|MAXIMIZING THE YIELD ON YOUR REAL ESTATE INVESTMENT|
| Passive real
estate investors feel that with time, property investments get easier
and more lucrative. Proactive real estate investors need to know how
much their property is yielding on its equity. Proactive investors are
always looking for ways to increase their return.
Those looking for maximum bang for their buck are big on yields. Yields work this way - say you have $100,000 to invest in a Certificate of Deposit. You would see which bank offers the best rate on the money – a.k.a. the best yield on their equity. If World National Bank is offering 2.8% and National World Bank is offering 3.4%; obviously you are going to buy the CD with the 3.4% yield -> $3,400 annually. Say you liked the return and bought a million dollar CD, the cash flow would be $34,000 and the yield would still be 3.4%. Yield is a constant, but the cash flow changes as the equity changes.
“In the recent marketplace, you can exchange a property every couple of years for a considerably higher yield,” confirms investor Bruce Norris.
Take the concept of yield and apply it to real estate. Let’s say you paid $500,000 for a well-located fourplex in the property lull following the Northridge earthquake. You put 25% down and took at $350,000 loan. When you bought the property, your cash flow (total income less expenses and debt service) was $10,000. Your yield on equity, or cash-on-cash return was 8%. The math is your cash flow - $10,000 - divided by the hard cash invested - the $125,000 down payment.
Thanks to the growth of the real estate market in the
|WHERE THE INVESTORS GO
investors purchase a rental property, their primary concern is whether
they can get an immediate return on their investment by leasing the property.
Appreciation is secondary. In the constantly escalating Southern California
market, many, many people have been speculating by purchasing property
with a negative cash flow.
"You never want to buy a property where every month you have to feed it," observes investment analyst Neil Binder of Bellmarc Equities.
Experts advise that before buying an investment property, add up your projected property taxes, mortgage payments and maintenance costs, and make sure the total is less than your expected rental income. In a more traditional real estate market, savvy investors on average try to pay anywhere from 45 to 85 times monthly rent for a property. In recent years, on the West Side, that number has been closer to 300 times. In a valuable investment, That means annual rental revenue should be about 15 to 25% of the property's value. We’re seeing about 7%.
Knowledgeable investors have been going out of state. Here a $350,000 condominium rents for $1,200 a month. In Dallas a $1,200-a-month condo can be had for $95,000. For a landlord, that's an annual return on investment of 4% in Los Angeles vs. 15% in Dallas. Measure profitability of a market by noticing the price-to-rent ratio – what is the median property price to annual rent for a similar property.
“The bigger the number, the less likely you are to make money as a landlord,” confirms Ward Ipperson, who has been liquidating his local assets and buying in other states.
|64% of L.A. Roads are in Substandard Condition|
According to a study by the a nonprofit organization TRIP, more than one out of four major metropolitan roads are in substandard condition. TRIP, a Washington, DC-based organization that researches, evaluates and distributes economic and technical data on highway transportation issues found that California is home to five of the 10 worst regions with San Jose ranked second at 67% substandard roads. The other four regions with substandard roads include Los Angeles (64%); San Francisco/Oakland (61%); San Diego (58%); and
|3Q 2005 REAL ESTATE WRAP UP|
|As we wrap up the third quarter
of 2005, the Santa Monica real estate market remains in a strong position.
Fewer properties are selling for increasingly higher prices, and there
are more properties to choose from. Around Los Angeles and life is still
rosy, with annual appreciation predicted to come in at close to 17%. The
scenario is even more rosy for the Golden State, even in perspective to
the rest of the world…
Let’s start off with our home turf. In Santa Monica, according to the Multiple Listing Service, 225 single-
|7% CAP RATE MULTI-TENANT
AUTOMOTIVE SPECIALTY CENTER
1117-1131 W El Segundo Blvd., Gardena
|other featured properties:|
GREAT PLAYA VISTA MIXED USE PROPERTY
A GREAT OFFICE BUILDING FOR SALE IN MAR VISTA
INGLEWOOD INDUSTRIAL PROPERTY WITH EASY ACCESS TO THE 405 FWY
Prime Inglewood M1-Zoned Owner / User / Investor
SPACIOUS ENCINO ESTATE
EMINENT DOMAIN IN OCEAN PARKBy Jodi Summers People were all freaked by the recent supreme court ruling on Kelo v. City of New London, which allows government agencies to exercise eminent domain and take private property for economic development. Well, allow us to introduce you to our very own eminent domain branch of government - The Santa Monica Redevelopment Agency.
The Santa Monica Redevelopment Agency was established on August 13, 1957. They state they work “in partnership with the community,” striving “to improve a neighborhood's physical, economic and social environment through redevelopment activities.”
Their first quest was the Ocean Park Redevelopment Project in April 1958 - a plan to redevelop 33 acres in the southwest corner of the City. The Ocean Park Redevelopment Project (1a) encompassed the northern 25 acres. It was approved by the City Council on June 30, 1960. The results were two 250-unit 17-story apartment buildings, completed in 1967, and the 340-unit Sea Colony condominium project. They threw in Ocean View Park to please the community.
Ocean Park Redevelopment Project (1b), completed in 1983, encompassed the southern eight acres. It now features two senior citizen residential apartment complexes- The 100-unit Nelson Villas was completed in 1977. Barnard Park Villas is 61 units, opened 1983. A utility now houses the art collection of the Eli Broad Family Art Foundation.
Ted Gleason has lived in Ocean Park since he was born in 1948. He grew up at 116 Ocean Park Blvd. He has vivid memories of how the Santa Monica Redevelopment