Wednesday, October 13, 2010

Venice, California -- Small Investment Opportunities Abound In High-Rent, High-Demand, Hi-Style Neighborhood by the Beach

A couple of months back I blogged about 421 Grand Avenue, in Venice, a small lot consisting of two beach cottages of about 650 sq ft each with a separate and secure garage on site. The price of this property has now been lowered to $949,000. With vacation rentals of a similar size going for as much as $3,600/month or even $250/night for short term stays, one could live in one of the cottages, let the other, and look at clearing around $30,000/year after vacancy and expenses. This would go a long way towards any mortgage payments. So, it got me thinking that I could explore some other similar opportunities in and around Venice for this post. Here’s what I found out there in the market.

902 Milwood Avenue, Venice is priced at $1,295,000 and is located just one block west of Lincoln and about halfway between Rose and Venice. (We love Milwood Avenue and represented buyers on the purchase of a property on the 700 block.) This California bungalow has a second home/income property that could be let for around $2,500/month. I wasn’t able to see the two bedroom rental property, but the main home is beautifully maintained and well appointed with three beds, two baths, and a large grassy yard with front and back porch area with swings. The interior has detailed paneling, original features, and built-in 1920’s cabinetry. There is also a spacious garage that could easily accommodate one large car or two small cars. The price on this property has been reduced and I think the owners are highly motivated. They’ve already moved abroad, have hired a company to stage the home and will consider offers.  With the income property bringing in around $20,000/year (net), this could make mortgage payments very similar to what one could expect to pay in rent for something similar.

An investor with an eye for opportunity may be interested in 667 Marine Street. Technically Santa Monica, this 3,700 sq ft corner lot is just west of Lincoln between Rose and Ocean Park and still has that Venice vibe. It’s a really cute area with a local grocery shop directly opposite, and the property is just seven blocks from the beach. At $779,000, it’s a steal – but here’s why: it’s pretty much a tear down. But the upside is clear. The existing house (740 sq ft) is in good enough condition to move into right now whilst building a new house in the spacious yard. Or one could tear the whole place down and build a sizeable property instead. It’s being sold in “as is” condition, which means buyer beware!

For an investment property that you would actually live in, check out 3007 3rd Street, Santa Monica, listed at a highly competitive $645,000. This area is known as the San Francisco of the South due to the landmark buildings, hilly streets and walking community. West-facing, with an ocean view and 42 steps up from street level, this bright and breezy 1908 California bungalow definitely has a San Francisco vibe. The house needs some TLC, but for around $50,000, one could spruce it up to a very high standard. The compound used to consist of four duplexes (8 units), but was converted a few years ago into four freestanding bungalows with two beds and two baths each.

All four properties are owned as a “tenancy in common”. In layman’s terms, this means that any new owner would become an equity stakeholder in all four properties with equal ownership and rights. The obvious downside meaning that you would have to consult with your tenants in common over matters such as improving, maintaining and managing the property. Again, the price has been dropped recently and the other co-operative tenants in common are motivated to sell. The listing agent lives in one of the units and has extensive knowledge of the property. She has also gained permission from one of the other tenants in common to convert their basement into a two-car garage and she is offering one half of this garage for the use of the new owner.


Finally, for the Vacation Rental by Owner (VRBO) investor, 447 Grand Boulevard, Venice, offers a very high rate of return. The property consists of three immaculately maintained and well-appointed one bedroom, one bath vacation properties, and is priced at $1,650,000. They have been remodeled with sustainable/green features and include washer/dryers, dishwashers, full kitchens, WiFi and 42” HDTV’s. Renting at either $250/night or around $4,000/month, these properties yield a “back of the envelope” 5.8% cap rate based on 65% occupancy. If one were able to market more aggressively or secure longer-term tenants, the cap rate could be as high as 9%. For Venice, this is an exceptional yield. The current owners have built a solid brand and have loyal returning clients. This existing client base and the brand awareness of these rentals would be “goodwill” that comes with the property.

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