Los Angeles 5-bed townhouse at $880,000: does $5,377 rent leave enough margin?

[EsmeAsh]

At $880,000, the expected rent needs to survive a fairly unforgiving cost check. This would be our first rental: a 5-bed Los Angeles townhouse with projected income of $5,377 a month, or roughly 7.3% gross.

The building looks sound, but $5,377 is a market estimate rather than rent secured under a lease, and competing supply could weaken it. I have budgeted for ordinary repairs, professional management, empty time between tenants and a larger future job. Turnover could also cost more than the vacancy allowance suggests.

Before thinking about an acceptable net yield, which figures should I verify first—insurance, the post-purchase tax position, tenant-change costs, association charges or owner-paid utilities? I’d rather check those separately and then stress-test the rent than rely on the headline yield.

 

[frame.grand]

I’d investigate insurance, the post-purchase property-tax amount and any HOA costs before trusting the 7.3%. With a townhouse, you also need to establish exactly what the association covers and what remains the owner’s responsibility. Are there monthly dues or possible assessments, and have you assigned utilities between landlord and tenant?

 

[EsmeAsh]

Good point. I haven’t put a firm HOA figure into the model because I still need to confirm the structure and what exterior work, if any, falls on the owner. The $5,377 is an expected market rent, not income already secured by a lease.

Would you evaluate the property first on net yield before financing, then run a separate debt-cost stress test?

 

[nia_sage]

Yes, but I’d challenge the rent before refining the financing. A 5-bed can have a narrower tenant pool, and one vacancy allowance doesn’t capture repainting, cleaning, leasing costs or a longer gap after turnover. Compare $5,377 with genuinely similar whole-townhouse rentals, including condition and parking, rather than simply multiplying a room rate.

 

[lila_escrow]

I partly disagree with focusing on a target net yield this early. There isn’t a universal number that makes the deal safe. First calculate annual rent less recurring operating costs and realistic reserves, excluding debt. Then test financing separately across less favorable payment and vacancy assumptions. That shows whether the weakness is the property itself or leverage.

 

[LightPaper]

Annual gross rent is $64,524. A useful sensitivity shortcut here is that every annual expense equal to 1% of the purchase price removes $8,800, or roughly $733 per month, from the headline result. Insurance, tax, management, HOA and turnover can therefore compress the apparent yield quickly. I’d run at least one case with lower rent, a longer vacancy and a major repair occurring together.

 

[oak.grand]

Before deciding, replace every percentage assumption you can with a property-specific figure: an insurance quote, tax estimate based on the $880,000 purchase, confirmed HOA dues and responsibilities, utility allocation, management proposal, and evidence for the $5,377 rent. Then keep routine maintenance, turnover and larger capital repairs as separate lines. If the deal only works when all three stay unusually low, the 7.3% gross yield is not providing much protection.