Here’s a bad selling strategy

|

Take a look at this listing on Silver Ridge in Silver Lake:

http://takesunset.com/2013/03/2338-silver-ridge-avenue-in-silver-lake/

Absolutely beautiful example of modernist design in an A+ location.

So, why am I complaining about it?

Take a look at those rents. They’re getting $2595 each, which implies they were rented pretty recently (if they’d been rented more than a year ago, I would expect the number to be less “round”, due to one or more 3% increases). That equates to roughly $62k / year, meaning the property is listed at a whopping 14.5x the rents.

Now, for an investor, that’s an insane price. The returns are going to be terrible going in and for a long time to come.

For a homeowner, that price may not be that crazy. After all, if you want to live in one of the units, you can talk yourself into paying whatever price you feel.

But, here’s the problem: The tenants are rent controlled. So, getting them out in favor of an owner-occupier user is going to cost a minimum of around $7500 (more if the tenants are older, have children, etc.) plus a major pain in the ass with the city.

By filling both units and then putting the property on the market, the owner has made it much more difficult to get the price he wants. A better strategy would have been to rent one of the two units, renovate the other as a really slick owner-occupier unit and sell it with that unit vacant.

Share