Sold $700,000 - 4-Plex
Question: How many 4-plexes are available to buy in Echo Park north of Sunset for $700K? Answer: None! None, that is, except for this one 🙂 It was on the market for $799K. I got it into escrow with a client of mine and we renegotiated the deal down to $700K. It didn’t quite work for that particular client, but it doesn’t mean it shouldn’t work for you.
Granted, the numbers aren’t amazing at the point of purchase. They certainly aren’t terrible, but basically you would be buying it for the future opportunity it represents, which is absurdly good. Here are the specifics:
This is 4 two-bed units, two of which are in the rear and are about 650 sq ft. The other two are in the front and are about 850 sq ft. There is no parking, but it is a good location and street parking is pretty good. One of the smaller units is vacant and, fixed up, you will get about $1900/mo. It needs very little work; you may spend about $5K on that one. On the other small unit which is getting $1100/mo, the tenant has agreed to leave for $30K re-lo fee. That one, of course, can also be rented for $1900/mo once you fix it up. You will spend $25K on that one.
One of the two larger front units will be vacant in two years when those tenants retire. They already own a home in Mexico and will go there to retire. That one will also need about $25K of work but will rent for $2400/mo. That may or may not need a re-lo fee but plan on having to pay $20K just in case. That leaves the remaining large two-bed which presumably one will be able to vacate in the not-too-distant future. Plan on $30k for re-lo fee on that one. The front two units, then, will need about $30K each and there is $30K that needs to be spent on the foundation.
Add up all the expenses for re-positioning the property (re-lo fees and reno expenses) and it comes to $210K over time. Add that to the $700K purchase and you are at $910,000. However, you will have a total of $8600/mo income, or$103,200 annual income. At that point, your monthly cash flow would be $4K/mo, or $48,000 annually. If you re-finance, then your cash out of pocket will end up being only $227,500, so you would have an absurdly good 21% cash-on-cash return. That is, of course, down the road. But incrementally, over a fairly short period of time, you would gradually have a return which approaches that until you finally arrive at that. Even at the beginning, it will be $5200/mo income for a $765,000 total amount of money. If you re-fi, your cash out of pocket would only be $190K. Your monthly cash flow would be about $1300/mo or $15,600 annually, or 8.2 % cash-on-cash return.
Like I said, the thing that makes this a great deal is what happens over time but it shouldn’t be a long time. And meanwhile, you have a great property in Echo Park that is cash flowing right now.
Call if you are interested and I’ll help you get it.
