Where Should I Invest $1,000,000?

That's the question I'm going to work on this weekend. I hope to be able to provide several viable options for several clients who are ready to invest in real estate.

The answer is easy if the prospective buyer is a first time home buyer, as owning your own home provides several benefits in addition to providing shelter. Once the primary residence is in place, and perhaps even the move-up residence, it becomes a matter of personal choice as to what real estate vehicle best fits your real estate portfolio model. Vacation home or income property are always options.

Although throughout history a great many people made their fortune in real estate, it is not without its risks. Ask anyone who was trapped "underwater" during the Great Recession and you will hear one horror housing story after another. With mortgages larger than the value of their property, many walked away, did a short sale or were foreclosed upon. Many learned the hard and costly lesson that real estate prices do not always go up. It was a difficult time in the world of real estate as well as the overall economy.

Real estate is a market, and like the stock market, today's prices do not reflect tomorrow's value. The secret sauce is location, and there is nothing new about that. However, it is wise to investigate why one location is superior to another even though they may be within the same general geographic neighborhood. The sub-categories of location are view ( buy one if you have the option), proximity to amenities such as shopping and dining, schools, freeways, public transportation (close enough to keep commutes easy, but far enough away to avoid noise and pollution), and perhaps the most difficult to project--future growth and value potential.

Every savvy investor would like to get in on the ground floor of the next trendy neighborhood, the deal of the decade and so on. The key to identifying real estate opportunities is to first know what's happening in the communities of interest and watch local trends. One of the driving forces of today's rental market is more young people are delaying the purchase of their first home. This translates to a higher demand for rental units in urban and beach locations as this is where young professionals want to live.

On the other hand, suburban areas with top-rated schools will attract renters who do not purchase due to affordability or other personal factors, but still want their children to enjoy the benefits of the best education they can provide. I've leased many Palos Verdes homes for this exact reason.

Income producing property in a highly sought-after neighborhood may not be offered at a bargain price, especially if in a coastal location, but chances are there will be a growing demand for such properties. This translates to increase in value (equity building) and a low vacancy rate--both positive factors from an investor's point of view.

If you're in the market to purchase income property, or a second home, we would happy to discuss your investment goals and help you meet them.

- Norma Toering - Broker/Owner of Charlemagne Intl Properties
(310) 493-8333

Builders and Investors Move In - Redondo Beach Heats Up

"Is Redondo Beach next?" This question has been popping up from our income unit investors and builder clients for the last couple years. The answer, based on the competition we are running into when making offers on property, is a resounding "Yes."

Historical and forward looking Beach Cities average property values
(2009-2014 actual, 2015 projections - Zillow)

 

The Manhattan Beach Money Spills Over

In the last 15 years, Manhattan Beach went from a sleepy beach cottage town to a booming, hip city of multi-million dollar ocean view properties. Fueled originally by the run up in values through 2007, it continued the price climb as new families moved in and brought the public schools from average to stellar quality. Next, the "Silicon Beach" tech money rolled in sending ocean frontage Strand homes into the $10,000,000+ range followed promptly by a wave of high income buyers who wanted that relaxed, laid-back lifestyle they had heard so much about.

As the Manhattan Beach prices spiraled upward the builders, flippers and investors all fought over every tear-down home, fixer, vacant lot and even income units. Buyers looking to hold income properties for revenue stream just couldn't compete with the offers from builders who saw millions to be made by putting in new townhomes or luxury ocean view estates on the Strand. It sent many buyers into the next town south, Hermosa Beach. The same wave hit Hermosa and sent those property values racing up. It was only a matter of time before that money started moving south again. The next stop was Redondo Beach.

  

Redondo - Snuggled between the Manhattan Beach and Palos Verdes

Redondo is the largest of the Beach Cities, with South Redondo along the coast and North Redondo tucked just behind Manhattan/Hermosa. It is bordered by the popular Hollywood Riviera section of Torrance and the posh peninsula of Palos Verdes beyond. The ocean frontage section of South Redondo is where we are seeing the most activity, but the North Redondo neighborhoods are also seeing bulldozers moving in to replace older 1950's homes/duplexes with new townhome build outs.

Still Time to Buy in Redondo Beach?

The price escalations have certainly started, but there is still room for profit compared to Manhattan Beach or even Hermosa Beach. The signs of the coming changes are all there:

• Multiple offers - In 2013 we ran into twenty offers on a fourplex in Redondo, but 5-10 offers with half of those being "all cash" was very common.
• Duplexes going to builders instead of income property investors. A strong sign of the market shift to new construction.
• The construction fences. We often drive by homes that sold in the last couple months to see the construction fencing wrapping the property and a demolition crew moving in. The architects, builders, landscapers and crews all cover the fence with their business signs knowing more money is moving in.

Would you like more information on the opportunities available in Redondo, just give us a call.

- Norma Toering Broker/Owner of Charlemagne Int'l Properties (310) 493-8333
- Josh Toering  REALTOR (310) 525-9440

More Redondo Beach income property for sale:

Tenant Estoppels and Profit & Loss Statements - Income Property

One of our investment clients recently asked us about some of the technical forms involved in selling their seven unit complex. While this client does have a manager on-site, he was still concerned about the procedures, paperwork and expectations for these forms.

Tenant Estoppel Certificate: This form just verifies that the tenant/landlord/manager/new buyer all agree on the stated monthly rent, security deposit, lease dates (if any) and ownership of any appliances. Normally the tenant is provided a copy once the property is going in to escrow and then it is signed by all other parties. In addition to the estoppels, landlords usually provide copies of any leases or rental agreements on the properties.

Profit & Loss Statements: These come in many forms as every landlord/manager will have their own way of accounting. Most are a simple one page sheet showing the rental income and expenses. The common sales contract will ask the seller to provide such a statement for the last 12 months, though we often get a calendar year statement or two years, since it is kept that way for tax purposes anyways. Sometimes the buyer may ask to see additional information such as utility bills or details on recent repairs, but this is requested after the basic report is provided.

Do you have questions about preparing to sell your income property? From the paperwork, to negotiations, to wrapping up the deal so you can move on, Toering and Team assists our clients everyday. If you would like to discuss how we can help, please give us a call.

- Josh Toering, REALTOR
Charlemagne Int'l Properties
(310) 525-9440

Beach Cities of the South Bay Income Property Update-June 2014

The Pier in Redondo Beach CA.

May 2014 was a busy month for income property in the Beach Cities of Manhattan, Hermosa and Redondo. 10 Multifamily income properties sold during the month and 19 are in escrow with accepted offers. There are currently only 18 multifamily properties for sale in the Beach Cites.

Income Property breakdown by City for May 2014:

Manhattan Beach:

•  Active: 2 
•  Pending: 2 
•  Sold: 4   

Hermosa Beach:

•  Active: 11 (two are condos) 
•  Pending: 7 
•  Sold: 1   

Redondo Beach:

•  Active: 5
•  Pending: 7
•  Sold: 5  (Charlemagne Int'l Properties represented the buyer on one of the income properties sold in Redondo Beach.)

For more information regarding buying or selling income property in the Beach Cities of Manhattan, Hermosa and Redondo, contact Josh at 310.525.9440 or Norma at 310.493.8333.

Manhattan Beach income units for sale:

Hermosa Beach CA income units for sale:

Redondo Beach Units for Sale:

Redondo Beach Income Property

Redondo Beach, California income property is a desirable commodity and the supply is always limited. When a highly desirable property hits the market the one thing an investor can count on is there will be competition vying for ownership, and offers to purchase will be plentiful, and often over asking price. Last year saw an enormous surge in both properties available for sale and number of offers submitted. One agent's response to my question as to whether he had other offers was, "More than twenty." Our experience this year shows we can expect more of the same. This month we had one of ten offers on a Redondo Beach income property in a prime ocean close location.

Currently there are seven Redondo Beach income properties for sale ranging in size from two to 15 units. The price range is from $999,000 for a 2 unit property, up to $5,395,000 for a 15 unit complex close to the ocean. There are currently 12 Redondo Beach multifamily properties in escrow with accepted offers. Seven Redondo Beach income properties have sold year-to-date.

Redondo Beach is one of the three Beach Cities in the South Bay area of greater Los Angeles. Its prime coastal location makes it a popular rental area and consequently, a sought-after location for income property buyers. With its sandy beaches and coastal breezes Redondo Beach is a prime Southern California location, and savvy investors are always anxious to add a piece of Redondo Beach real estate to their investment portfolios.

Taking a quick look back at the history of Redondo Beach income property sales, per the Multiple Listing Service, since 1995 1207 income properties sales with a minimum of two units were recorded. The highest price paid was $8,100,000 in 2007 for a 32 unit complex located on the Esplanade with unobstructed ocean view.

For more information on Redondo Beach income property contact Norma or Josh at Charlemagne International Properties and we will add your name to our list of income property sellers and buyers in the South Bay, and provide you with a list of hand-selected properties matching your investment criteria.

- Norma Toering, Broker/Owner Charlemagne Int'l Properties
(301) 493-8333 - Email Norma

Redondo Beach Units for Sale:

Income Property - Terms

The analysis of income property has a vocabulary of its own. When you are looking over potential units for purchase, these terms will often be mentioned or included in the reports.

Cap Rate (Capitalization Rate) - Cap rate or "cap" is very similar to an interest rate, such as on a bank CD or savings account. Cap rate is the standard starting point when reviewing an income building. The property cap rate provides an expected annual income return percentage rate by comparing the income after expenses to the purchase price. Note that loan payments are not included because those would vary by each purchaser's terms.

• Cap Rate = (Annual Rental Income - Annual Expenses excluding loan payments) / Purchase Price.
• The simple version: Assuming a cash purchase, after expenses what kind of return could I expect on this building.

Gross Rent Multiplier (GRM) - Gross rent multiplier gives a snapshot of the ratio of purchase price to the rents. The gross rent multiplier is a simple tool to quickly compare buildings to each other. With an average GRM for a neighborhood or city, you can also compare a building to the surrounding competition. GRM ignores all expenses which is why it uses the gross operating income.

• Gross Rent Multiplier = Purchase Price / Annual Gross Income
• The simple version: How many years would it take for me to make back the purchase price at the current rental rates and not paying any expenses.

Operating Income - This comes in two formats, gross and net, which are usually presented in yearly totals. The gross operating income is the sum of all rental and other income the property generates. The net operating income is what remains of the gross income after expenses have been deducted.

Expenses - Some unit listings will include the yearly expense numbers or percentage, though it is rarely very detailed. Once an offer is accepted you should review the last 12 months of accounting reports from the owner or their property manager. Utility bills, upkeep and general ownership costs should be listed along with details on rental and any other income generated by the property.  

 - Josh Toering (310) 525-9440 or Email

Duplex for Sale in San Pedro

1027 S. Centre St

Spanish charmer aptly describes the front house with its courtyard entrance, tile roof, cove ceilings, fireplace, hardwood floors, tiled bathroom and the list goes on. The spacious kitchen with glass front cabinets and tile counters has a breakfast nook. A formal dining area, living room and two bedrooms plus a full bathroom with tub and shower completes the one-level living area with artisan craftsmanship apparent throughout. Many original doors and fixtures throughout. The back house built in 1940 enjoys front courtyard, large porch, hardwood floors, tiled bathroom and two bedrooms. Both houses have ample basement storage. Current owner re-built one car garage, replaced some windows, security doors and other upgrades. Both units are leased. The property is zoned Store and Residential but currently functions as two-on-a-lot with a 1-car garage.

• 1027 Centre St, San Pedro CA - Full listing information
• Annual Gross Income: $28,200
• Annual Net Income: $21,020
• Cap Rate: 5.19%
• Gross Rate Multiplier: 14.4
• Currently listed at $405,000

Rents:

• 2/1 Front Unit - $1450/month
• 2/1 Back Unit - $900/month

For more information give us a call or an email.

Norma Toering, Broker-Owner (310) 493-8333
Josh Toering, REALTOR (310) 525-9440

More information on South Bay income property - San Pedro units for sale