8427 Otis St

South Gate, CA 90280

$1,725,000D-

1 bd · 1.0 ba · 576 sqft · Built 1951 · MultiFamily · Active · 28 DOM

Cashflow @ list (25.0% down · 7.5%)

• Estimated rent: $12,508/mo
• Mortgage (P&I): −$9,046
• Tax + insurance: −$1,618
• HOA: −$0
• Vac / Maint / Mgmt: −$2,627
• Net cashflow: $-782/mo
• Annual: $-9,390/yr
• Cap rate: 5.75%
• Cash-on-cash: -1.94%
• DSCR: 0.91
• 1% rule: 0.73%
• Cash to close: $483,000

Investor read

• This is a 7 × 1-bed/1-bath units multifamily listed at $1.73M.
• At list price, monthly cash flow is $-782 ($-9k/yr) — negative. Per door: $-112/mo.
• To cash-flow at today's rent, offer at most $1.59M (8.0% below list).
• To meet the 1% rule (rent ≥ 1% of price), the offer needs to be $1.25M (27.5% below list).
• It's been on market 28 days — a 2% lower offer ($1.70M) is reasonable based on typical stale-listing flexibility.
• Recommended offer: $1.25M (27.5% below list) — sets the bar for 1% rule.
• Local home prices are declining (-3.0%/yr); year-one equity from $12k of loan paydown is wiped out by about $52k of value loss. Plan a longer hold.
• Location reads 63/100 on livability (#459 in CA) — a middle-class / working-renter tenant base. Strengths: commute A+; Watch: health & safety C-, schools D-, crime F.
• Los Angeles Unified (urban): math 29% / reading 54% proficiency, ranked #223 of 517 in CA (top 43%) — families likely to look elsewhere, expect single-tenant / working-renter base with shorter leases; 67% free/reduced lunch — lower-income household profile, screen leases tightly.
• Watch-outs: built in 1951 — expect roof / HVAC / electrical / plumbing capex.
• Market conditions: Rents rising fast (+5.0%/yr); 51 active listings in the ZIP; 34 comparable units currently listed for rent nearby; rentals at typical pace (median 25d on market — plan ~3-4 weeks tenant-placement turnaround); 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.
• Current owner paid $110k; list at $1.73M implies a 1468% gain — meaningful room to come down on a strong offer.
• Climate carrying-cost: extreme-heat days projected 7→22/yr by 2055 (HVAC capex compounding) — expect insurance premiums to compound above CPI over the hold.
• Cap rate 5.7% vs local median 2.8% in South Gate — 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 $12,508/mo this rent would consume 201% of the median local household income ($75k/yr) (locally 4041% 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 1951 — 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 D-rated, which usually means shorter tenancies and higher turnover. Who's the typical renter profile here, and what's been the actual vacancy rate?
• 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?