• New Listings
  • Contact Now


Recent Blog Posts

  • Supplemental Tax assessments or supplemental tax bills raise property taxes. Need help understanding and reading your Supplemental Tax bill? View an explanation of each information field of the bill at the Los Angeles Assessor’s website: http://lacountypropertytax.com/portal/bills/suppbill.aspx Large, and sometimes surprising, Supplemental Tax assessments or supplemental tax bills are common with Remodels, New Construction, or longtime […]

  •     Address: National Modern Living 11500 National Blvd #102 Los Angeles CA 90064 11500 National Boulevard, also known as ‘National Modern Living’, is an 18 unit, two story, new construction (yb 2014), townhouse style, condo development in Mar Vista.  This building is high tech. All of the condos are 2 bedroom 2.5 baths starting […]

  •   Nestled within the winds and folds of Woodrow Wilson Drive in the Cahuenga pass, is a peculiar row of small mountain cabins known as the Boathouses. Built in 1958 and 1959 by Architect Harry Gesner, these homes are stilt houses that reside on ‘unbuildable lots’. Ronald Buck purchased the group of lots and asked […]

  • Central Heat and Air is the most common air conditioning system in Los Angeles. Central Heat and Air is sometimes also called ‘forced air’, or a ‘split system’.  Central Heating and Air uses air as its heat transfer medium.  The system relies on ducts and fans to circulate the conditioned air throughout the house. An […]

  • Heat pumps are a combined heating and cooling system that works great in moderate climates like Los Angeles. Heat pumps and Central Air are the two most common heating and cooling systems you will run into in LA. Heat Pumps ability to heat goes down when outdoor temperatures drop below freezing so they are not used […]

Blog >> Heat Pump

Single Family Home Investment

Buying a single family home as an investment is the starting point for many real estate investors. Unfortunately, in Los Angeles, most single family homes don’t debt cover when being considered as an investment. The cardinal rule of real estate investing is: cash flow break-even or cash flow positive.

Homes have no correlation between their prices and the amount of income they produce. Therefore, it is common to see houses with 18-20 GRM and 2.5% cap rates or worse.

If the single family home doesn’t cash flow positive, you will have to come out of pocket each month to hold the property. When you lose money each month- that is a bad investment.

The only reason I can think of that an investor would be willing to do this is in the hopes appreciation will increase the value of the property greater than holding cost (4%/yr) + cost of sale (7-8%) expenses.

Single Family homes have a greater vacancy loss risk than multifamily properties because they only have one tenant. If you have a vacancy you will be losing 100% of your gross income every month the house is empty.

Single family houses are more management intensive than multifamily properties because they have multiple roofs, lawns, locations… etc. They don’t scale well.

A perk of single family homes is that utilities are separately metered. If a single family home can be purchased for a 11.5 GRM or less, and a Cap rate of 5% or more- they could make financial sense.


Let’s consider a real world example:


hancock Park Bungalow

2Br/2Ba Hancock Park Bungalow worth $800,000 and rents for $3,600. Property is purchased with 20% down at an interest rate of 4.38%. The Vacancy reserve is increased from the normal 3-5% to 15% ($6,500 or two months vacancy) because of the high vacancy loss risk. If you were to manage the property yourself, the property would negative cash flow $1,500/mo. (or $18,000 annually).

Hancock Park Bungalow example

What does the purchase price of this bungalow have to be to break even? The answer is $480,000!

Hancock Park Bungalow example 2