Results for ‘Real Estate Math’ category

How one little equation perpetuates slum conditions

Dave C commented on yesterday’s post asking, in effect, what can be done about a rent control building which is deteriorating. The short answer is: nothing. The reason is one little equation. If you’re the owner of a rent-controlled building with below-market tenants in Los Angeles, your tenants are never leaving. You can’t raise the

Never, ever reduce unit count

One of the contractors I use a lot recently did a rehab of a small apartment building in Silver Lake. He bit a lot of our style, but that’s life. When I asked him about the project, what he told me shocked me. Apparently, the genius who bought the place paid my contractor to turn

How to be a bad broker (episode 387)

Am working with a client considering buying a duplex in LA. The listing broker has the building on the market at $500k. He has no idea what the rent is on the one occupied unit (in what is a rent control building). To illustrate how insane this situation is, let’s review the numbers: List price

I have a bone to pick with all of you

I’ve been recommending to every single reader that they check out my post on “How to value an apartment building” for six months now. In all that time, no one noticed that I had got the equation for calculating a cap rate wrong. Here’s the relevant text with corrections: “To calculate a CAP rate, you

Why there are vacant lots in Los Angeles

Have you ever wondered why there are vacant lots in Los Angeles? Blame Prop 13. Proposition 13 is an amazing law for California property-owners. Passed through CA’s referendum process in the late 1970’s, Prop 13 sets property tax at 1.25% of a property’s original purchase price and restricts increases to 2% per year (until the

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