Rental deal in Los Angeles: $280,000 purchase, $1,550/month — sanity check after 39 days

After 39 days on the market, I have to choose between investigating this properly and treating the low price-to-rent figures as a warning. It is a Los Angeles 3-bed new-build flat at $280,000, with projected rent of $1,550 a month and a gross yield of about 6.6%.

My base case assumes no appreciation and deducts vacancy, management, routine repairs and a reserve for less frequent work. What I still need are the unit’s actual property-tax bill, insurance quote and building charges. I also want comparable leases supporting the $1,550 figure and a full estimate for one tenant change, including lost rent, cleaning and management fees.

If those documents leave a durable net return, the 39-day marketing period may create room to negotiate. If the calculation works only with low insurance and immediate reletting, I would walk away. Which document would best explain why this new-build has remained available?

I would focus less on the 6.6% and more on obtaining the actual property-tax, insurance and any building-association figures for this specific unit. Those are difficult to estimate from the purchase price alone. Turnover can also combine vacancy, cleaning, repairs and management charges in one bad month. If the deal only works with every assumption near its optimistic end, I’d pass.

Is this an all-cash calculation or will there be financing? That changes the decision substantially even though the property’s net yield stays the same. Also, does your $1,550 rent assumption come from comparable 3-bed units, or from the listing material? At that price-to-rent combination, I’d want to understand why it has remained available for 39 days.

I slightly disagree with Maria’s implication that the gross figure is mostly noise. It is a useful first filter, and 6.6% leaves at least some room to investigate. The problem is that a flat may have building-level costs or restrictions that a simple maintenance allowance misses. Ask for the complete recurring charge history and what, if anything, is included.

The exact Los Angeles location matters, as does whether this is an independently rentable unit with any occupancy or affordability restrictions attached. Don’t assume “new-build” means low insurance or no near-term building expense. Get a quote tied to the address and intended rental use, then confirm the tax position rather than carrying over a seller’s current bill.

I’d model one normal year and one turnover year. In the second version, add a longer vacancy, leasing or management expense, cleaning and make-ready work. Then run both with higher insurance and financing costs. My required yield would depend on how badly that second case affects cash flow; a single target net percentage can hide the real risk.

What is inside the “larger repair” reserve? A new-build flat may shift some concerns away from the unit itself and toward shared-building costs, but only the actual ownership documents will show that. I’d also separate routine annual maintenance from rare capital expenses. Combining them makes it harder to see whether the monthly rent genuinely covers normal operations.

Nadia’s distinction is important. I’d make four separate lines: unit maintenance, shared-building charges, turnover, and major one-off costs. Then add Maria’s tax and insurance numbers only after obtaining property-specific figures. If the resulting cash flow is thin before financing, appreciation would be doing too much unspoken work despite being excluded from the base case.