Thursday, July 9, 2009

Hollywood Multi-Family Market -- 2nd Quarter 2009

Twelve income properties sold in the Hollywood area during the 2nd Quarter of 2009, with a median sale price of $445,000.

Half of these sales were bank-owned duplexes (all closing at $439,000 or less). Two of the sales were probates.

Three multi-unit sales were for $1,000,000 and over and give an indication of the metrics at which income properties are trading in this neighborhood.

1210 N Mariposa1626 N Fuller Avenue, a fully-remodeled twelve-unit building in a high-demand rental neighborhood just south of Runyon Canyon, sold for $3,050,000, below its original $3,400,000 asking price, in 27 days.

The building has 12,540 sq ft of living area (units average about 1,000 sq ft) on a 7,056 sq ft lot. Unit composition is 3 x 2 br, 2 ba, 3 x 2 br, 1 ba, and 6 x 1 br, 1 ba. Upgrades include hardwood floors and new appliances, tiled baths and custom finishes. Units are rented at market rate.

Gross annual income is $296,760, amounting to a 10.3 GRM (Gross Rent Multiplier = Sale Price /Gross Annual Rent). This GRM of consistent with the GRM recorded during the 1st Quarter of 2009.

1625 N Fuller1243 N Virgil Avenue, a nine-unit building near the intersection of Fountain Avenue and Sunset Boulevard (Silver Lake-, Los Feliz-, and Hollywood-adjacent), sold for $1,275,000, below its $1,450,000 asking price, after 141 days.

This 1966 building has 9,934 sq ft of living area (about 1,000 sq ft/unit) on a 6,534 sq ft lot. Unit mix consists of 3 x 2 br, 2 ba, 4 x 2 br, 1 ba and 4 x 1 br, 1 ba.

Gross income is $105,900, amounting to a GRM of 12.0 on current rents. The seller notes that rents are currently 40% below market. This is the sort of long-term value-added opportunity that investors are seeking in the current market.

1243 N Virgil1427 N Martel Avenue, a 7-unit building between Fairfax and La Brea, south of Sunset Boulevard, sold for $1,000,000, off its $1,175,000 list price, after 32 days on the market.

The 1959 building has 5,416 sq ft (770 sq ft average) of living area on a 6,969 sq ft lot. Unit mix is 3 x 2 br, 1.5 ba, 4 x 1 br, 1 ba).

Gross income is $91,447, amounting to a GRM of 10.9. Rents are well-below market, although it may take some rehab work to improve them.

1427 N MartelOne duplex sale, 1210 N Mariposa Avenue, in Central Hollywood, gives us a window of insight into REO-land. This property consists of two character craftsman houses on a large 6,490 sq ft lot, in average condition, and sold for $650,000 on May 5, 2006.

Financing was 5% downpayment – 90% loan ($585,000) at 8.67% and 5% equity line ($32,500).

By May 2, 2008, not even two years later, the bank foreclosed upon the property and bought it at the trustee’s sale for $578,000. The equity line was wiped out in the sale.

New market. New buyers. The duplex was listed at $390,000 and sold for $365,000 42 days later, closing with a 25% downpayment.

How much was he loss? The bank loaned $578,000 and after foreclosing, and holding the property for almost a year, netted about $310,000 (after sales costs, management, etc.). A $268,000 write-off in three years' time.