All Forum Posts by: Jon Schwartz

What's a tax lot adjustment?

The quickest strategy is a tenant buy-out, and many investors purchases multifamily property with the intent of buying out most or all of the tenants. This strategy works better at larger scale; an investor might buy a 20-unit building knowing he only needs to achieve 8 buy-outs to be profitable, and based on past experience, is confident that's achievable. With a fourplex, you have less room for error. If you need all three tenanted units empty in order to achieve market rents and be in the black, even one hold-out can screw up your plan.

Outside of the City of LA, but remaining inside LA County, you are allowed to relocate tenants in order to perform a major renovation, which is defined as work that takes more than 30 days to complete. You might want to investigate Long Beach, Pasadena, and other LA-adjacent municipalities that don't have municipal rent control.

Outside of those two avenues, our hands are rather tied.

Good luck!

Jon
 

I was waiting for Reafco to chime in!

Give Remington my love.

Best,

Jon

What longer term trends should I be concerned about?

Look at Columbus's longterm population growth: https://worldpopulationreview....

For the records, I invest in Los Angeles, where I live, for appreciation. But if I were to invest in a cashflow market, I'd invest in Columbus because I think it will appreciate nicely over the next decade.

Columbus, OH.

@Peter Trettl, hate to say it, but you're in denial of the obvious. The duplex is available for $660K because it has tenants paying a combined $2000/month. If the seller could vacate the units, he would, and then he'd sell the property for $1M.

Without a vacant unit for you to occupy, you won't get approved for an owner-occupant loan. With owner-occupant relocations on hold due to the moratorium, and you don't have a good path to getting this property with an owner-occupant loan.

Also, earnest question here: if you don't have cash for relocation fees, how will you get cash to renovate and build two ADUs?

Best,

Jon

@Alex K., appraisers use a prevailing gross rent multiplier (GRM) to calculate value on residential multifamily.

GRM is like a cap rate, but it doesn't take expenses into account. It just analyzes the gross rental income for a property.

The best way to think of GRM is, "How many years' worth of gross rents would it take to pay off the property in full?"

To get a GRM, you divide the price of a property by a year's worth of gross rents.

Conversely, if you have a sense of what the GRM for a neighborhood is, you multiply a year's worth of gross income by the GRM to ascertain a building's value.

For example, today I was valuing a duplex in San Pedro. The prevailing GRM based on recently sales is 17, and this duplex generates $5100 of gross rental income per month. The value equation looks like:

$5100 x 12 (month) x 17 (the GRM) = $1,040,400

Best,

Jon

Fourplexes are residential multifamily, so yes, the sales comparison approach will be used in the appraisal.

However, because it's also an income-generating property, the income approach will also be used in the appraisal, and then the two numbers will be reconciled somewhere in between.

I have a residential multifamily in LA that was recently appraised at $2.36M on the sales comparison approach and $2.365 on the income approach. The appraiser decided to reconcile down to $2.36M. I could have argued that the true value is the average, $2.3625M, but why quibble?

No can do in California. Rent control state!

Signing an exclusive representative agreement with a broker doesn't limit you to that broker's listings; it merely limits you to transact with that broker — on any transaction listed by any broker (or even off-market).