Investors – check out our new listing of a 12-unit apartment complex with a 4.5 cap!
Jim Klinge
Klinge Realty Group
Broker-Associate, Compass
Are you looking for an experienced agent to help you buy or sell a home?
Contact Jim the Realtor!
- 682 S. Coast Hwy 101, Suite #110
Encinitas, CA 92024 - (858) 997-3801 call or text
- klingerealty@gmail.com
CA DRE #01527365, CA DRE #00873197
Does property tax remain that for new buyer?
Property taxes of $14,342 would turn into $39,000 and the roof fund is easily 1/5th underfunded. The deal is still attractive but not 4.5.
With low interest rates even a large mortgage can be covered here. This is a good deal but I’ve seen enough of these to know to verify the details.
Thanks Rob. I’ve done a lot of residential investing but never ventured into commercial (though I’ve always had a desire).
How do you know there’s not some major isssue that the current owner knows about? In residential, home inspections usually will uncover anything major that warrants walking away, but for some reason I’ve never been comfortable with inspections on larger, multi unit places where my liability will be greater with many tenants occupying.
Right now 4% with an all cash purchase in a relatively safe investment is not looking bad.
How do you know there’s not some major issue that the current owner knows about?
True, there can always be something with every property, and each owner has to decide what they can live with.
Risk is the logical acceptance of the unknown, and worry is what keeps you up at night.
If you get good help, you’ll be able to assign most of your concerns to the former.
Property taxes of $14,342 would turn into $39,000 and the roof fund is easily 1/5th underfunded. The deal is still attractive but not 4.5.
Yes, and let’s do the projected analysis (which most brokers are happy to flaunt as their only analysis provided):
Market rents are $1,700 to $2,000+, so let’s use $1,800 each:
$259,200 – Gross Scheduled Income
$6,000 – Laundry (closer to the actual anyway)
$265,200 – Total Annual Income
$80,066 – Total Annual Expenses (using your $39k for taxes and adding $2k for prop mgmt)
$185,134 – NOI
Cap Rate = NOI/Price = 4.9% Cap (projected)
Can we bump the rents immediately? No, there is rent control so we need to catch up over time. How much time?
The rent control is 5% + CPI, which today is 5% + 1.8% = 6.8% per year.
It will take 4-5 years of steady increases, but buyers are in it for the long haul so there is real upside long-term.
There will be the usual not-recurring-very-often expenses, like roof, carpet, and water-heater replacements, and an occasional vacancy (there are tenants who have lived here for 10-20 years) so factor those in too.
The wild card is re-purposing the property and building low-rise condos on this site like they did across the street.
> The wild card is re-purposing the property and building low-rise condos on this site like they did across the street.
As long as the city doesn’t insist on too many affordable units the property itself is undervalued for an investor willing to take little to nothing for a few years and then reap rewards. The first thing I noticed was single story and seeing 14 units plus 2 affordables.
Are the people paying their rents now? Or is the landlord waiting to receive money from Newsom’s rent relief?
hey Anon……shhhhh!!!!
adults are talking.
Are the people paying their rents now? Or is the landlord waiting to receive money from Newsom’s rent relief?
A fantastic gauge for how close the rents are to the market-rate is how many are paying during a pandemic.
All are paying here.
Plenty of upside!
My last re-rental in the mountains of San Bernadino went for 40%/mo more than the previous rate a mere 18 months prior. I expect this will be my last or next to last renter before we turn it into a vacation cabin.
before we turn it into a vacation cabin
With so little (if any) financial pressure to make payments every month, there’s no surprise that the vacation-home market is seller-controlled. The cost of holding is so cheap that months of vacancy won’t matter.
Check out the lottery winners at Lake Naciemento.
https://www.zillow.com/homes/for_sale/?searchQueryState=%7B%22pagination%22%3A%7B%7D%2C%22usersSearchTerm%22%3A%2293446%22%2C%22mapBounds%22%3A%7B%22west%22%3A-120.97331760729965%2C%22east%22%3A-120.84542988146957%2C%22south%22%3A35.6976771624281%2C%22north%22%3A35.76682808594385%7D%2C%22isMapVisible%22%3Atrue%2C%22filterState%22%3A%7B%22ah%22%3A%7B%22value%22%3Atrue%7D%7D%2C%22isListVisible%22%3Atrue%2C%22mapZoom%22%3A14%7D
Tiny, ratty, old and expensive. Or go big and buy the mega-cabin behind the dragon’s neck.