Quote from @Dom Cassissa:
Quote from @George Azita:
No professional real estate investor should say they are not buying properties in this high-priced market because professionals should be in the buying mode every day of their career providing they are doing what they are supposed to be doing and that is they should be constantly looking for great deals and then be ready to pull the trigger regardless of the market prices.
I can say that I have not purchased any properties in the past years because of the prices, but I can't say that I am not or would not buy today if I find a great deal.
Incidentally, I did put an offer on a 6-unit property today in the Athens District in Los Angeles. It is 6 1-bedroom units for $950,000 per unit and that is low compared to the $300k per unit for every the unit for thousands of miles around.
There are many reasons I would never have purchased in the Athens District due to the Athens gang that is notorious for murdering innocent people, but this property is on a culdesac and is the only apartment building on the block with single-family homes. The rents are $550 under market (currently $1,000 per unit) and the building is under Los Angeles Rent Control where rents can be increased by only 3% per year, or if you want a tenant to move the landlord has to pay the tenant $18,000. One unit will be vacant when I take over the building. So, if I have to pay the other tenants $90,000 to move then I will increase the rents by $550 per month and will earn an immediate 6 x $550 x 12 x 13.5 Gross Multiplier = $534,600, or more than half of what I paid for the property plus the increased rental income plus annual increases over a 10-year period puts me at a $1.3 million in profits.
Yes!!! Every investor should be buying in this market when he (or she) can find the property with numbers that work.
6 units for $950k per?? $5.7M for $108k total rent annually (6 X $1500 X 12) am I understanding this right? How is this possibly making money?
What I was explaining was the profit (on paper) I would earn by purchasing the 6 units for $950k when the current rents are about $1,000 per month. One tenant is already scheduled to move because there was a leak in the roof and there is damage in the unit.
By using the Gross Multiplier as a rule-of-thumb for the value of the property, if I pay the other 5 tenants $18,000 to move out as required by Los Angeles Rent Control and then increase all 6 rents to $1550 per unit, which is still under the market rent prices, then I will increase the value of the property within a few months by:
6 units x $550 rent increase x 12 months x 13.5 Gross Multiplier = $495,000 increase in the property's resale value plus I will earn the additional cashflow from the increased rents.
The seller is asking for $1 million and it definitely needs a new roof plus I think one unit is thrashed and has not accepted my offer of $950k, yet.
The chart looks like this and the calculations and this chart includes $150,000 to pay the tenants $50,000 to move and $100,000 to rehab the 6 units. I like the idea that I can earn $140,000 per year over a 10-year period for a small 6-unit property with today's high prices.
