Since the last RE listing that got 12 offers, I have been looking at rental properties more diligently. As all rental apartments do not have open house, the most important tool is financial analysis like cashflow analysis, cap rate, return on investments etc.
I have been concentrating on 4 unit apartments because the mortgage rate is fixed for the entire term of the loan. Mortgages on apartments with more than 4 units have to be refinanced every 5 years.
Based on my analysis, a down payment of at least 40% is required in order to breakeven on cashflow. The asking price of these investment properties are generally 20% overpriced! The only return on investment is probable future increase in value.
There doesn't seem to be any reason to buy RE at this time other than to beat inflation when it strikes. Guess what? My 2 RE agents today said THE SAME THING too!!! I guess I have analyzed them to death!
Guess either RE prices in LA has not fallen enough or rental props have held up better because - with high foreclosures -> lead to more renters; with higher demand for rentals, these props' prices held up. Pure theory!
ReplyDeleteDoes it make sense of LA rental market situation? Are there lots of such 4 unit rental props on the market? In general have rents gone up, or eased? Sorry too many question here ! ... Just ignore them and enjoy your Friday!
Oh yes, Celtics rule !!!!!
Puzzled, there is one more reason for the huge difference between asking price and 'reasonable' price beside the obvious one that the seller is greedy and the buyer is stingy. My RE agent told me that the buyer bought the property at exceptionally high price back in 2006 and would not recognize the drop in RE value. Furthermore, he still wanted to make a profit on top of his exceptionally high cost!
ReplyDeleteThere aren't that many 4 unit apartments on the market, but a lot of 'for rent' signs probably because people were moving back with their folks when they lost their jobs, something like that.
You Celtics fans?
I heard that foreclosure rate is high. Maybe the bankers have properties for sale.
ReplyDeleteGo Lakers Go. I still think that they just let Houston won yesterday so that they can play one more game in LA.
I also wish Ah Ming will have a speedy recovery.
Celtics Fan.. yes big time... from my Boston U days.... think it might end up with LA vs Boston?? that would be fun eh? got to bring out my jinx kit .. just kidding or maybe not!
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