Something has been happening lately that is both frustrating and encouraging. I’ve had several buyers email or call me recently and ask my opinion on a particular property. The only catch is, they are already in escrow on the property with another agent. First off, I’m grateful that these buyers in question have been forthright about their current agent status. And while it’s frustrating to hear them admit their regret not working with me, in each of these instances I encouraged the buyer to feel confident in their purchase. Why? Because in these particular cases, they were making smart decisions already and were simply looking for reassurance. It’s not my job to tell someone what I would do with my money – it’s important to understand the buyer’s needs, explain the potential pitfalls and opportunities, and let them make the decision that’s best for them.
Category: Activity
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1414 Dixon is Pending!
After 6 days on the market, several above-market offers, and just 2 hours after our Sunday open house, 1414 Dixon is in escrow. Because I marketed Glendale’s lack of rent control and the seller proved that the property could achieve high rents, it sold very fast. If you want to make a back-up offer let me know, or if you want to buy or sell a Glendale property, I know how to get the right price.
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Dream Fourplex: 1414 Dixon St.
I’m not one to exaggerate. There are some properties that have one business strategy that will make it worth owning: you have to buy out the tenants and renovate, for example. This leaves you in a lurch if any of the tenants won’t leave for a reasonable dollar amount, or renovating costs rise higher than you budgeted.
The new fourplex that I’m listing is rare because it has multiple positive options:
- Don’t do a thing. It already cashflows with a 4.85 CAP at the listing price of $1,195,000
- Raise the rents on three under-market units: did I mention there’s NO RENT CONTROL in Glendale? At market rents you reach a 6.5 CAP.
- Raise the rents until tenant turnover happens slowly so you can renovate the units and get top dollar in the skyrocketing Glendale pocket neighborhood.
- Spend cash to develop, maybe add bedrooms, and you tell me what else you can do with a 10,000 SF flat, buildable lot.
Here is the public MLS listing. Here is the slideshow.
I’ve told some of my clients what I think of Glendale as a new opportunity. My sister is a writer for animation, and because of that I’m friends with dozens of young(ish) animators who work at Disney TV Animation’s new huge facility in Glendale, and others. The industry itself is growing, and animators and their friends are moving to Glendale. That, along with the growing popularity of Los Feliz and Atwater Village at the doorstop of Glendale, the cool neighborhoods are climbing northeasterly into Glendale’s green streets, raising market rents.
Key features:
- NO Rent Control
- 4,272 SF
- 10,169 SF lot
- Four Units: Two 2+1, Two 1+1
- Four Garages (Three Empty)
- Updated: Plumbing, Electric, Sewer, Floor, Landscaping
- Current $80,340 annual gross rent
- Approximate 20% under-market rents
- Actual 4.85 CAP
Please let me know if you’d like more information: 310-801-0000
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The Fed and What .25% Means
I couldn’t explain this more clearly and succinctly than one of my go-to loan brokers, Justin Brown of NuHome Financial:
First, what is the Fed?
The Federal Reserve Board (the Fed) controls the Fed Funds Rate and the Discount Rate. These are overnight loans from bank to bank or from the Fed to member banks. The Fed adjusts the rate to influence the economy. For example, if things are going well, a rate increase may slow inflation. If the economy is struggling, a rate drop could be the boost it needs.
Two important things to note:
– The Fed can influence, but does not directly set, consumer rates.
– The Fed’s rates are short term and often do not impact longer term rates, such as mortgage loans.
Why the fuss?
Increases in the Fed Funds rate can cause banks to raise their “prime” rates, which are often used to calculate costs of revolving credit or home equity lines of credit (HELOCs).
What about mortgages?
Mortgage loans are a different animal, so to speak. The “agencies” (Fannie Mae and Freddie Mac) pool mortgages together and sell them as mortgage bonds. The amount investors pay for these bonds directly influences mortgage rates.
Bottom Line:
When the Fed moves, it generally provides lots of warning, and markets have already had a chance to react. Markets are constantly responding to other factors as well, from the stock market to global events to consumer spending. In the end, no one can say for certain what the reaction to Fed moves will be.
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The Arts District is Gone
Every investor wishes she invested in the Arts District five years ago. It could be the fastest developed area in Los Angeles’s recent history of rapid gentrification. You know the current story, but here are a few developments planned in the next five years:1) THE BRIDGE – The new world-class 6th St. Bridge, set to complete in 2019, will become the only bridge worth talking about in Los Angeles with its bike-friendly, eco-friendly awesome swoopy look. It connects Boyle Heights to the ever-fancifying Arts District downtown.
2) HOLLENBECK PARK – In Boyle Heights, Hollenbeck Park on 4th St and St. Louis, already one of my favorite parks in the city for its hills, water and bridges, is going to get a 1-million-dollar upgrade thanks to the money coming into the Arts District.
3) MATEO – The Arts District is going all in on becoming the next
East VillageOld Town PasadenaWest Hollywood and building an industrial-chic open-air shopping center that will certainly attract ritzier clientele.So, what does this mean for the Arts District? If it’s unaffordable now, it will fall into the “bad deal” category for investors before you know it. I have heard of a very affordable neighborhood three minutes across the bridge though…
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Buy a Los Angeles condo?
I have a client in a 1031 exchange whose recent fourplex purchase has left very little cash to buy a second property. So we’ve turned to condos, where the market is great for buyers right now. I don’t normally buy condos in Los Angeles because if a cheap 1-bedroom condo costs $250,000, that makes the fourplex version of that cheap condo $1,000,000. Would I buy a vacant fourplex full of 1-bedroom apartments in Westlake for $1,000,000? Not as of today (10/30/2014), I wouldn’t.
That said, you can’t normally buy a $1,000,000 fourplex with $100,000 down, but you can buy a condo in almost any part of Los Angeles, from West Hollywood to the Valley. Condominium units usually come in much better condition than a multifamily property, they often don’t have rent control, and maintenance is cheaper because the HOA pays most of it.
So when is a good time to buy a condo in L.A.?
Are you paying more than $2500 in rent? Do you have $100,000 that is making you less than 4% on your money? If the answer is yes to either of those questions, contact me and let’s look at your options. While a good 2-4 unit property is largely preferable as a pure investment, buying a condo and living in it can save you money in the meantime.
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Closed Vendome at $1,060,000
My broker is calling this the best deal in the history of Los Angeles real estate, but he likes to make grand statements. The seller of 228 S. Vendome bought this property one year ago, using an FHA-backed loan ($30k down payment) for $636,000. After spending about $50,000 in renovations and evicting the last remaining tenant, he was able to up the rent roll to $87,000 per year. We listed the property at $997,000 and got five offers over asking.
For his first-ever property, the seller invested approximately $80,000 cash and ended up quadrupling his money in one year.
Now, please don’t think these deals are everywhere, because they’re not. That said, something about my synergy with this client makes us work very well together. He responds lightning-fast to texts, emails, phone calls and Docusigns, remains open to various neighborhoods, asks the right questions, and isn’t greedy. He’s in escrow to buy another property right now in a 1031 exchange that might just clear him another $350,000 in profit if we play our cards right.
On the buying side, the buyers of 228 S. Vendome are getting a rare 6% cash return and 8% overall return after putting 40% down and investing another $40,000 in improvements.
Representing both the buying and selling side made the transaction incredibly smooth, as both the buyer and seller ended up extremely happy and even met after the sale to exchange keys with smiles on their faces. A job well done all around.
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8% Return on Fourplex!
I have a new listing that you should definitely check out. It’s a turn-key fourplex in the red hot Silver Lake adjacent neighborhood – 3 minutes from Sunset Junction. Rents in this area keep going up, and there were multiple applicants for the last unit, which was rented at $1950/mo. The address is 228 S. Vendome St. – here are more photos and a map.
If you put 25% down with a 4.5% interest rate, you can make 8% return on your investment at asking price. That’s incredibly hard to find in this market in quality neighborhoods like this.
Each unit is 2br-1ba with separate gas and electric meters, which means low costs. Here are some features:
hardwood floor in 2 units
new carpet in 2 units
new paint
two new front doors
new appliances
new sprinkler system
some new fixtures
new blinds
new staircase
8 parking spaces
4 in-unit laundry hook-upsHere’s how the numbers look:
List price 997,000 Units 4 Structure sq. ft. 3,480 Built 1917 Lot sq. ft. 4,807 % down 25.00% Downpayment 249,250 Total monthly rent 7,250 Total monthly costs 1,678 Monthly net income 5,563 Interest Rate 4.5% Monthly debt service 3,775 Monthly free cashflow 1,789 Cash-on-cash % return 8.25% Please let me know if you have any questions!
david@adaptiverealty.com
310-869-6577 -
A New One
I’m in a fun escrow on a fourplex right now. My client is buying a property from a slumlord because that’s often where you find upside in turning a property around. See Moses Kagan’s post on the topic for further explanation on that point.
I’m mostly being sarcastic by calling it fun, except when this slumlord’s listing agent, his ex-wife, today served us with a Demand to Close Escrow. Sounds intimidating, right? A DCE is a signed document that can come from the Buyer or the Seller to demand that the other party close escrow within three days, but not before the agreed upon escrow closing date in the purchase agreement.
I’ll explain more about this particular situation once escrow closes, but receiving this DCE today was a first in that I’ve never gotten a DCE the day after I served the Seller with our own DCE. Essentially, this seller is demanding to close escrow on the same day we are. Just a little tit for tat, I guess? If you play the trump card, so can we? I’m due to write a post on how real estate agenting is 80% psychology, and this is a prime example. When you’re dealing with small business owners and not banks, logic doesn’t always factor in to the decision-making process.
If there’s a lesson here, it’s this: make sure your agent knows the purchase agreement inside and out, or you may end up feeling undue pressure to close escrow the same exact day you asked to close anyway.
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In Escrow Again
Sorry for not posting in a little while, but I just got into escrow with a client on an awesome fourplex in Virgil Village near Silver Lake. This is a FHA client, which makes me even prouder of our accomplishment! My client was aggressive in his offer and we were patient in our hunt. That’s how you make FHA deals happen.
While I’ve become the go-to agent for FHA deals at our brokerage, I don’t know if this is quite my future. I do love a good challenge, and while helping those with less cash is something I feel passionate about, the amount of work to get into escrow is about three times that of a conventional loan, and probably ten times that of cash buyers. And because FHA buyers in L.A. all look at the same deals, it’s hard to take on more than one buyer at a time.
Meanwhile, my broker Moses Kagan is writing up a storm over at kagansblog.com – check out some of his latest posts, too. And tell him I sent you. 😉
