All Forum Posts by: Lee L.

skeletal remains of a dead dog in the crawl space

@Bill Bruno Generally, with cap rates the way they are, properties in CA do not cash flow as well as those in other states, unless you put a substantial amount down, northward of 30% - 35%. There are properties that do cash flow ok with the standard 20% - 25% down, but they're generally in C - D neighborhoods such as South LA. There are plenty of people who make a killing by working these neighborhoods. It's just not my cup of tea. 

But in L.A. where rent control depresses rents, you can get properties to cash flow great if you have the cash up front to pay the tenants the relocation, which can range from around $7,800 to as high as $30K+ per unit, depending on whether the tenants are "qualified" or "eligible", and whether they know how much their unit would be worth vacant. Usually, the relocation will be around $10K - $20K per unit. See document this document from city for rules. details: http://lahd.lacity.org/lahdinternet/LinkClick.aspx...  If you're goal is to adjust the rents to market through relocation, you'd want to negotiate "cash-for-keys" and not do it through the city (the document shows you how to do it through the city. However, tenants will generally use the numbers in the document as an anchor point for negotiation). 

Once you pay the relocation, you can put in new tenants and adjust the rents to as high as the market can bear, something on the order of $1,800+ all day for an outdated but functional 2 bedroom. Additionally, you can reposition the unit by adding high-end finishes, laundry machines, dishwashers, private patio areas etc. to make it more appealing, and thus charge even more, something on the order of $2,300 - $2,800 per unit. This strategy works great for gentrifying areas where a slew of high-income people are suddenly finding the area "hip" and willing to pay top dollar even though the schools aren't necessarily nice and there are still bars on windows (East Hollywood, Echo Park, Highland Park for instance). Additionally, much of the existing housing stock has not been updated for a while due to having long-term tenants. Therefore, there are many repositioning opportunities. 

I invested in an income property in Silver Lake last year and have repositioned the main 3-bedroom unit, and have been helping buyers look for similar properties. Numbers look great so far. Get in touch if you need more info!

As for the loan officer I've been working with, he requires 6 month's rent reserves for the loan.  

@Alex Tonecha

Try redfin.com. Search for the city, then under filters checkmark the sale records (light blue icon), and you can choose 3 months, 6 months etc. 

@Michelle Watt Have you thought about the Mid-City area in L.A.? Definitely up-and-coming, many plexes, relatively affordable, gets good rents and pretty close to the Westside. Definitely pretty hot especially as people are getting priced out from the West. Perhaps area in and around 90019. 

@Mario

How do you arrive at ARV? Projected rents? Comps? What are the current rents? Are you spending the $30K on fixing up the unit to rent so you can rent it for $1350? Or on deferred maintenance, or a bit of both?

It sounds like you are projecting that $30K in repairs will basically double the value of the home from $65K -> $125K. I'm a little worried you might be underestimating the repair bill especially if it's a really old home, and it's a hoarder house. You can spend $30K on one unit, easy. 

@Account Closed

My friend's son is graduating from UCLA this year as an undergrad. He lived in the international co-op through the school and loved it. A lot of international students, and the rents are cheaper, though I'm not exactly sure by how much. You do need to do some chores every week as part of the deal. More info here: http://www.uchaonline.com/

@Victor Argueta

 Thanks! That seems like a pretty good deal. Even if the installation was $500, that's still less than a year's worth of water. 

@Elaine Lau

 What you end up getting with earthquake insurance isn't really that great of a deal when you factor all the exclusions. It has been said that you might be better off getting your property bolted instead. 

 I didn't know you could do that. Can you share a few words on your experiences with this? How much does this cost per unit? Thanks in advance!