Sunday, April 5, 2009

Silver Lake / Echo Park Income Property: 1st Quarter 2009

Seventeen income properties sold in Silver Lake / Echo Park during the 1st quarter of 2009. Seven of 17 – an incredible 41% -- of the sales were foreclosed properties.

The top two sales show there’s a vital investment community that’s purchasing income properties that aren’t distressed.

632 Maltman Silver Lake Los Angeles

632 N Maltman Avenue

632 N Maltman Avenue sold for $2,080,000. The 1924 trophy-quality property which has been meticulously maintained consists of nine bungalows, each with private garden, and 6,902 sq ft of living area. The property sold in 55 days at a big reduction from its $2,495,000 asking price.

1549 Silver Lake Boulevard Los Angeles
1549 Silver Lake Boulevard

1549 Silver Lake Boulevard, a seven-unit mid-century property that has deferred maintenance sold for $1,095,000, close to its $1,175,00 asking price, after only 17 days on the market. This stretch of Silver Lake Boulevard, between the 101 Exit and the "village" surrounding ground-zero -- LA Mill Coffee – is a high-visibility rental area.

The Gross Rent Multiplier for 632 N Maltman and 1549 Silver Lake are 10.54 and 10.15, respectively. (GRM = sale price/annual gross rent) Gross Rent Multiplier is a crude tool in assessing a building’s income-generating power (“cap rate”, which takes into account a building’s expenses, is the true test), but it does reveal how much income investors are willing to accept for a given purchase price.

During the 1st Quarter 2009, the Silver Lake average GRM of 10.34 was close to the Hollywood average GRM of 9.9 – approximately a GRM of 10.

To simplify the income property market to the broadest strokes, the GRM of 10 for Central Los Angeles means investors are looking to get $100,000 of income annually ($8,333 monthly) for $1,000,000 sale price of 7+ unit buildings.

Two to four unit properties and/or properties that are to be “owner-user” cannot be analyzed on these narrow terms and have variable GRMs.

Almost half of the sales of income property in Silver Lake / Echo Park in the 1st quarter of 2009 were for $500,000 or less. One year ago the median sale price for income properties in Silver Lake / Echo Park was $842,500. Like in this neighborhood’s single family market, bank-owned properties dominate sales and have driven down the average median sale price of income properties.