26 Dec How to Get Started with Buying Multifamily Properties in Los Angeles, CA

Are you planning on buying multifamily properties in Los Angeles, CA? If so, in this article we will provide you with a step-by-step guide that you can use for getting started with buying your first multifamily investment property in the LA area.

Start Small or Go Big?

The first thing to do before buying a multifamily investment property in Los Angeles is to determine if you want to start small with your first investment property or go big?

Keep in mind that when you purchase a large multifamily property, there are many more things to consider compared to the things to do when you buy a smaller property. If it’s your first multifamily investment, it may be best to make your first property a smaller one that’s a duplex or triplex.

Determine Where You Want to Buy

In Los Angeles there are so many neighborhoods to choose from; there’s the downtown area, Koreatown, Venice, Pacific Palisades and more! Before looking at just any property on the market, you should determine the area where you want to buy a property because that area could also affect your ability to easily travel there if you plan on doing DIY property management for a while after you purchase it.

Financing

Start working on the financing that you will need to buy a multifamily property now. If you plan on getting a conventional loan, it’s best to take the steps to get pre-approved and know the amount that your quality for now.

Besides getting a conventional loan, you can also obtain financing via a real estate crowdfunding website, partner or hard money loan.

What to Do When You Find A Property You’re Interested In buying

The key to success as a multifamily investor is to take the time to analyze a deal before you plan on investing in it.

If you’ve never invested in multifamily real estate before, you can easily analyze a deal in about 5 minutes simply by considering the following criteria.

Location – Find out what part of Los Angeles the property is located in then determine if the area can be considered to be a Class A, B or C area. Class A obviously would be an area like Bel Air while Class B and C could be considered to be more common areas like Sherman Oaks.

Tip – Don’t be turned off by an “ugly” property because, even though a multifamily property may be a little scary on the outside, it could just need some curb appeal improvements.

Number of Units – This is important because the number of units that the property has will ultimately affect your profits as an investor.

Rent – How much rent does the property bring in each month? You should also calculate what each unit is currently renting for individually as well but keep in mind that the rent on older rental properties in California cannot be increased by more than 5% per year plus inflation.

Expenses – What are the expenses for the property? Ideally, the expenses should be based on the 35% rule. This means that 35% of the income from the rent that you receive from the property should be left for you to pay the mortgage.

Seller – Find out who the seller is and you should confirm specifically why they are selling the property. This is important to find out because if the property is a bank repo, for example, you should be able to purchase that property at a significant discount.

Repairs – You should always look closely at the repairs that a multifamily property needs because even though the pictures of a property may look good, the repairs that it needs may be telling you a different story.

When estimating repairs, it’s always best to estimate higher because you’re never going to know the full extent of repairs that are needed because making one repair may lead to another so it’s best to have plenty of money set aside in your budget rather than having to come up with more money later on.

Submitting an Offer

Once you find a great multifamily property that you’re interested in purchasing, the next step is to submit an offer on the property.

To set yourself apart from other investors who are considering the same multifamily property, you should write a separate letter to the seller which details who you are and why you want to purchase the property.

If you live in the Los Angeles area, it would be especially helpful if you also provided a picture of yourself, this way the seller could see that you’re a real person who lives locally instead of just a faceless investor.

After you create this letter, it’s best to have your agent submit the letter with your offer letter to the seller agent, then sit back and wait for their response.

Tip – Your offer letter should include a 7-day inspection contingency. This will give you plenty of time to review all of the units in the property. This contingency should be non-negotiable because there’s nothing worse than buying a property sight unseen.

You should also give yourself plenty of time to close (45 days is typical) because there may be some issues that come up with your financing and it’s best to give yourself plenty of time to find another lender or source of funds (if needed).

Inspection

If you’re new to buying multifamily investment properties, it’s best to hire a professional inspector to go over the property completely because this will enable you to find out if there are any problems or issues that you should know about.

Before hiring an inspector, you should confirm that you can be their “shadow” while they are inspecting the property because this will enable you to “get your feet wet” as a landlord and see what’s really happening with the property.

Hire A Property Management Company

One the property passes inspection; you should make the smart decision to hire a property management company to professionally manage that multifamily property for you.

A property manager will save you the time, money and hassle of managing the property yourself so you can focus on enjoying passive income from your investment property.

Contact MW Real Estate Group

At MW Real Group we are an excellent company for the sourcing, acquiring and managing of multifamily investment properties in Los Angeles, CA. To learn more about the services that we can offer you contact us today by calling (213) 927-2117 or connect with us online.