East Los Angeles Multifamily

25 Replies

Purchased a multiunit - 3bd/1ba & 1bd/ba

Cost: $490,000

Down payment: $200,000

Renovation Budget: $70,000

Mortgage: $2100/month - 30 yr fixed @ 4%

Expenses: $190/Month (Utilities, upkeep, and administration) 

Rental Income: $4000/month ($2400 3bd/1ba & $1600 1bd/ba)

Profit: $1600-$1710 a month depending on utility costs

To keep costs down my wife and I did as much work as we could, such as painting, installing kitchen cabinets, laminate flooring, light fixtures, etc. But hired professionals for things like plumbing ($6100), AC/Heating ($15,000), electrical ($2000) and landscaping ($5000) 

All profit each month is directly applied to the principle. The goal is to pay off the house ASAP so we can have a stable income when my wife and I retire in the next 15-20 years

Let me know your thoughts or questions by leaving a comment.

Here’s a short video I made on the renovation process:

Updated 10 months ago

https://youtu.be/twoDK02m6eo

Originally posted by @Peter Sinclair :

Purchased a multiunit - 3bd/1ba & 1bd/ba

Cost: $490,000

Down payment: $200,000

Renovation Budget: $70,000

Mortgage: $2100/month - 30 yr fixed @ 4%

Expenses: $190/Month (Utilities, upkeep, and administration) 

Rental Income: $4000/month ($2400 3bd/1ba & $1600 1bd/ba)

Profit: $1600-$1710 a month depending on utility costs

To keep costs down my wife and I did as much work as we could, such as painting, installing kitchen cabinets, laminate flooring, light fixtures, etc. But hired professionals for things like plumbing ($6100), AC/Heating ($15,000), electrical ($2000) and landscaping ($5000) 

All profit each month is directly applied to the principle. The goal is to pay off the house ASAP so we can have a stable income when my wife and I retire in the next 15-20 years

Let me know your thoughts or questions by leaving a comment.

Here’s a short video I made on the renovation process:

 Looks good and should be good long run. Keep in mind the ductless mini splits hvac systems work well enough in the smaller style homes and are relatively cheap as compared. 

Good luck!

@Peter Sinclair

Congrats!  Where (roughly) is this property and how did you find it?  I didn't think it's possible to find a cash flow duplex around East LA.  

Thanks!

Henry

This property was in East LA, just above Caesar Chavez 

Cash flow very much depends on much you’re willing invest.. When we decide on purchasing a property is has to be vacant, under $600k and able to produce $1000 rough profit per month (Rental income - Mortgage - Expenses) 


Originally posted by @Henry J. :

@Peter Sinclair

Congrats!  Where (roughly) is this property and how did you find it?  I didn't think it's possible to find a cash flow duplex around East LA.  

Thanks!

Henry

@Peter Sinclair Looks awesome! Very impressed with your final product and very cool that you did a lot of the work yourself to keep costs down. Would you mind sharing where you got your materials? Was it all Home Depot, Lowes, and IKEA or did you order some of the products direct? Are the cabinets RTA? Did you put the softclose hardware in? Love your look and just did something similar in Kansas City. Once my refi goes through I'm going to post a BP success story about it. I want to duplicate it on a larger scale making very livable small units with modern finishes. Looking at specing out all the materials right now and would love to hear where you got some of yours! Really great work! 

Congrats, Looks nice especially for a rental. Also I believe that East L.A doesn't have rent control since it's an 'unincorporated' part of L.A . It'll definitely be interesting to see what things will be like in the next 15-20 years. 

Always interesting to see people post about buying rentals in L.A since it's seems so rare. The last post I remember reading about in the L.A area was also one in East L.A .

Originally posted by @Lee Ripma :

@Peter Sinclair Looks awesome! Very impressed with your final product and very cool that you did a lot of the work yourself to keep costs down. Would you mind sharing where you got your materials? Was it all Home Depot, Lowes, and IKEA or did you order some of the products direct? Are the cabinets RTA? Did you put the softclose hardware in? Love your look and just did something similar in Kansas City. Once my refi goes through I'm going to post a BP success story about it. I want to duplicate it on a larger scale making very livable small units with modern finishes. Looking at specing out all the materials right now and would love to hear where you got some of yours! Really great work! 

All of the tile was from HomeDepot. The kitchen wall tile was the only one that was special ordered through the website at $2.09/sq ft. The bathroom wall tile and floor tile were $1.89 sq ft. 

The Bathroom vanity was from Ikea.. I think it was around $500ish 

We order our cabinets from a small local business that imports his stuff in from China. Although we didn’t intend to put in softclose, he ended up giving us all the softclose hardware on the house. The handles were ordered from Amazon. 

We try to make the units appear very high end using inexpensive materials where we can. In all honesty, the units we renovated so far look better than our actual house. 

I cant wait to read your BP success story! 

Here’s a video of our very first renovation:

https://www.youtube.com/edit?o=U&video_id=SIsky7tk6j4

Originally posted by @Joseph M. :

Congrats, Looks nice especially for a rental. Also I believe that East L.A doesn't have rent control since it's an 'unincorporated' part of L.A . It'll definitely be interesting to see what things will be like in the next 15-20 years. 

Always interesting to see people post about buying rentals in L.A since it's seems so rare. The last post I remember reading about in the L.A area was also one in East L.A .

 Thanks!

East LA doesn’t have rent control. We do have another duplex in a rent controlled area of LA but because it was built after 78’ it isn’t under rent control but does require an annual inspection from the LA city housing department. 

As downtown LA continues to build expensive luxury apartments it will push out those how cant afford it into the surrounding areas such as Boyle Heights, South Central LA, and Inglewood. In turn, those people will be forced out into areas where homes are even cheaper. 

I believe LA costs way too much, that’s why its rare. You need so much working capital to get an affordable mortgage.. after getting into this real estate game I realized it takes ALOT of money to make money lol 

Hi Peter, great job with your multi-family. I live in LA and trying to find something cash flowing that is worth it seems impossible. I wasn't aware that East LA doesn't have rent control - that's great news. How have your tenants been? How long did it take to find tenants?  

Originally posted by @Megan Alice :

Hi Peter, great job with your multi-family. I live in LA and trying to find something cash flowing that is worth it seems impossible. I wasn't aware that East LA doesn't have rent control - that's great news. How have your tenants been? How long did it take to find tenants?  

 Hi Megan,

To find something that is cash flowing is very difficult, especially if you’re on a budget. The rent control isn’t that bad of thing, considering your not purchasing a property that already has tenants. We try to find places that are empty, so that we can renovate to the amount of rent we need to make a profit. Sometimes, you can ask as a closing condition that all units be delivered vacant. 

For example, we aim to collect rent that is double what are mortgage would be. If you renovate an apartment that looks fairly modern with inexpensive materials you should be able to manage decent rental income. For example, 3/2 houses rent for about $2200-$2800 depending on parking, amenities, and how updated it is. 

It takes us about 2-3 weeks to find tenants. We use the cozy app for applications and rental payments. 

@Peter Sinclair

Between your 40% down payment and 70k renovation budget, you’ve got a lot of money tied up in this property.

Are you planning to cash out refi?

What is the new value of your duplex?

Originally posted by @Eric G. :

Peter Sinclair

Between your 40% down payment and 70k renovation budget, you’ve got a lot of money tied up in this property.

Are you planning to cash out refi?

What is the new value of your duplex?

Hello Eric:

The plan is to pay off the house ASAP, and not have any debt. This helps us avoid the amortization costs, so we can really capitalize on equity that will be built over time. Essentially, we invested $270k into this property and will (hopefully) see a profit of $19,200 for the year. That’s a 7% return on the investment, comparable to conservative stock trading. 

The new value of the duplex is around $600k. 

Nice and congrats. That’s a 180deg turn around to reach for the toilet paper! Jk looks great.

Two suggestions:

AC-$15K suggest it is wired, plumbed and ready. When tenants request you install it.

Landscape-$5K yard can be drought tolerant water wise.

Originally posted by @Sam Shueh :

Two suggestions:

AC-$15K suggest it is wired, plumbed and ready. When tenants request you install it.

Landscape-$5K yard can be drought tolerant water wise.

 Thanks for the suggestions! 

Water wise landscaping was done. We did a small area of turf, used a lot of decomposed granite, and put drought tolerant plants in giant pots with a drip irrigation. We also used crushed stones for the side areas of the house. I really think we overpaid but we went ahead and did a bit extra Incase we decide to sale the house later next year. 

For the AC system we installed a multi-zone ductless. So plumbing would be difficult but electrical not so bad. I was thinking of saving costs on the next renovation by doing wall AC units (essentially bigger window ACs) 

It's a very pretty unit.

I've been trying to purchase a multi-family in Boyle Heights (or maybe Lincoln Heights) for a couple of months now. Currently in escrow for the second time. My brother and I really wanted to focus on BRRR but as people have noticed, really hard to make it work in LA. The typical cap rate seems just terrible. But appreciation, in contrast, has been off the charts for like the past 10 years (bubble?).

The 3 times we put out offers on nice places, we were completely outbid and the properties went for a pretty big margin over ask. It seems to me like the only to really make a rental work out there is to really fix it up a lot (like you did there, looks gorgeous btw).

Anyways, congrats on getting something to pay for itself in that market. I get so jealous sometimes hearing the discussions of these 120k 3 bedrooms out in the rest of the country. LA is just stupidly expensive. But I think Boyle Heights is where it's at right now. Downtown has really come back to life in a way I can hardly believe, and Boyle Heights is a really short commute from the downtown circle. Really fun neighborhood too. I grew up in LA but have been away for a long time. Back when I last lived there it was still called "East LA" and was considered sort of a Latino slum. The cynic in me has to smirk at least a little at the rebranding. But I gotta admit, it was effective. The neighborhood isn't slummy at all any more. It's getting really cool. Amazing food. Went to the streetside version of Pinches Tacos last time I was out there. Incredibly good.

Originally posted by @Omar Matthew Belove :

It's a very pretty unit.

I've been trying to purchase a multi-family in Boyle Heights (or maybe Lincoln Heights) for a couple of months now. Currently in escrow for the second time. My brother and I really wanted to focus on BRRR but as people have noticed, really hard to make it work in LA. The typical cap rate seems just terrible. But appreciation, in contrast, has been off the charts for like the past 10 years (bubble?).

The 3 times we put out offers on nice places, we were completely outbid and the properties went for a pretty big margin over ask. It seems to me like the only to really make a rental work out there is to really fix it up a lot (like you did there, looks gorgeous btw).

Anyways, congrats on getting something to pay for itself in that market. I get so jealous sometimes hearing the discussions of these 120k 3 bedrooms out in the rest of the country. LA is just stupidly expensive. But I think Boyle Heights is where it's at right now. Downtown has really come back to life in a way I can hardly believe, and Boyle Heights is a really short commute from the downtown circle. Really fun neighborhood too. I grew up in LA but have been away for a long time. Back when I last lived there it was still called "East LA" and was considered sort of a Latino slum. The cynic in me has to smirk at least a little at the rebranding. But I gotta admit, it was effective. The neighborhood isn't slummy at all any more. It's getting really cool. Amazing food. Went to the streetside version of Pinches Tacos last time I was out there. Incredibly good.

 This has some potential (if it can be delivered vacant).

-https://www.redfin.com/CA/Los-Angeles/1952-City-View-Ave-90033/home/6938332

Boyle Heights is being bought up like crazy... We got really lucky when we found our first duplex; we found it by following some “OPEN HOUSE” signs. I would suggest looking at East LA (zip code 90063), its in a non-incorporated area of LA, meaning no rent control, and its a bit easier to find housing. Also, I’m noticing South LA, and Inglewood on the rise. Prices are lower there, I believe in the $300ks, and rents in Inglewood are going up. 

Yeah, it crazy to see how inexpensive housing is in other parts of the country! LA down payments can fully payoff multiple properties. 

I grew in the LA area, went from Inglewood to Pasadena and then to Altadena. I remember when everything to the east of the 5 was East LA and when Highland Park and El Serrano were overunned with gangs! And If you haven’t been to Silverlake lately.. it has completely changed! 

Omar, I sure you’ll come across a deal sooner or later! Till then feel free to hit me up and hopefully I can share some advice from the mistakes we made, so you wont have to. 

ha! 1952 City View!

My brother did a drive by on that one. I forget why he didn't like it. He found a craftman in 90033, and has house hacked it so he's almost paying no rent. W could probably have already refi'd to make our next purchase easier but ...um...some stuff happened to make that less practical for him. Now he wants to just hold on the the equity for now. 

It looks like we're gonna get through equity this time but the property we are buying is WAY more run down than the one he managed to get. Duplex on Ithica for 399. We're still negotiating terms. It's gonna need foundation work, and a tone of other stuff. We spent about 40k fixing up my brother's place but this one is gonna cost a bit more. The last place we looked at was another super run down place, also with foundation issues but at 510 and the sellers wouldn't budge, not on price, not on terms. This time at least the seller seems to understand their property is falling apart, so we're optimistic. 

The rents are vastly under market so if we fix it up, and can even get one of the two units empty, it should work nicely.

I grew up in Glendale. But I live in China now so it's a bit weird. By brother is there on the ground, and he's the one who zones in on Boyle Heights. But I've got the credit and a better head for money. Then his room mate, who was actually the seller on his current home, is a construction guys so that's our team so far. 

I only looked at your pictures. Does the video show any of the outside work? We're still trying to come up with a good economical way to do a backyard patio area on his craftsman. The stuff he priced so far, some sort of brick patio or flat stones seemed way to expensive. We haven't come up with an economical alternative to the ugly, cracked and warped sidewalk type paving that's out there now.

@Peter Sinclair   , I was born and grew up in L.A too. Imagine how cheap property was when those areas were considered 'rough gang areas'. Echo Park was considered a gang area too (Mi Vida Loca was based there) . Now average home price is $800,000 ...crazy. 

It does seem like the gentrification could spread to East L.A since it's very close to Downtown and right next to Boyle Heights. The no rent control thing is nice too. But I wouldn't be surprised if they do expand rent control to other areas and to cover more property types. The city seems to be way more pro tenant versus landlord. 

Lot's of these tenant groups are organizing 'against gentrification' so we will see what the city does to appease them.

In South L.A the city council has agreed to "slow gentrification" in the area recently. 

https://therealdeal.com/la/2017/11/27/council-does...

Originally posted by @Omar Matthew Belove :

ha! 1952 City View!

My brother did a drive by on that one. I forget why he didn't like it. He found a craftman in 90033, and has house hacked it so he's almost paying no rent. W could probably have already refi'd to make our next purchase easier but ...um...some stuff happened to make that less practical for him. Now he wants to just hold on the the equity for now. 

It looks like we're gonna get through equity this time but the property we are buying is WAY more run down than the one he managed to get. Duplex on Ithica for 399. We're still negotiating terms. It's gonna need foundation work, and a tone of other stuff. We spent about 40k fixing up my brother's place but this one is gonna cost a bit more. The last place we looked at was another super run down place, also with foundation issues but at 510 and the sellers wouldn't budge, not on price, not on terms. This time at least the seller seems to understand their property is falling apart, so we're optimistic. 

The rents are vastly under market so if we fix it up, and can even get one of the two units empty, it should work nicely.

I grew up in Glendale. But I live in China now so it's a bit weird. By brother is there on the ground, and he's the one who zones in on Boyle Heights. But I've got the credit and a better head for money. Then his room mate, who was actually the seller on his current home, is a construction guys so that's our team so far. 

I only looked at your pictures. Does the video show any of the outside work? We're still trying to come up with a good economical way to do a backyard patio area on his craftsman. The stuff he priced so far, some sort of brick patio or flat stones seemed way to expensive. We haven't come up with an economical alternative to the ugly, cracked and warped sidewalk type paving that's out there now.

 For the back patio maybe just do a simple gravel patio or decomposed granite with a paver border. Its fairly inexpensive and can be done yourself.

I was looking for pictures of the landscaping we did but I realize I deleted them from my phone. The only other ones I have are still on memory card from my camera. Before tenants moved in we took some “professional” pictures in case we decide to sale this property in the near future, once I get around to editing those images I’ll post them here. 

Interesting move, from California to China. My wife is Chinese. 


 For the back patio maybe just do a simple gravel patio or decomposed granite with a paver border. Its fairly inexpensive and can be done yourself.

I was looking for pictures of the landscaping we did but I realize I deleted them from my phone. The only other ones I have are still on memory card from my camera. Before tenants moved in we took some “professional” pictures in case we decide to sale this property in the near future, once I get around to editing those images I’ll post them here. 

Interesting move, from California to China. My wife is Chinese. 

 I'm gonna have to forward this to my brother. It looks really nice.

Not so odd to move to China. Never planned to stay here that long. But I speak the language and am not sure how I could possibly get a comparable job back home. If this real estate thing works out well enough, I'm hoping it will give me a way to get back to LA.

Originally posted by @Peter Sinclair :

Purchased a multiunit - 3bd/1ba & 1bd/ba

Cost: $490,000

Down payment: $200,000

Renovation Budget: $70,000

Mortgage: $2100/month - 30 yr fixed @ 4%

Expenses: $190/Month (Utilities, upkeep, and administration) 

Rental Income: $4000/month ($2400 3bd/1ba & $1600 1bd/ba)

Profit: $1600-$1710 a month depending on utility costs

To keep costs down my wife and I did as much work as we could, such as painting, installing kitchen cabinets, laminate flooring, light fixtures, etc. But hired professionals for things like plumbing ($6100), AC/Heating ($15,000), electrical ($2000) and landscaping ($5000) 

All profit each month is directly applied to the principle. The goal is to pay off the house ASAP so we can have a stable income when my wife and I retire in the next 15-20 years

Let me know your thoughts or questions by leaving a comment.

Here’s a short video I made on the renovation process:

 Great job.  I think it looks amazing.  I too live here in socal.  I am essentially giving up on finding a cash flowing property around here.  I really don't want to put down 40%.  The triplexes and 4 plexes around me go for 1.4MM and up.  40% of that is a big ouch and out of my budget.  Congrats!

@Yong Park , Socal is more a speculation market these days. If the 3-4 unit goes up from $1.4 million to $2million of course that would be nice but appreciation is less certain. 

I imagine many of these multifamily buildings like that are being bought as possible redevelopment opportunities too. Tear down the 3-4 unit and build several brand new townhomes ,condos or small lot homes. Maybe they figure even if they aren't making much cash flow at least they have some money coming in while they plan the development. 

Are you looking outside of socal or out of state to invest?

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