Collaborative sleuthing?
I’d like to try an experiment which will 100% definitely fail if you (my readers) don’t get involved. So, basically, I’m putting myself out here publicly and I’m going to have egg on my face if no one feels motivated to help.
Here’s the experiment: I’ve posted a listing below. I would like us, as a group, to evaluate the opportunity the listing represents.
I’m interested in answering all the questions that a buyer would ask before offering to buy the property, such as:
- At what price does this make sense?
- What’s the GRM?
- What’s the cap rate?
- Are the rents on market? Above? Below?
- Do the expenses look reasonable?
- Are there LAHD problems?
- LA Dept. of Building and Safety problems?
- Are the units permitted? The bathrooms? Bedrooms?
- What do we think of the area? Crime rates? Industrial nuisances?
- Is it rent controlled?
- Could you develop the land further?
- Are the schools any good?
- Is there anything going on in the neighborhood that we should worry about?
The concept is that we, as a community, ought to be able to work together to get a very good sense for the deal. And, in doing so, we ought to learn from each other about what it takes to get a good sense for an investment opportunity.
Please put questions and comments about the deal in the comments. There are no stupid questions. I don’t know everything. Feel free to chime in with answers. Together we’ll answer all the questions and learn.
Please please please get involved.
So, with that in mind, here is the (Loopnet) listing for 4417 Toland Way in Eagle Rock: http://www.loopnet.com/lid/17811820
And here is the pdf of the offering memorandum: Toland Offering Memorandum
EDIT: For zoning info, check zimas.lacity.org ; for Housing Department issues, search for LAHD and check under “code enforcement” ; for LA DBS, search LADBS and find the property activity report for the property. Come on – get involved!
I don’t see how they get 22 parking spots in looking at Google. Also, the expenses look fairly reasonable, although I think the utilities look high, especially considering they just have dirt in the front yard. Is it individual hot water heaters or a boiler. I would think the utilities would be more like $4k or $5 at the most. I don’t know Eagle Rock at all, but the location seems decent just in looking at streetview – pretty close to some commercial/industrial, but also across the street from sfr’s. Cap rate seems a little low, but that goes to your last post and the state of the market I suppose.
Mattmason999
08/31/2012 at 11:16 am
Thanks for getting involved! Very good point about the parking.
Here’s an article that looks at sizes of parking spaces (you better believe I think about this kind of stuff): http://en.wikipedia.org/wiki/Parking_space
mjkagan
08/31/2012 at 11:21 am
Hi Moses! I like reading your blog, I do. It looks like those rents are below market for the area, however I’d have to wonder how old the units are inside – any renovations? For instance, there are no 2BR for less than $1200 in Eagle Rock, in a quick CL search. So could be big upside potential with updating. It does look like a good location, too – close to the freeways and a college. It’s priced on the low end per unit, looking at the comps. Those mature trees make it look pretty – good curb appeal.
kallethompson
09/01/2012 at 11:31 pm
This is wonderful! Thanks Kalle!
Totally agree about the rents being under-market. The property is rent-controlled, though, so it’s not like a new owner can just come in and raise them.
Agree re location. Eagle Rock is good and improving, though it is more of a single family destination than a hot rental market. But I think that’s changing as more apartment buildings there get fixed up.
Anyone else?
mjkagan
09/02/2012 at 12:58 pm
Hey Moses: through my eyes (admittedly not very “Soft”) it seems very expensive to me – Cap rate low. Of course as your other readers have noted, rents are low for the area (and for Los Angeles period). Question: how is Section 8 paying approx $850 for a 2 bed 1 bath in Eagle Rock and paying $1,300 per month in Watts. Somebody has not been getting their 3% Section 8 increases in MANY years! something ain’t right.
At what price does this make sense? uhhhhh… $750k? hmmmmm… let me read more of the financial analysis… thanks! this is FUN!
Larry Robinson
09/06/2012 at 10:11 am
You make a very interesting point about that Section 8 rental – seems like there is definitely value to be extracted there, right?
mjkagan
09/06/2012 at 10:13 am
I agree… to pay a 5.75% cap on a $1.25 million purchase – in my feeble mind – rents need to be closer to market… But then again… WTF do i know?
Larry Robinson
09/06/2012 at 10:19 am