All Forum Posts by: Allan Glass

Hi Everyone,

I have four newer vintage duplexes I'm looking to move in the city of Los Angeles,  These are ideal for cash flow investors looking to build on a portfolio or few a newer investor looking to break into the LA market and needing/wanting existing net cash flow immediately upon purchase.

The properties were built in 2008/2009, which falls outside the rent control ordinance for City of LA.  These have an excellent unit mix (all 4bed/2bath and 3bed/2 bath units) which makes them very desirable to long term tenants, meaning very low turn over.

They have a great tenant history and have been professionally managed since being built.  Current cash flow will yield a 6.% cap rate on existing income at purchase.

The properties are located off the 110 freeway south of USC and north of the 105 freeway.

Selling price is: $2,165,000    current net income is: $130,487

Please message me if you have an interest.

I appreciate everyone's interest, but please keep inquiries to principals only no broker fees are being offered and no assignment / wholesaling clauses on these.

Best,

Allan Glass

[email protected]

@Jeff T.

Yes.  agreed.  I'm not intimately familiar with the micro levels of the Florida market, but I do understand it's a volatile market (large price swings / vacancy swings / rent rate swings between up and down markets). For me, these markets provide opportunity for short term cash flow investing or quick turns (flipping), but are not safe wealth building markets (unless you're buying at the bottom of a recession like 2009-2010).

I'm not an advocate of cashing out of mature markets, to speculate.  I like to speculate with extra cash and/or liquidity, but would not trade in a purchase I could not replicate in a mature and A market, to play that game.

I hope we all find continued success!

A

Hey @Gene D.

 and @Jeremiah H.

Sorry for the quick/short answer but yes, I'm saying if/when possible focus on the ROI not the short term cash flow, unless you "have to." Wealth building, which is the goal of real estate investing, is a long term play (the point of Ben's article). Buying for cash flow is a means to the end. It's a job, a paycheck, to move you towards financial independence.

Not being able to pull equity out of his asset with a refi, or not having additional cash to invest in other assets, when you "need" cash flow is a "have to" scenario, so if you need to generate additional short term cash, do so to survive and continue.  I didn't get the sense he needed the additional cash flow, just that he was thinking he could generate more cash flow by selling and investing in Florida.

The goal, the end game, is wealth building. You do that by focusing on ROI and by not selling performing assets in A markets that will likely appreciate (both by market appreciation and rental appreciation), that provide positive cash flow and effectively paying for themselves.

I'd advocate building a portfolio of more assets via leveraging or accumulating more cash, not trading one for another to squeeze out a one time (taxable) profit via flipping or chasing annual income yields (cap rates).

my two cents....

Hope this helps,

A

Hi @jeremiah 

@Jeremiah H.

Instead of writing a long explanation, i'll refer you to Ben's post on the subject, he did a great job of conveying the point I'm trying to make

http://www.biggerpockets.com/renewsblog/2015/07/21...

Everyone is so eager to move on to the next thing...  I don't understand why someone would sell an appreciating asset, that has positive cash flow unless they had to. It doesn't seem like you have to @Gene D.

1) consider leveraging your assets to buy more 

2) if you must sell, 1031 exchange to defer all taxes on sale. 

BTW, Gene you have it backwards, you buy for income in the short term for wealth or ROI in the long term. For a more detailed explanation visit one of @ben leybovich posts.

I'll leave you with a quote from my first real estate professor, on the first day of class in my freshman year. It has always stuck with me. 

"Anyone who buys any piece of cash flowing real estate, anywhere, at any price, and holds it for 30 years will build wealth. That is real estate investing. The rest is speculation..."

Best of luck to all of you!

A

Thanks @Justin R. for the vote of support. 

I don't want to give anyone the impression cash flow investing is not possible in LA, just very difficult as they'll be competing with buyers who can typically pay more. It's nearly Impossible if they are hoping something will fall into their lap off the MLS.

Hope you all find success. 

A

thanks @Ben Andrews  glad it was helpful. 

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I would agree with @Moses Kagan

however it is possible to build at $185 psf hard costs.  I'd give extra value to a piece of land that also gave you an additional access point (eg. a corner).

Best of luck,

A

Hi @Michelle Mapp

Southern California is a mature market, Particularly the cities that have national or international notoriety (Beverly Hills, Pasadena, West LA, Santa Monica, etc...).

Mature markets attract all types of investors, which can sometimes make deals unattainable or non-performing for some groups.  Your value problem is that you are competing with "wealth" investors as a "cash flow" investor.

Here's what I mean.  Some real estate investors have reached a point where they no longer need additional cash flow; whether from their primary jobs, or from their investments, they have amassed enough wealth to live off the monthly income they generate.  Many not only make enough to cover their expenses, they have additional money which accumulates allowing them to further invest.

For these investors, additional monthly cash flow is not their goal.  They often seek three things:  1) stable / mature markets to invest in 2) the prospect or probability of asset appreciation (where real wealth is generated) and 3) passive losses to offset the excess income they already generate.

Just like an investor seeking cash flow will find it difficult to compete on price with a buyer who intends to live in the property they are buying, a cash flow investor will find it difficult to compete on price with a wealth investor who is less concerned with income and deems short term cash flow losses acceptable.

In Los Angeles, Pasadena included, you are competing on both ends.  First, Pasadena is a desirable and expensive are to live.  For some who wish to live in the city a single family home is unattainable; but a duplex that generates some income may be just enough to lower the mortgage payments to allow them entry to the market.  Investors needing cash flow will find it difficult to compete on price with this buyer.

Second, nicer areas, again Pasadena included, would be considered a stable and more importantly an appreciating market by wealth investors, this means it would be attractive to carry a property for several years, even at a loss, to realize the appreciation on exit.  Again, cash flow investors will find it difficult to compete with these investors on price.

So... what do you do?

You'll typically have two options as a cash flow investor.  Go to softer, less mature markets, or find something dilapidated that you can buy and renovate into positive cash flow. I'll address the latter first.

The competition you face on dilapidated properties stems from the fact that they are often desirable to owner/users. This means there are many "Flippers" who will buy those properties at a price that allows them to renovate and add value, but leaves them in a financial position where they do not cash flow after renovation. To make matters worse, they buy with cash or hard money loans, meaning they can close in 5-15 days vs. the 30-45 days you'll need for an FHA loan. Again the cash flow investor loses here on price, typically to the tune of 10-15%.

This leaves you with the opportunity to buy in either the "emerging" markets of a mature overall market (Southern California) or to go elsewhere.  Elsewhere would cover any market where you don't see much appreciation and the have an abundance of renters vs. owners.  These markets repel wealth investors and the have little to no competition among owner/users.

I hope this helps.

Best of luck,

A

PS: there are markets in Los Angeles where you can compete, don't give up!

@Joshua McGinnis two items of advice:

1) get at least three bids from architects for the drawings.  You'll be amazed at the wildly different costs from each architect.

2) sub out MEP etc in conjunction with the architect you choose.  Last thing you want is an adversarial relationship between arch and engineers / subs.

We're in the same market I have a few good referrals for you if you want to DM me

@Nick Coonis

 You're a talented guy, but I see you're from La Mirada, they grow 'em strong and smart in LM...

Best of luck

A