1502 Palm Dr

Hermosa Beach, CA 90254

$1,995,000C

2 bd · 2.0 ba · 762 sqft · Built 1913 · MultiFamily · Active · 100 DOM

Cashflow @ list (25.0% down · 7.5%)

• Estimated rent: $18,401/mo
• Mortgage (P&I): −$10,462
• Tax + insurance: −$1,322
• HOA: −$0
• Vac / Maint / Mgmt: −$3,864
• Net cashflow: $2,753/mo
• Annual: $33,032/yr
• Cap rate: 7.95%
• Cash-on-cash: 5.91%
• DSCR: 1.26
• 1% rule: 0.92%
• Cash to close: $558,600

Investor read

• This is a 2×2bd/1.0ba + 2×1bd/1.0ba units multifamily listed at $2.00M.
• At list price, monthly cash flow is $3k ($33k/yr) — positive. Per door: $688/mo.
• The deal already cash-flows at list — no discount required.
• To meet the 1% rule (rent ≥ 1% of price), the offer needs to be $1.84M (7.8% below list).
• It's been on market 100 days — a 9% lower offer ($1.82M) is reasonable based on typical stale-listing flexibility.
• Recommended offer: $1.82M (9.0% below list) — sets the bar for market timing.
• In year one you build about $22k of equity ($14k loan paydown + $8k appreciation (0.4% local appreciation)).
• Location reads 71/100 on livability (#217 in CA) — a middle-class / working-renter tenant base. Strengths: schools A+, amenities A+, employment A+; Watch: health & safety C-, crime D, commute F.
• Hermosa Beach City Elementary (suburban): math 25% / reading 75% proficiency, ranked #102 of 517 in CA (top 20%) — acceptable for families but not a draw, mixed tenant base, ~2y average lease; only 4% free/reduced lunch — higher-income household profile.
• Watch-outs: built in 1913 — expect roof / HVAC / electrical / plumbing capex.
• Market conditions: Rents rising (+2.4%/yr); 58 active listings in the ZIP; 40 comparable units currently listed for rent nearby; rentals at typical pace (median 26d on market — plan ~3-4 weeks tenant-placement turnaround); high-income renter base; 19,697 units permitted in Los Angeles County in 2024 (9,426 in 5+ unit buildings).
• Los Angeles County population projected at +9% by 2050 — modest demand growth; plan on rents tracking national, not racing it.
• 2 sale attempts; this cycle's ask has dropped $255k (11%) from the opening price — seller is motivated, your offer sets the floor, not the list.
• At projected returns (0.4% appreciation + 2.4% rent growth), your $559k cash investment doubles in ~8 years — after that, you're playing with house money.
• By year 6, paydown + projected appreciation supports a ~$136k cash-out refi (75% LTV) — recoverable capital for the next deal without selling this one.
• Cap rate 7.9% vs local median 1.5% in Hermosa Beach — top-decile yield for the area; either an underpriced asset or a hidden risk that comps aren't pricing in. Stress-test before assuming the spread holds.
• At $18,401/mo this rent would consume 133% of the median local household income ($166k/yr) (locally 651% of renters already pay >50% of income on rent) — very limited rent-growth headroom before tenants either downsize or default.

Questions for listing agent

• It's been on market 100 days. Have you received any prior offers? Is the seller open to a 9% concession, seller financing, or rate buy-down credit?
• Can we see the unit-by-unit rent roll, current vacancy, and any below-market leases? What's the average tenancy length?
• What capital expenditures (roof, boiler, parking lot, exteriors) have been made in the last 5 years, and what's planned in the next 2?
• Built in 1913 — when were the roof, HVAC, electrical panel, plumbing, and water heater last replaced?
• Why hasn't it sold? Are there any deal-killer items the seller is aware of (foundation, flood, title, zoning, code violations)?
• Is there a deadline driving the sale (1031 exchange, divorce, estate, relocation)? That informs how much negotiation room exists.
• Schools are A-rated — typically a magnet for longer-tenancy family renters. What's the average tenant stay here, and is there a school-zone premium baked into asking?
• Crime grade is D in this area — have there been break-ins, vandalism, or insurance claims at this property in the last 3 years? What carrier currently insures it and at what premium?