How to Capitalize on a 2-4 Unit Opportunity in Long Beach
Dustin Edwards • October 23, 2020
Find the Right Opportunity and Grow Your Rental Portfolio
Managing properties throughout Long Beach, Lakewood and select nearby cities we manage our fair share of 2-4 unit properties. These properties are generally very popular as they have a nearly “home like” quality. They often provide attractive benefits to tenants such as on-site laundry or even a courtyard. For our property owners there is the added benefit of multiple rent checks from a single property!
One question we often get asked by our single family homeowners is, how do I find a great opportunity for a 2-4 unit? For the best values we have found it requires a bit of insight and usually a bit of work. Find out more on how you can find a 2-4 unit property that could be added to your portfolio.
Identify Opportunity Where Rents are Under Market
In any given market there are multi-family properties where the owner hasn’t taken the opportunity to steadily increase rents as allowed by laws and market conditions. For some owners they don’t want to lose great tenants and for others they don’t take the time to analyze market rents to see if more can be earned from their asset. Regardless of the reason, a key opportunity in looking for your next 2-4 unit property is identifying the buildings where the rent is far below the market rate.
When a property has rents below market rate it will make the asset appear as if it is being overpriced. The property may even look like a bad deal. Key commercial real estate metrics of Cap Rate and Gross Rent Multiplier are both based off of the revenue collected from rents. With rents low and the price possibly at nearly a market rate this can mean the property won’t initially look attractive. Take the time to analyze the market rents and even adjust the purchase price in your model, and leverage online rental calculators
to help you see how you could create a true win-win if you can acquire the property.
The Units aren’t Updated
To have a strong upside in rents and the property value the units should be modernized. As you are evaluating properties with the largest opportunity look for structures that have been well taken care of (i.e. roofing, foundation, exterior walls, landscaping, etc.) and the units haven’t been updated in more than 20+ years. You might see terms used in the listings such as “original charm” or “authentic interiors” and that is your queue to dig a bit deeper to identify the condition of each unit.
Upgrading the units can be quite a job and one needs to be careful to follow every applicable rental regulation which can mean paying tenants a fee to vacate the property if you want to upgrade all of the units at the same time. Other options include allowing for natural attrition of units and upgrading the unit prior to the next tenant which can be easier on cash flow. Whichever direction you decide a key component for success will be updating the units.
Add an Accessory Dwelling Unit (ADU)
While ADU’s (Accessory Dwelling Units) have largely been associated with residential properties the same opportunity is available to residential income properties. This means you could effectively make a triplex into a 4-unit property (or even larger)! Adding an additional unit to an existing property is a powerful way to add additional income as well as additional total value to the property.
Multifamily properties do have a number of key aspects for compliance and we would encourage you to research California Legislation AB 68
& AB 881
in greater detail as it will help you to see the opportunity for an ADU as part of a multifamily property.
When it comes to capitalizing on a 2-4 unit opportunity in Long Beach there are many items to consider. To help you understand how you could increase your rental portfolio we invite you to call us today at (562) 888-0247. Or if you prefer a complete evaluation of your property we invite you to fill out our Free Rental Analysis.
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Your property’s roof is its first line of defense from the sun, rain, and wind. Which means it will eventually wear out. Many landlords overlook this since a roof is generally designed to last twenty or so years, and they simply forget until the signs begin to show. Below, we’ve compiled a short list of five signs it’s time to replace your roof for when doing property inspections. Tenant Complaints When your roof has become damaged, your tenants will likely be the first to notice. When tenants report water stains on the walls and ceilings, it's a sign that you should inspect your roof. In severe cases, your tenant may notice water dripping from roof leaks. This moisture, if left unchecked, can lead to the growth of mold and mildew, which can be a health concern for your tenants. Some tenants simply move out, assuming the odors or recurring respiratory issues are caused by the rental and not just the roof. This leaves you with a vacancy to manage, and if you’re unable to find the leak during this period, the following tenant may have a negative experience as well. Many landlords have found it beneficial to have property inspections regularly in order to preserve both the property’s value and the tenant’s trust. Roof’s Age Even with the highest quality materials, a roof still has a shelf life. Most roofs in Long Beach, CA, use asphalt shingles, and these generally last around twenty to twenty-five years. Once they've passed this threshold, the faults begin to show themselves. A sagging roof line is a sign that your roof is due to be replaced, as it's a serious concern. It often indicates that moisture has entered the underlying decking and caused some structural damage. From ground level, you may not be able to notice these problems. However, during an inspection of the property, an experienced inspector should be able to notice soft spots or contours on the roof. These forms of damage often get worse over time. Coordinating these inspections and preventative maintenance can be difficult for landlords with an extensive portfolio, which is why many enlist help. Shingle Damage Damaged shingles are one of the most obvious signs that your roof is deteriorating. If you ever notice cracking, curling, or patches with missing shingles, the roof is no longer providing adequate protection to your property. Although you can buy time with spot repairs, if the entire roof shows signs of damage, it’s likely time to replace the roof. Aside from protecting your property, the roof affects your property’s curb appeal. A patchy and worn-out roof can drive down the rental appeal. Prospective tenants will easily be able to spot the differences between pictures taken in the listing when compared to the property in person. This can not only hurt your chances of filling a vacancy, but it can also hurt your reputation as a landlord. Granules in Gutters After heavy rainfall, it's a good idea to inspect your rain gutters. If you or your property manager notice large amounts of black or gray granules, it means your roof shingles are breaking down. These granules are critical for shedding water off the roof. Once the granules fall off the shingle, the shingle begins to degrade faster under the sun and elements. If you’re not sure how old your roof may be, Loss of granules can be a strong indicator that your roof is nearing the end of its lifespan. Regular gutter cleaning and roof inspections can help catch these problems early before they become expensive repairs . Increase in Utility Bills Your tenants complaining about their utility bills increasing or poor temperature control in the rental may not realize the roof is to blame. A failing roof can result in subpar insulation and ventilation. This can lead to higher heating and cooling bills for your tenant. This can be frustrating for your tenants while putting more strain on the HVAC system. This puts more wear and tear on your HVAC system. Being aware of the warning signs and being proactive can protect your rental property, maintain tenant satisfaction , and avoid emergency repairs. If you need help inspecting your roof or you need help managing your Beach City rental property, we invite you to call us today at (562) 888-0247 or complete our Owner Application online .
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