12805 Vanowen St, North Hollywood

the sale of 12805 Vanowen Street, a 6-unit rent controlled apartment building located in North Hollywood, California. We closed escrow today at $1,140,000 with the help of our co-listing agents, Star and Bruce Barlava, and the buyer's agent, Eli Appel, who's a long time friend and colleague of ours at Marcus & Millichap's Encino office.

Property Overview

Built in 1954, the property consists of (4) one-bedroom / one-bathroom units and (2) two-bedroom / one-bathroom units. The building is 4,208 gross square feet, sits on a 6,599 square foot lot, was fully re-roofed in 2018 and is located in a qualified opportunity zone. The Subject Property offers investors huge value add potential with an estimated 53% upside in rents. In addition, there's potential to convert the carports in the back of the property to ADUs.

Deal Story

We were able to generate 6 signed offers on this listing, most of which were right around $1.1M. We opened escrow with a fellow Marcus & Millichap agent, Eli Appel, who brought an experienced investor to the table. We chose this buyer due to his strong qualifications. He owns more than a dozen other multifamily properties in the San Fernando Valley and focuses on buying value-add properties with very low rents and deferred maintenance.

After one counter offer from the seller, we opened escrow at $1.15M, all cash, and with a 10-day due diligence period and a 60 day close. The buyer would also be responsible for any termite and/or retrofit work to the building after close of escrow, making it a very clean offer.

We hit a bump in the road when the buyer received the inspection report back. The report came back with a laundry list of items needing attention, but the buyer was most concerned with two issues: the electrical panels and the damaged carport. The electrical panels were Federal Pacific panels which have been deemed a fire hazard by most insurance carriers, making this property very difficult and expensive to insure until those panels were replaced which could cost upwards of $20,000 to do. Next, there was visible damage to the carport framing with substandard wiring and it appeared crippled at the header with missing straps. This issue, the buyer thought, could cost him about $30,000 to repair.

The buyer then asked for a $50,000 reduction to the price in order to remove his contingencies and move forward with the purchase. The seller was willing to cancel escrow after that request, and the deal very nearly died. After many...