This past week one of my clients wanted to make an offer on a pocket listing I have. The listing is priced at $699,000, and he wanted to offer $670,000. I could not bring the seller to accept, and I offered him another unit I had priced at $800,000. Now even though it is priced much higher, it’s a much better rental property. Now only the ratio between price and rent is much higher, because of some extra features like enclosed bedrooms and high closets I think it would rent much faster.
I could not get him to go that high, but it made me want to demonstrate below how to price sometimes can be misleading for rental property. Of course, you cannot only take into consideration the rent as some buildings have higher HOA’s and lower taxes (Mills Act buildings). Below I got a few examples from Lofts for sale in Downtown LA and analyzed as an investor the prices and rental ratios. For more places or help buying a rental Loft, please contact me directly.
|Address||Price||Rental||HOA(round it up)||Taxes||12-Month Rental as a % of the Price|
|645 W 9th St #619||$799,000||$4,000||$1,100||Standard||6%|
|1111 S Grand Ave #712||$565,000||$2,700||$806||Standard||5.73%|
|1100 S Hope St #901||$1,385,000||$5,500||$920||Standard||4.76%|
|738 S Los Angeles St #607||$529,000||$2,300||$787||Standard||5.21%|
|1100 S Hope St #1306||$725,000||$3,000||$833||Standard||4.96%|
So the way to read the above is: The Higher the percentage on the far right the better rental property the unit is as long as the HOA is not higher than the other.