6 unit multi family in Long Beach

[Joseph P Finkelstein]

Investment Info:

Large multi-family (5+ units) buy & hold investment in Long Beach.

Purchase price: $1,195,000
Cash invested: $315,000

A 6 unit 1960's build. All 1 bed 1 bath units. At the time of purchase it was roughly 12.5 x gross rents, however shortly after purchase we had two vacancies and were able to get it to 11.5x gross.

What made you interested in investing in this type of deal?

I got my real estate license in order to invest in real estate, but quickly learned getting licensed teaches you nothing. By luck I was introduced to my brokerage that specializes in investing education, and figured my biggest competitive advantage was executing on what was being taugh to me.

I also specifically needed to purcase a 5+ unit deal in order to work around my limited income history to qualify for a loan.

How did you find this deal and how did you negotiate it?

I found this deal on the MLS and negotiated in with the help of my broker and myself.

How did you finance this deal?

5yr fixed, 3.25% commercial loan. In hindsight, I should have negotiated the interest only option to boost cashflow.

How did you add value to the deal?

By increasing rents the state allowed amount, as well as renovating vacant units and advertising for top of makret rent

What was the outcome?

Immediately we got 2 vacancies and were able to bring 2 units up to market. The other two we were able to bring within market with rental increases.

Lessons learned? Challenges?

As this was my first deal, I made the mistake of oversharing. I verbaly said we were excited by the deal and thought we could do a full price offer. This led to a weak negotiating position.

I've now learned to never verbally state a number and work off of your offers and counter offers.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

I could not have done this without the help of my brokerage and my broker Cody Charnell. He guided us throught the process. We also used the brokers network of David Guevarra at momenta capital and Borba property management in Long Beach, whom without we could not get the deal done.

[Joseph P Finkelstein]

@Nate Wiger When we purchased, it was during the pandemic, so rates were dirt cheap. We still got about 25 basis points off the 3.5% I underwrote going in, but I couldnt tell you technically how that happened. Perhaps its because my sister and I had strong credit, but that was the rate that our mortgage broker was able to quote us going in at the 5year fixed term. 

As far as vacancies, we got extremely lucky and the tenants just chose to find a new building. Perhaps they knew what was coming. I know from other colleagues and clients, getting tenants out hasn't been too much of a challange (minus a few exeptions).  "Cash for keys" negotiations have been pretty successful. Average is between $5k and 7k, but probably safe to budget $10k going in just incase.  It is a bit of an annoying extra expense, but its nice that in Long Beach you aren't starting negotiatons at $8300 like in LA and there isn't a lot of doctrine regarding the negotiation