206 E Avenue 40

Los Angeles, CA 90031

$865,000B

1 bd · 1.0 ba · 560 sqft · Built 1921 · MultiFamily · Pending · 54 DOM

Cashflow @ list (25.0% down · 7.5%)

• Estimated rent: $14,264/mo
• Mortgage (P&I): −$4,536
• Tax + insurance: −$950
• HOA: −$0
• Vac / Maint / Mgmt: −$2,995
• Net cashflow: $5,783/mo
• Annual: $69,391/yr
• Cap rate: 14.31%
• Cash-on-cash: 28.65%
• DSCR: 2.27
• 1% rule: 1.65%
• Cash to close: $242,200

Investor read

• This is a 7 × 1-bed/1.0-bath units multifamily listed at $865k.
• At list price, monthly cash flow is $6k ($69k/yr) — positive. Per door: $826/mo.
• The deal already cash-flows at list — no discount required.
• Meets the 1% rule at list price ($14k rent vs $865k).
• It's been on market 54 days — a 3% lower offer ($839k) is reasonable based on typical stale-listing flexibility.
• Recommended offer: $839k (3.0% below list) — sets the bar for market timing.
• Local home prices are declining (-3.0%/yr); year-one equity from $6k of loan paydown is wiped out by about $26k of value loss. Plan a longer hold.
• Location reads 68/100 on livability (#273 in CA) — a middle-class / working-renter tenant base. Strengths: amenities A+, commute A+, employment B; Watch: health & safety C-, crime F, cost of living 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.
• Zoned schools: Loreto Street Elementary (266 students, 94% FRL); Florence Nightingale Middle (790 students, 93% FRL); Woodrow Wilson Senior High (math 23% / reading 59%, grade F, #502 of 1,170 statewide, top 43%, 1,406 students, 93% FRL) — zoned schools average 93% FRL vs 67% district-wide (26 pts higher); higher-poverty schools than district average — tighter screening recommended.
• Watch-outs: built in 1921 — expect roof / HVAC / electrical / plumbing capex.
• Market conditions: Rents rising fast (+5.1%/yr); 126 active listings in the ZIP; 39 comparable units currently listed for rent nearby; rentals at typical pace (median 27d on market — plan ~3-4 weeks tenant-placement turnaround); 46% of comp listings sitting > 30 days — soft ceiling on asking rent; 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.
• 12 sale attempts since 19y 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.
• Current owner paid $400k; list at $865k implies a 117% gain — meaningful room to come down on a strong offer.
• At projected returns (-3.0% appreciation + 5.1% rent growth), your $242k cash investment doubles in ~4 years — after that, you're playing with house money.
• 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 14.3% vs local median 2.1% in Los Angeles — 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.

Questions for listing agent

• It's been on market 54 days. Have you received any prior offers? Is the seller open to a 3% 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 1921 — 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?
• What's the average days-on-market for RENTAL listings here right now (not sales)? A rising rental-DOM trend means longer vacancies and softer asking-rent achievability than the comps imply.