All Forum Posts by: Steve Short

Raise the rent 30% and market it as an old Cheech and Chong movie set that is fetching a premium.

Lemons...Lemonade!

Am I a wussy for thinking turnkey for my first real estate investor?  Be honest I can take it. 😊

Thanks

Tony V

Hi @Matt R., thanks!  That metric did not really come into play.  The real kicker was the requirement that 85% of the monthly rents equal or exceed the monthly PITI.  That requirement alone excluded a lot of properties within the rent-controlled city limits of Los Angeles, hence the reason I had to look a little further out (like Santa Clarita).  I wouldn't call it a great deal, but here are the metrics nonetheless:

Purchase price: $435k reduced by seller credit of $15k for net $420k
Down Payment: $15,225
Monthly Rents: $1,025 1-bed + $995 1-bed + $675 studio (hasn't been raised in 15 years) + $650 (bedroom in my unit) = $3,345.  I am eventually going to raise the rents on the studio to $750 and rent out the unit I currently live in for $1,000, making the total rents $3,770.
Monthly PITI: $2,862

For only $15k up-front, it was worth it for me since I was kicking money out the door every month in rent previously, despite the fact that the property is older, and I know it will have lots of maintenance (such as ).  So let's say I need to put $10,000 in repairs over the next few weeks before El Niño (which scares the crap out of me, and I'm pretty sure will not be pretty for lots of people with older properties in SoCal...but that's a different story).  Even so, I'm in this thing for only $25k, and I've certainly done sillier things with $25k, and plus now I'm not paying rent and am now getting landlording experience on a cashflowing property in Southern California (though I know a lot of that cashflow will go toward maintenance...I'm not spending or investing any of the cashflow...keeping it all in reserve...who knows what the rains will bring with them?).  Would I have gotten into this property for $100k+ (25%) down?  Not a chance.  But for $25k, why not?

I suppose to the original poster @Arvin T. above) can give some better advice.

I just did a few weeks ago. Fourplex in Santa Clarita purchased using FHA financing. I live in one of the units. We'll see how it turns out.

Now I'm just trying to decide whether or not to buy another fourplex in SoCal or to put money out-of-state...or to sit on cash.  Curious to hear others' thoughts as well.

I did a little digging into these properties and spot checked several of the listed properties for sale. 

They are all owned by the same individual (and sometimes his spouse). While OP states the owner has kept 2000 units for himself, I was only able to find about 106 properties under the same ownership as the units listed above. Perhaps 2000 is inclusive of properties he doesn't own, but manages for others?

The owners are associated with http://oceandevelopment.com/ which states that they manage over 700+ properties.

Potential buyers should be know that the many of the units are Section 8:

I also see that the product type is very similar across the units just by doing street view on the list. They're a run-of-the-mill duplex with 1 up / 1 down and separate entrances. Nothing wrong with this in my opinion.

I don't see any red flags in regards to the asking price. Many of the properties were acquired 10+ years ago and it seems the owner is looking to liquidate some of his portfolio in an up market. Nothing wrong with that.

The biggest issue I have is the location of these properties.

In August this year, Los Angeles had 39 homicides out of the 484 homicides we've had this year. Here's a map of the homicides in LA for 2015.

Now, compare that to the map above of the properties available for sale...

All that said, there's absolutely nothing wrong with buying or developing properties in these areas. In fact, I'd argue that the quality of product is relatively decent (from what I can tell), but it is important for buyers to know where and what they are buying into.

It goes without saying, be sure you research any area you plan to invest it in.

If you had a million dollars and it was the only million you had sitting in a money market account drawing less than 1% per year how would you invest it?