Investor · Tarzana CA and Houston, TX · Member since 2015 · 326 posts · 130 votes
hey all
Los Angeles investors I need some help/insight!
I am looking to do a 1031 exchange on one of my properties and its sounding like i might be getting an offer worth selling for...the problem is i just did a search around town and I am not really finding anything thats better than a 5-6cap
Does anything better than a 6 cap exist in los angeles anymore? I am looking at a range of 500k-2m and striking out pretty bad
In order to get a better cap you'll have to do some work. It's damn near impossible to buy a property that's above a 5-6 cap. If one is listed it usually goes extremely fast and all cash buyers will most likely get it. Many investors in LA are relocating the tenants and remodeling/rehabbing the units to up the rent and then refinancing. This usually turns into an additional hundred grand or more (depending on the number of units) spent on the initial purchase price but then it allows rent increases that offer a much better return.
In order to get a better cap you'll have to do some work. It's damn near impossible to buy a property that's above a 5-6 cap. If one is listed it usually goes extremely fast and all cash buyers will most likely get it. Many investors in LA are relocating the tenants and remodeling/rehabbing the units to up the rent and then refinancing. This usually turns into an additional hundred grand or more (depending on the number of units) spent on the initial purchase price but then it allows rent increases that offer a much better return.
In order to get a better cap you'll have to do some work. It's damn near impossible to buy a property that's above a 5-6 cap. If one is listed it usually goes extremely fast and all cash buyers will most likely get it. Many investors in LA are relocating the tenants and remodeling/rehabbing the units to up the rent and then refinancing. This usually turns into an additional hundred grand or more (depending on the number of units) spent on the initial purchase price but then it allows rent increases that offer a much better return.
I am more than willing to get the work done and do all those youve mentioned but i cant even find "value add" plays right now...i dont know if this is the forum for it but if you do have something for me to look at i would be very interested!
Investor · Los Angeles, CA · Member since 2016 · 72 posts · 55 votes
10y
Agreed with @Archie Robb. Once you do the work yourself you can turn a property around, there are plenty of properties for sale where rents are way under.
Most of LA is under rent control so please be aware of that.
Long Beach does not have rent control, you may try looking there.
Commercial Mortgage Banker · Los Angeles, CA · Member since 2016 · 34 posts · 10 votes
10y
Maybe South LA, depending on how you run your analysis. Most sellers analysis with their CAP rates are wrong anyways - understanding expenses and proforma income. In LA you're mostly buying for future rents, either value add or gentrifying neighborhoods.
Investor · Los Angeles, CA · Member since 2014 · 122 posts · 35 votes
10y
@Kevinwong any neighborhoods that have caught your eye that are worth taking a good hard look at? What about ones running near the new metro line to the beach?
Investor · Tarzana CA and Houston, TX · Member since 2015 · 326 posts · 130 votes
10y
To all the posts... Thank you so much! i ended up legging into a 4plex in a non rent controlled part of south la and also bot 2 single family homes to hopefully expand on and sell at a later date....not exactly slam dunk deals but not terrible either.... hey at least i got that 1031 covered!
@stevejones oh man i cant believe im about 2 months late to this post I didnt realize there were replies to my own thread haha - I just listened to your podcast episode last week I grew up in a lot of the areas you are doing your work in and also have a few investments in echo park (although growing up in the glendale/lacrescenta area we never thought of it as anything but gangland haha how things change).
what are your thoughts of the river renovation and the mount Washington area... all hype or some real opportunity? seems like some nice views of downtown los angeles
Real Estate Coach · Venice Beach, CA · Member since 2012 · 6k+ posts · 3k+ votes
10y
If you're getting even a 5-6% cap in LA, I'm impressed! But are you looking for residential or commercial? Those are two different stories (potentially). Residential, no you probably won't find anything. Commercial is another sector though.
Investor · Tarzana CA and Houston, TX · Member since 2015 · 326 posts · 130 votes
10y
@aliboone
I actually found one in south LA , they arent exactly type A markets but its something i am comfortable with and have had investments for over 6 years. I like parts of South LA because the non rent control areas tend to still have strong rental demand and you are giving people a chance to live in a place and care about it. I personally go into a project with the idea to buy neglected, remodel higher end than what the neighborhood might command, then rent out at market or slightly above but not over the top. One thing I can say about south LA, they are people like everybody else. Screen tenants aggressively, require a deposit + first month last month to weed out those who are serious about their life, treat them with respect and they will treat you with respect
Real Estate Agent · Redlands, CA · Member since 2016 · 253 posts · 115 votes
10y
Hi Alex J. I am also investing in the LA area and am having a hard time finding deals with decent cap rates. I bought my first deal in 2011 (a steal with over 10% cap rate) and have assumed all deals should be like that. Haha. I am totally wrong in this market. Do you mind sharing what cap rate you found in the LA area on your 4plex?
Contractor · Los Angeles, CA · Member since 2015 · 4k+ posts · 1k+ votes
10y
Actually South LA is not that bad, I know a bunch of people come and go there as my employees. Investors buy them for 300-500k then rent around 1600-2500.
Investor · Tarzana CA and Houston, TX · Member since 2015 · 326 posts · 130 votes
10y
Sorry had to look a my old sheet of bids...
1306 w 106th 90044 was one house plus duplex one lot....The other was 237 w 111st 90061 house plus 3plex
They were both decent deals but I didn't have my offer accepted on either because I am very selective on price and want to buy where I see value aka lower than ask hah
Investor · Tarzana CA and Houston, TX · Member since 2015 · 326 posts · 130 votes
10y
1317 92nd closed 430k...current rent is 3350...can be increase non rent control market to 3800 to 4000mo pretty easily it's a 4plex 1 bed 1 bath
utility is about 200 a month the maint say 200 average and tax is 1.25% so around say 450 a month....850 total. If you raise rent 3800 which is still below market mkt is around 1k to 1100 for a 1 bed bath in the area...you are around a 7 cap...just under it a actually.