Lincoln Heights 4-plex

Los Angeles, CA, USA
Triangle 1 Created with Sketch. Great Deal Alert Triangle 1 Created with Sketch. $699,000 - 4-Plex

The first thing we should cover as regards this “great deal” is why Lincoln Heights? Lincoln Heights is directly in what the real estate world refers to as “the path of progress.” That is the path in which gentrification is headed in the L.A. Metropolitan Area as both renters and buyers are rapidly being priced out of places like Echo Park and the rest of Northeast LA. Lincoln Heights is a sort of “perfect storm” for astute real estate investors: On the one hand, rents are rising at a rapid rate, but on the other hand, it is “flying under the radar” to some degree so there is still the possibility of getting a deal.

And I think I have one right here. Here is how this one rolls out:

You have the following units at the following rents:

2/1 – $1600
2/1 – $1375
1/1 – $850
1/1 – $800

The 1/1 $800 has just moved out this week and is being delivered vacant. The 2/1 $1375 is presently in negotiations with the seller and should also be moving out shortly. With minimal work being done – my guess is about $15K for the 1/1 and $35K for the 2/1 – you will get $1100/mo and $2200/mo respectively. That leaves the remaining two units which are getting decent rents right now.

However, if you as the new owner were prepared to pay to relocate the remaining two tenants, and it shouldn’t be too difficult to negotiate that, then you would have an even better income property. Frankly, it’s good either way. If you calculate based on just the two tenants gone, it looks like this: You are “all in” at about $750K, but you are getting $5750/mo or $69,000 per annum. Monthly cash flow is $1800/mo or cash-on-cash return of 11.5%. If you relocate the remaining two tenants, you are now out of pocket about $150K between the relocation fees and the renovations. That on top of the purchase price will total about $850K. But, you will now have a property that should yield approximately $7150/mo or $85,800 per annum.This will mean a monthly cash flow of approximately $2750/mo or $33,000 per annum. So, cash-on-cash return in this scenario will be approximately 15%!. Not bad, right?

If you want it, you have to move pretty fast and I will help you get it. Over to you . . .

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