All Forum Posts by: Matt Mason

 I think the rental growth is key.  If that wasn't part of the equation, then the answer would likely be more weighted to the initial cash flow property.  When you model out over 10 years a 4% rental growth rate vs. a 2.5% rate, it makes a big difference.  Of course who knows if you will really get a certain rate of growth in rents vs another rate, but you can tell where things are set up for that and are more likely if you do your homework.

My overall view is that pretty much all markets are relatively evenly priced from a macro level when you take all these factors into account.  Many markets have higher initial cash flow and probably easier access to discounted deals, while others lend themselves to more forced appreciation plays and just have a higher overall ceiling.

I personally like investing close to home.  That would be true if I was still living in Virginia, Indiana or CA.  I am not much of one for traveling 2000 miles to deal with directly owned real estate among many other issues of having property so far away, but to each their own.  West Coast markets are the big leagues and you have to hustle a lot more with a thin wallet.

 Not sure who said it was.  The title of the thread and the ensuing description clearly states "LA meetup".

I thought the venue was great and I know it is tough to find these spaces for such a big group, especially free of charge.  Thanks to Jon Huber and whomever else helped organize.

The posts that really get me are where someone has bought an out of state turnkey and not even in a year in they have had an eviction that took a couple of months and damage to the unit and then a few more months of trying to get a new tenant in, who is probably just another warm body.  Then the turnkey provider tells them you were smart to invest here instead of CA, because of the tenant friendly laws. LOL

@Evelyn Jordan 

I'd like to attend.  The 28th is a Saturday not a Sunday though, so just need to be sure which day this is.

Yeah, I think the argument about needing a new car to avoid being stranded is pretty much just an excuse for people to go out and buy a new car to make themselves feel better under the guise of safety.  Unless the car being replaced is truly falling apart, you just don't see 7-8 year old cars stalled on the side of the road.  They make cars so much better than in the 70's and 80's, so I can understand why older generations think this though.  Cars from this era were often horrible, especially the American ones.

This is largely incorrect information.  There are a few new apartment towers in the city, but by and large Los Angeles is completely built out so for a developer to find a parcel that is desirable they have to tear down a building.  That is very expensive in the few places where it is even really possible.  Also, these buildings don't really compete against B product as they are A buildings with big prices.  Sure, if tens of thousands of them were built it would have an effect, but a few thousand new units in a county with over 10M people is a drop in the bucket.  This is why dense older cities like SF and LA tend to have older housing stock and what some see as a housing crisis no matter the price signals from the market.

On the seismic issue, you can't just build a bigger building on these parcels with more units.  In most cases, the zoning is already maxed out.  These are buildings with soft stories above parking.  To build a new building, you are going to have to build an underground garage in most cases and with a setback equal or even greater than what is being replaced.  Also, in LA you have to buy the tenants out of the old building you are replacing.  That all is going to be cost prohibitive.   It does happen in a few wealthy spots, but it is tough.

Mark, I agree the .5% vacancy factor is way too low even for a strong market.  Also, 1% for expense growth?  Not sure how taxes work in PA, but my guess is that they are not capped at 1%.  Other expenses are going to grow at more than 1% too, so I'd say that assumption is way off.

When I see sponsors play games with their pro-formas, I pretty much lose interest right away, because you can't trust much of anything from them.  Either that or they really don't know how to underwrite or evaluate a deal.

Matt,

My advice would be if you are really ready to buy your home, you should go for it, but realize that you should really be sure that you want that to be your home and home city for quite a while.  I think prices are fully valued in LA at this point, but on the positive side, mortgage rates are very low and 10-20 years from now you are going to be happy that you locked in such a low rate.  

It has been so long since interest rates have risen, that people don't realize that mortgage lock may become a real issue.  That means that people won't want to move, because they can't take their mortgage with them.  Probably won't be an issue until mortgage rates rise 200 basis points or more and that may be a few years out or even more.  In CA there is already a similar phenomenon in Prop. 13 and people not wanting to have a big increase in property taxes.

With the high cost of homes in LA, you don't want to pay the 8-10% in selling and moving costs, because that is a big chunk of change.  

Are you cool with the schools in these areas?  Pasadena is a great city and my one of my favorites, but it's schools are held in much less regard than say South Pasadena.

I think you have to watch chimneys on SFR, soft story buildings like dingbats that have not been reinforced, and liquification areas. Otherwise, just spend a few bucks to bolt the foundation and reinforce weak spots over EQ insurance. San Francisco has some regulations on mandatory improvements for soft story buildings and Los Angeles just came out with some proposed regulations that will require these buildings be reinforced

This list is correct.  FYI, San Pedro is a part of the City of Los Angeles and would fall under the City of Los Angeles Rent Stabilization Ordinance.  It is important to note that rent control laws vary from city to city.  Santa Monica and West Hollywood have more stringent laws than Los Angeles.  Something more similar to San Francisco where you have increases that aren't even 1% some years. 

Back before California effectively banned true rent control, SM and WH had actual rent control even for vacated units and Los Angeles had what was called rent stabilization which just limits the increase for occupied units.  The LA RSO sets a floor of 3% increases so the increase has never been less than that 3%.