https://www.zillow.com/homes/for_sale/Santa-Monica... ) [Mortgage of only $7200 with rents $8900 and to me it appears the rents are even a bit below market.]

I've seen many properties that seem to have cash flow like this or better in this area - even at the asking price of the seller- and feel like I must be missing something.

Obviously I know I have no way of knowing what all of the expenses are for this property, but it appears at first glance like these properties do in fact profit. Nevermind the fact that it may be a low cash-on-cash ROI due to it's very steep purchase price, which doesn't matter for me if it means achieving my goal.

Does anybody more experienced than me have any input? on whether I am crazy and just miscalculating or is it actually viable to find cash-flowing properties in this area?

Rotate Log in or sign up to reply
user profile avatar
  • Posts 320
  • Votes 250

Max Gradowitz
Attorney from Bakersfield, CA

replied over 3 years ago

Right now, trying to buy a rental property in LA and similar densely populated cities in California that cash flows well is nearly impossible.  But, if your plan is to move here, the good news is that some cities within reasonable driving distance from LA (1-3 hours away) that do cash flow and are not expensive to purchase in.  Some people I know buy properties in Kern County and Northernmost LA County for these reasons, both for investments and their own residents.

Rotate Log in or sign up to reply
user profile avatar
  • Posts 6.2K
  • Votes 3.7K

Aaron K.
Specialist from Riverside, CA

replied over 3 years ago

Some things to consider for that purchase price, that will hamper your cash flow, Property tax which will likely be 1% or higher, property management (if you aren't self managing), insurance, for a property that size could be over $1,000 per year.  Plus you will have to consider repairs, the farther inland you go the better your returns will be, but it will be difficult to achieve significant cash flow in the LA metro area.  It may be there but you will definitely have to dig.

Rotate Log in or sign up to reply
user profile avatar
Check Rosette Top Subjects:
Rentals, Real Estate Finance, and Traditional Financing
  • Posts 13K
  • Votes 23K

Russell Brazil (Moderator) -
Real Estate Agent from Washington, D.C.

replied over 3 years ago

Nearly all properties in all markets will cash flow if purchased with all cash.  

Rotate Log in or sign up to reply
user profile avatar
  • Posts 10
  • Votes 2

Maksym Logvin
from Santa Fe, New Mexico

replied over 3 years ago

Three hours drive to work? This is how much you need to earn to spend every day on the road for almost 6 hours?

Rotate Log in or sign up to reply
user profile avatar
  • Posts 6.2K
  • Votes 3.7K

Aaron K.
Specialist from Riverside, CA

replied over 3 years ago
Originally posted by @Russell Brazil :

Nearly all properties in all markets will cash flow if purchased with all cash.  

 Completely agree. By the way your podcast is my favorite.  Cash is king, especially in competitive markets too, which Santa Monica is.

Rotate Log in or sign up to reply
user profile avatar
  • Posts 6.2K
  • Votes 3.7K

Aaron K.
Specialist from Riverside, CA

replied over 3 years ago
Originally posted by @Jacob Barnhart :

First, it has always been my dream to be able to move my family out to Santa Monica. Our family has always loved the area. Which is why it concerns me when I read how its impossible to cash flow in that given area.

I've heard from many places that it's just about impossible to cash flow in the very populated California cities. I did a little looking through zillow and rental websites to determine market rents in the area and I found this triplex that seems to cash flow from year one. ( https://www.zillow.com/homes/for_sale/Santa-Monica... ) [Mortgage of only $7200 with rents $8900 and to me it appears the rents are even a bit below market.]

I've seen many properties that seem to have cash flow like this or better in this area - even at the asking price of the seller- and feel like I must be missing something.

Obviously I know I have no way of knowing what all of the expenses are for this property, but it appears at first glance like these properties do in fact profit. Nevermind the fact that it may be a low cash-on-cash ROI due to it's very steep purchase price, which doesn't matter for me if it means achieving my goal.

Does anybody more experienced than me have any input? on whether I am crazy and just miscalculating or is it actually viable to find cash-flowing properties in this area?

 Another thing that you should think about, is why is it your dream to move to Santa Monica specifically? If it is the beach, there are cheaper beach cities. If it is the city, there are cheaper areas of the LA Metro.  Just some things to consider.

Rotate Log in or sign up to reply
user profile avatar
  • Posts 326
  • Votes 127

Alex J.
Investor from Tarzana CA and Houston, TX

replied over 3 years ago

South la still cash flows

Probably putting more down cash flows

You are not crazy

Rotate Log in or sign up to reply
user profile avatar
  • Posts 2.7K
  • Votes 3.1K

David Faulkner
Investor from Orange County, California

replied over 3 years ago

I've been cash flowing quite well in SoCal for the past 15 years, so I assure you that it is possible ... and my cashflow increases every single year with rent increases, which is another thing to consider. However, you also need to be aware that many places in SoCal (like Santa Monica) are under rent control. While I prefer to invest in areas of LA that are NOT subject to rent control, if you study and understand the ordinances then often times not every single property will be subject to rent control even in rent controlled areas. For example, single family homes are often exempt. Much of Orange County and I believe Riverside and San Diego Counties are not rent controlled. Also realize that the underlying reason places put in rent control is because rents are very high and increase rapidly, so while I am no fan of rent control, I am a big fan of the underlying market conditions that cause it to come into being.

Rotate Log in or sign up to reply
user profile avatar
Check Rosette Top Subjects:
Rentals, Flipping, and Maintenance
  • Posts 3.0K
  • Votes 3.3K

Dan Heuschele
Investor from Poway, CA

replied over 3 years ago

Property tax at 1.25% (typically a little conservative) would be almost $2k month.

I would place cap expense on this RE at more than $500/Month (but use $500 for calculations below).  Many people will think I am conservative with this but I do not agree.

Vacancy at 5%.

Insurance: I have no units in Santa Monica but I will use $150/month but I am sure others could provide a more accurate number.

Maintenance: I have no units with this mix but I think $150/month might be close.

Utilities for laundry room and ?: Maybe $50/month if they are not separately metered (more if separately metered).

8900 - 7200 (PI: using your number but not sure what interest you used on what down payment to know how real this number is: non owner occupied has small rate premium) - $500 (cap ex) - 445 (vacancy) - 150 (insurance) - 150 (maintenance) - 50 (utilities) = 405/month if self managed.

10% Property management: would provide 405 - 890 (PM) = -$485 using a PM.

So it may have cash flow if self managed but not a lot.

Good luck

Rotate Log in or sign up to reply
user profile avatar
  • Posts 314
  • Votes 73

Carlos Altamirano
Rental Property Investor from Orange, CA

replied over 3 years ago

@Jacob Barnhart

Hello Jacob, any property can cashflow depending on the tenant you are trying to serve. Lots of people are cash flowing premium real estate here in Orange County by renting on a short term basis to tourists, business people, families, nurses etc. Converting a single family home into an assisted living facility or sober living will most like  cashflow. The key is understanding your customer, and serving  them well. One single family home can service many types of tenants. Personally, I like the midwest class B and C buildings for long term rentals servicing blue and white collar workers, and even section 8 tenants. Good luck! 

Rotate Log in or sign up to reply
  • 1

Free eBook from BiggerPockets!

Ultimate Beginner's Guide Book Cover

Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!

  • Actionable advice for getting started,
  • Discover the 10 Most Lucrative Real Estate Niches,
  • Learn how to get started with or without money,
  • Explore Real-Life Strategies for Building Wealth,
  • And a LOT more.

Sign up below to download the eBook for FREE today!

Download the eBook Now

Lock We hate spam just as much as you

Related Resources General Real Estate Investing
Don’t Invest Without Understanding the Risks—Here’s What You Need to Know
Single Family vs. Multifamily Rentals: Which Investment Is Right for You?
Maximize Your Tax Returns This April With These Smart Maneuvers
How to Start Investing In Real Estate at a Young Age (or a “Young at Heart” Age)
Why It’s Almost Always a Bad Idea To Invest in Real Estate To Save Money on Taxes
Resources Read, see, and learn more!
Link Real Estate Investment Calculators
Link BiggerPockets Blog
Link Path to Purchase
Link Mortgage Loans
Link Find a Contractor
Link Real Estate Agents
Link Hard Money Lenders
Link Real Estate Listings

Top Contributors

Gervon Thompson
Gervon Thompson
Brooklyn, NY
9.46
Score
Greg Scott
Greg Scott
SE Michigan
4.54
Score
Joe Villeneuve
Joe Villeneuve
Plymouth, MI
3.87
Score
Patrick Flanagan
Patrick Flanagan
Beaverton, Or
2.25
Score
Tanvir Sattar
Tanvir Sattar
Cincinnati, OH
1.88
Score

General Real Estate Investing Trending Discussions

  • W2 professionals - passive investor or DIY?
    39 Replies
  • Accounting Software - Multiple Entities
    3 Replies
  • Largest Problems You Run into on a day-to-day basis
    4 Replies
  • What is considered over leveraged?
    18 Replies
  • Multifamily Investing in Houston/ San Antonio/ Austin/Dallas
    2 Replies
Log in Sign up

Log in

Forgot password?

If you signed up for BiggerPockets via Facebook, you can log in with just one click!

Log in with Facebook

Or
btn_google_dark_normal_ios Created with Sketch. Continue with Google

Let's get started

We just need a few details to get you set up and ready to go!

Use your real name

Use at least 8 characters. Using a phrase of random words (like: paper Dog team blue) is secure and easy to remember.

By signing up, you indicate that you agree to the BiggerPockets Terms & Conditions.

Or
btn_google_dark_normal_ios Created with Sketch. Continue with Google

Why create an account?

Receive a free digital download of The Ultimate Beginner's Guide to Real Estate Investing.

Connect with 1,000,000+ real estate investors!

Find local real estate meetups and events in your area.

Start analyzing real estate properties, we do the math for you.

It's free!

Explore

  • Membership
  • Community
  • Education
  • Marketplace
  • Tools
  • FilePlace
  • REI Resources
  • Perks
  • Glossary
  • Reviews
  • iOS App
  • Android App

Company

  • About Us
  • Press
  • Advertising
  • Careers
  • Stats
  • Contact Us

Important

  • Editorial Guidelines
  • Terms of Use
  • Rules
  • Privacy
  • FAQ

Social

  • Facebook
  • Twitter
  • YouTube
  • Instagram
© 2004-2021 BiggerPockets, LLC. All Rights Reserved.