10883 Rose Ave was a 10-unit turnkey complex featuring (10) 2-bdrm. and 2-bath units that were not subject to local rent control. Built in 2000, the property was located in the heart of Palms, and was exempt from City of LA rent control, allowing for an 8.8% annual rent increase. Each bright and spacious unit averaged approx. 1,100 SF, and had a gas fireplace and central A/C. Several interiors were recently upgraded to include wood laminate flooring, stainless steel appliances, quartz/granite countertops and recessed lights. Property amenities include a gated parking garage with 20 spaces, a community laundry room, and controlled access.
About The Property
Stats
Price $4,650,000
Current CAP 4.25%
Proforma CAP 5.27%
Price p/ Sq. ft. $422
Price P/ Unit $465,000
Background
Built in 2000, 10883 Rose was a 10-unit complex exempt from the City of LA’s Rent Stabilization Ordinance (RSO). The exemptions provided a significant advantage, as approx. 75% of LA’s multifamily properties are subject to RSO restrictions. The ability to increase rents annually by CA’s maximum of 8.8% (5% + CPI), compared to LA’s rent cap of 4%, made the property particularly attractive to investors seeking greater flexibility and enhanced income potential. The property’s owner, a long-time client of Kenny’s, wanted to diversify their LA real estate portfolio.
Challenge & Result
In mid-October, we went under contract with an outside agent representing an all-cash exchange buyer. During the due diligence period, they discovered that the actual operating expenses were significantly higher than initially estimated. Despite this discrepancy, the buyer remained deeply interested in the property, ultimately closing escrow in 30 days at 97% of the listed price – $4,650,000. The seller plans to exchange into an out-of-state DST, significantly boosting his income stream. Meanwhile, the buyer recognized the value-add potential in this newer construction property, and intends to optimize expenses through more efficient prop mgmt. practices.
