Income Property Los Angeles

Category: Real Estate Blog

All things real estate.

  • Cheap Baldwin Hills house near Culver City

    getmedia-1Cheap single family home near Culver City in Baldwin Hills available now. 2+2, 1600 sqft.  Good flip (or live).  $328K  Let me know – david@adaptiverealty.com

  • Highland Park Townhouse – GREAT deal for FHA

    Highland Park townhouseHey there – There’s a really nice, sizable 2br 2.5ba townhouse in Highland Park that is open only to FHA-backed loans for a limited time.  If you want to own your own place in Highland Park with only $7,000-$10,000 down, let me know!!!  You can move out in two years and rent it for $1600+, if that’s your bag. Homeowners association dues are $200 and priced at $200K.

  • The Drive By

    You can tell a lot driving by the outside of a property. You stop, look around, get a sense of the street, the building quality, the curb appeal. Most renters decide before they walk into their prospective apartment whether they feel comfortable or not, so why shouldn’t you have the same reaction?

    There are several things I do before my clients drive by a property:

    – make sure the property is still available

    – see if the agent will meet us there instead (usually not the case without an accepted offer)

    – Google map it and check out the satellite images

    – check Zimas to make sure the assessor agrees with the listing agent about the number of units, square feet, bedrooms, etc.

    If all these things check out, a drive by can tell you a lot. You just have to get off your lazy/busy butt and drive…

  • FHA Loans + & –

    The FHA gives hope to many future homeowners who are short on cash.

    What is it?

    The FHA is a government organization that insures loans. It doesn’t give loans; it insures them. This makes FHA-backed loans very safe for banks because the FHA assumes the risk. But since it acts like an insurance company, you pay a premium and the FHA might not want to insure your loan if they don’t think the property is worth what you’re paying.

    Pros:

    – You can put down as little as 3.5% of the purchase price.

    – You can go through a normal (FHA-approved) lender.

    – You have certain move-in rights as an owner-occupier, and can sometimes relocate low-paying tenants and therefore raise the value of your property.

    – You get good interest rates.

    Cons:

    – You technically have to live there for two years.

    – If no unit is vacant, you have to pay the tenants to move out (between $8,000-$20,000).

    – Because the FHA appraiser is strict, there’s a chance your deal might not go through. This means many sellers will overlook  your offer in favor of an all-cash or conventional loan offer. And that means your pickings are slim in Los Angeles.

    – You pay an insurance premium:

    – You pay a 1.25% upfront premium (UFMIP). Luckily, this can be added to your loan amount.

    – Additionally, you pay 1.25% of the total loan per year as a recurring premium.

    – You pay 0.25% extra if the loan amount is above $625,500.

    – Thankfully, you stop paying the premium when your loan-to-value ratio lowers to 78% (and you’ve already been paying for 60 months).

    So yes, there is hope. But you have to know what you’re up against. Let me know if you’re in this market because this is what I specialize in.

  • Comps

    One thing I often do when a client wants to buy a particular property is offer a list of comparables. I’ll list all the properties that are active, in contract, and that have been sold in the last year in the same area, including relevant details.

    Comps show the price per square foot that properties are listed, and at what price they’ve sold. This way we know how low we can reasonably offer (in a seller’s market there are often counter offers).

    While price per square foot can indicate upside value, rents will tell you immediate value. In real estate we ask: what’s the GRM? The GRM (gross rent multiplier) is the fastest way to determine an apartment building’s immediate value – divide the price by its yearly rents. The lower the GRM, the better the cash flow.

    Comps tell you a story of a neighborhood, but they don’t tell you the whole story. Market activity can shift within months – inventory can dry up, more buyers enter the market –  and what you could buy 8 months ago isn’t always what you can buy today. That said, it’s good to use as many tools as you can when making an investment, and comparables just make you wiser.

  • La Brea & Venice

    4822-Pickford
    4822 Pickford St.

    There’s a slow gentrification creep right now moving southeast from Pico & Fairfax. A cornerstone of the “trendification” is the relatively new and lovely Paper or Plastik café and adjoining MiMoDa dance studio, whose owners I happen to know and adore. As these rent increases start to move, it makes a property like 4822 Pickford St. a viable investment option.

    Just southeast of Venice and La Brea, this triplex (listing at $499K) has decent rents for the area, with a lot of upside. It’s available now. If you want to know more about these numbers, email me.

  • Condo vs. Single Family House

    What are the advantages and disadvantages of owning a condo unit as investment property vs. a single family house? …Specifically if your goal is to rent it and eventually sell it…

    These are the main (very generalized) points I’ve found, in terms of pros and cons:

    Pros to House:

    – It’s what everyone wants, which means:

    – 25% higher rents

    – better chance of appreciation

    Pros to Condo:

    – less maintenance worry

    – better locations for lower price

    – less crime worry

    (the following cons are implied in the pros)

    Cons to House:

    – more maintenance

    – less desirable locations for same money

    Cons to Condo:

    – they’re apartments, not houses, which means:

    – shared walls

    – shared backyard, pools, common area

    – less than aesthetically pleasing high rises

    – dealing with housing association (which can sometimes mean fewer issues to worry about personally)

    In conclusion, if your goal is to flip in ten years, a house might be your best bet. If you want a cash-producing property now with little hassle, condos are safer if you know the rents.

  • Boyle Heights Fourplex

    2038-Hollenbeck2038 Hollenbeck came on the market a couple months ago at 475K, and was bought last week for 455K. Part of the reason it lasted that long is because people aren’t sold on Boyle Heights yet, the way they weren’t sold on Echo Park ten years ago.

    One thing I know about 2038 Hollenbeck is that it borders a beautiful park called Hollenbeck Park. Most park-bordering property in L.A. isn’t prime real estate, but this park is more like a New York or San Francisco park, with small streets bordering it, and the buildings all directly facing it.

    Actual rents were $800 each, with three 1+1s, and one 2+1. It would have been perfect for an owner-occupier who could move into the underpaying 2+1. If you moved out in two years and rented it at market value, that would turn the deal from a 3.5% annual return to a 9.5% return. Things to think about.

  • 827 E. Edgeware Rd. Offer

    827 E. Edgeware Rd. Offer

    I found an interesting fourplex in Echo Park / Angelino Heights just off Sunset. Listing price was 890K, in great shape, two vacant units, and the other units were renting for slightly under market at about $1450. A great recipe for a buy and hold deal with about 8% net cash return.

    We put in an offer for my clients and soon learned that an all-cash offer was accepted that same day for close to $1M.

    Why buy all cash in a loose money economy? Because interest rates are so low, all the competition is certainly driving prices up. Why not save your cash for a period with higher interest rates when cash speaks louder and you can get better deals?

    The answer is simple: Echo Park and Silver Lake real estate is hot right now. This is L.A., after all, and money follows the next big thing.

  • How low can I go?

    $40,000.  The lowest reasonable amount of cash you need in L.A. to buy an apartment building is $40,000.

    Now, you’re not going to get a “nice” apartment building in a “great” neighborhood, but you can buy a cash-flowing building in a soon-to-be up-and-coming neighborhood.  We’re talking Boyle Heights and Lincoln Heights – the areas just outside of downtown that haven’t quite felt gentrification yet, but are destined to.

    Here’s the math:

    $400,000 contract price (average 4-plex in those areas)

    3.5% down = $14,000

    Closing costs = $4,000

    Tenant Relocation = $10,000

    Renovations = $10,000

    Reserves = $2,000

    TOTAL = $40,000

    Now, there are 2 catches:

    1) The reason you can put just 3.5% down is because this is a FHA loan. The FHA insures risky mortgages (down payments below 20%) so you have the opportunity to own your first home – not income property. Home. That means they expect this to be your primary residence for at least two years. The good news is you can buy up to 4 units. And you have the right to move into one of the units with certain restrictions (I’ll post about this later).

    2) You have to prove that you made an average income of about $5,500 per month for the past two years. This varies, depending on the property, but that’s about the bottom line for Los Angeles.

    I’m in this boat and I have hope. So can you.