why is this property so cheap?

It's a dog of a property. Listing says rents are 70% below market, which is hard to believe. But if so, that, plus the condition of the property, makes me think the tenants have been in there for a very long time. Good luck getting them out in LA (I live here).

Even after removing current tenants, probably need to sink another $150-300k to renovate.

Great area near Larchmont though.

great, so you are familiar with the area. what about the condition is turning you off? I believe the listing said the property looks well taken care of. and I think the english is written poorly, what they mean is the rent is 70% of market value.

Fred Fredburger

Is it cheap? What do you think it should be worth? I am a bit familiar with greater LA and visit family in LA a couple times a year, but I am by no means an expert on LA markets. But here's my quick analysis below:

The rentable SF is quite small for the price (at least compared to my home market, which is a pretty comparable, tier 1 market). So perhaps the location is so great that it justifies lower cap rates; however, i noticed that there are window gates not only on this property, but on several of the neighboring properties, which tells me that this neighborhood at one point (or even currently) had issues with break-ins, but I also noticed that everyone's front yards are nicely maintained, which tells me that the people living in that neighborhood probably aren't running a meth lab. There are also some BMW's parked on the street, so perhaps the window gates are outdated.

From a financial standpoint, Redfin has a monthly payment estimate of $5,875 based on 80% LTV, 7.2% rate including RE tax and insurance. I think the rate is a bit high, but not by much, so let's go with it. So we'll say the cost is $6,000/month assuming $125 for water/sewer (i'm going to assume this will be self managed and not factor in repair/maintenance, because once you factor those in you're in pretty deep negative cash flow territory). The condition is not great, but definitely inhabitable, but from the limited photos, the units look very small and cramped. I don't know what market rents are for that location and condition, but a 1BR in a solid location in my home city would prob rent between $1600-$1800, so let's call it $1700, which brings you're gross rent to $5100, which means you're bleeding ~$1,000/month and that's not including R&M. Given that condition, it'll prob cost you a couple hundred dollars to maybe $1000 a year on repairs, unless you are handy and can take care of issues yourself. I also don't know how old the water tank is. Water tanks are usually good for about 10 years so if it's approaching 10 years that could be another $5k-7k. Even if you could get $2k/unit you would still be in negative cash flow territory. But like I said, I'm not very familiar with this area, so maybe this location is an up and coming Beverly Hills. Personally, I would not invest in it.

I'm actually in LA visiting family now if you want to schedule a tour and meet me there LOL jkjk

edit Wait I just saw the rent and expense info at the bottom on redfin. Are these figures accurate? Redfin says the townhouse 1BR rents for $2,528 and the 2 regular 1BR's rent for $1,276?? So the monthly gross rent is $5,080, annually that's $60,960 and it has annual operating expenses at $21,803? Assuming the mortgage payment is $4,733 (based on Redfin estimate) that's almost $57,000/year, which means you're generating roughly -$18,000 a year...even if you cut out some expenses like doing some repairs on your own and mowing the lawn instead of hiring a gardener for $100/month, you'd still be pretty negative. Even if you put in like $200k-300k to renovate it and boost rents, I still think you'd be negative. Maybe I'm also missing something...but this property sucks (for the price)

hello

thank you for the great analysis. I wish I could do this kind of analysis. Why I thought it's cheap is for 2 reasons: 1) in that area, you cannot even buy a one plex for that price, let alone a triplex. and 2) the website says the price comes out to $298 per square foot, whereas normally in that area you are looking at minimum of $500 per square foot. The area is neither beverly hills nor compton. I would feel safe during the day but would not walk outside after 8 pm. this is koreantown but you'd barely see any koreans here, I'd expect most people living on that street to be working class mexicans who barely speak any english.

Bars on every window in the pictures don't scare you. If I see that I'm running the other way.

Sounds like you don't know much about real estate.  My guess is you think "value add" means lowering your exit cap, right?