Los Angeles 2-bed at $1,280,000 and $3,989/month — does the rental math work?

[yuki_hope]

I have checked the basic purchase and rent figures, but the local running costs and lease terms are still unclear. This is a Los Angeles 2-bed priced at $1,280,000 with expected rent of $3,989 a month, giving a headline gross yield of roughly 3.7%.

My model allows for vacancy, management and ordinary upkeep, plus a separate allowance for an expensive repair year. It does not rely on appreciation. Before deciding whether the return is adequate, I need better figures for property tax, insurance, building charges and tenant turnover—for example, the combined cost of repainting and a vacant month. Which of those usually changes the cash-flow calculation most at this price?

 

[RealHorizon]

At that gross yield, property tax and insurance could consume much of the margin before management, vacancy and repairs. I’d also separate routine maintenance from tenant-turnover costs; repainting, cleaning and time between tenants can arrive together.

Is this a cash purchase or financed, and have you entered actual tax and insurance figures rather than percentages? Also include any building charges if applicable. I wouldn’t choose a target net yield until those fixed costs and the lease terms are known.

 

[jae.pike]

Once borrowing is included, the main question becomes whether turnover is even the largest risk. Scheduled rent is only $47,868 a year against a $1.28m purchase price, so fixed expenses already have limited room to move. A different interest cost or down payment could alter cash flow more than one routine change of tenant.

I’d check the actual tax, insurance and building charges first, then model the financing. After that, compare a normal year with one vacant month and a year containing a major repair. If the property remains negative in the ordinary financed case, it is difficult to describe the purchase as an income investment without assuming appreciation.