Great deal Alert – Rampart Village (Silver Lake adjacent) 4-plex – $800K

In a market as challenging as this one – especially for multi-family – sometimes one has to dig deeper and be more creative as far as how to see and/or create opportunity. Such is the case with this particular property. In the right hands, with someone willing to be a bit bold and adventurous, this has the potential to be a truly great real estate investment/project. Here’s how:

First of all, this property has been flagged as having a number of code violations, covered by a 300+ page report from the city. This alone will exclude most of your competition. But it would be a mistake to allow this to be off-putting to you. Pretty much anything that is being cited by the city are things you will want to fix anyway. And they are probably a lot less daunting than a 300+ page report would have one believe. At least that has been my experience. That said, it is probably a great basis for negotiating an even better price than the asking price, especially if you are coming in with only a short physical contingency, all cash, and a fast close.

Secondly, these tenants, though paying well below market, are not paying so much below market that you couldn’t successfully negotiate them out of the property at a cost that will work for you. And one of them is even being delivered vacant so that means you are only negotiating with three.

Thirdly, and very importantly, these units are averaging about 800 sq ft per unit, plenty large enough for 2 bed units as opposed to the 1 bed units they have been operating as. You could even make them 2 bed 2 bath. The property has enough charm and character and the location is good enough that you can get great rents. And the most recent State ordinances  allow you to increase the bed count without increasing the parking.

So, let’s summarize here and see what we’ve got. Even if you have to pay $50k per unit for re-location and, let’s say, $100K per unit for renovations, that puts you at $550K. Add that to the $800K to purchase (and remember I said you might even do considerably better than that,) that puts you at $1.35mm ‘all in.’ I have the rents at $3250/mo times 4 = $13,000. Those are pretty good numbers (understatement.)

Worried the tenants might want considerably more than just $50K? That’s possible, but unlikely. Either way, we can find out while still having a physical contingency in place. Then you can cancel if you don’t like the figures. According to my math, after stabilizing the property and getting a conventional loan with only $300K cash into the deal, give or take, you will be at $4500/mo cash flow, or $54,000 annually, which represents about a 16% cash on cash return! OK, there you go, Feel free to reach out to me anytime if you want help getting this property.

Best,
Ken Shapiro
Silverwood Properties
818-237-6963