402 Pacific

Santa Monica, CA 90405

$3,500,000D

6 bd · 9.0 ba · 2,664 sqft · Built 1954 · MultiFamily · Active · 14 DOM

Cashflow @ list (25.0% down · 7.5%)

• Estimated rent: $24,607/mo
• Mortgage (P&I): −$18,354
• Tax + insurance: −$5,599
• HOA: −$0
• Vac / Maint / Mgmt: −$5,167
• Net cashflow: $-4,514/mo
• Annual: $-54,165/yr
• Cap rate: 4.75%
• Cash-on-cash: -5.53%
• DSCR: 0.75
• 1% rule: 0.70%
• Cash to close: $980,000

Investor read

• This is a 6 × 6-bed/9.0-bath units multifamily listed at $3.50M.
• At list price, monthly cash flow is $-5k ($-54k/yr) — negative. Per door: $-752/mo.
• To cash-flow at today's rent, offer at most $2.70M (22.8% below list).
• To meet the 1% rule (rent ≥ 1% of price), the offer needs to be $2.46M (29.7% below list).
• Only 14 days on market — expect competitive offers; lowballing is unlikely to land.
• Recommended offer: $2.46M (29.7% below list) — sets the bar for 1% rule.
• In year one you build about $198k of equity ($24k loan paydown + $174k appreciation (5.0% local appreciation)).
• Location reads 72/100 on livability (#178 in CA) — a middle-class / working-renter tenant base. Strengths: schools A+, amenities A+, commute A+; Watch: health & safety C-, crime F, cost of living F.
• Santa Monica-Malibu Unified (urban): math 61% / reading 74% proficiency, ranked #123 of 1,400 in CA (top 9%) — acceptable for families but not a draw, mixed tenant base, ~2y average lease.
• Watch-outs: built in 1954 — expect roof / HVAC / electrical / plumbing capex.
• Market conditions: Rents rising (+1.1%/yr); 100 active listings in the ZIP; 4 comparable units currently listed for rent nearby; rentals at typical pace (median 25d 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.
• 17 sale attempts since 11y ago with the ask held roughly flat each time — persistent listings suggest the price (not the market) is what's stuck; bring a comps-based counter.
• By year 2, paydown + projected appreciation supports a ~$317k cash-out refi (75% LTV) — recoverable capital for the next deal without selling this one.
• Climate carrying-cost: extreme-heat days projected 6→17/yr by 2055 (HVAC capex compounding) — expect insurance premiums to compound above CPI over the hold.
• Cap rate 4.7% vs local median 1.2% in Santa Monica — 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 $24,607/mo this rent would consume 244% of the median local household income ($121k/yr) (locally 2402% of renters already pay >50% of income on rent) — very limited rent-growth headroom before tenants either downsize or default.

Questions for listing agent

• What do current leases actually rent for vs. the listed asking? Can we see a recent rent roll and the last 12 months of T-12 income?
• 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 1954 — when were the roof, HVAC, electrical panel, plumbing, and water heater last replaced?
• 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 F 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?
• The area grade is low — what's the realistic commute time and amenity access for the typical tenant pool here? Any planned neighborhood developments (good or bad) we should know about?