Subscribe to receive our weekly

South Bay Real Estate Blog

Subscribe to our blog
Receive our blog posts directly in your inbox.
* = required field

Thank you!

We'll email you our weekly real estate blog.

Manhattan Beach Condos Look to be an Affordable and Safe Investment

Who doesn’t love Manhattan Beach real estate? Especially at an affordable price.

As the premier beach real estate market in the South Bay, Manhattan Beach has buyers that are not as price sensitive in comparison to other markets. Much of the investment thesis is buy high and hold for the long term because of the belief that beach real estate never goes down.

But what if you do not have deep pockets and want to limit your risk if there is a short term hiccup in the market or economy?

Manhattan Beach Boulevard Condominiums

Look no further than two bedroom condominiums along Manhattan Beach Boulevard.

Not only are these condos insanely affordable relative to the rest of the Manhattan Beach real estate market, but they also limit downside risk better than any other piece of real estate in the city.

Let’s look at some examples on both sides of Sepulveda…

Example #1: West of Sepulveda

This remodeled two bedroom condo represents a super affordable home within walking distance to downtown Manhattan Beach. This condo stands well below the almost $2.4 million median priced home in the city for 2018 and was one of only six sales in the city under $1 million.

What makes this property intriguing beyond the affordable price, you ask? The relative safety it affords the owner as a rental property that is close to breaking even.

The most recent two bedroom condo rental was in this exact same building. See what it leased for below:

  • 644 Manhattan Beach Blvd. #5
    • Leased for $3,300/month

Since this property was not remodeled, one can assume that Unit #11 would command a premium of let’s say $3,700 per month.

If the owner, economy, or real estate market were to experience a little turmoil, here is how the numbers would breakdown assuming a 30 percent down and a five percent rate:

  • 644 Manhattan Beach Blvd. #11 Breakdown:
    • Rent: $3,700/month
      • Less
        • Mortgage: $3,300/month
        • HOA, Insurance, & Maintenance: $400/month
        • Taxes: $900/month
    • Cash Flow: Negative $900/month

When you factor in the $750 per month loan pay-down (amortization) each month on the 30-year note, the unrealized loss is about $150 per month.

Not bad!

In no way do I endorse ever going into negative cash flow unless you are a seasoned, professional real estate investor. But a 30 percent down payment on most Manhattan Beach real estate would result in a MASSIVE negative and/or unrealized cash flow.

The above example, however, delivers only $150 loss on paper not to mention a loss carry-forward from depreciation that could help in a future sale or when rents rise.

If you are confident that you can pay $1,000 per month out of pocket in a down turn and are okay losing about $150 per month due to the strong belief of Manhattan Beach appreciation over the long term, then this condo is about as affordable and safe as it gets due to its price and the limited negative cash flow.

It would be hard to find something similar in the city, unless of course you go east of Sepulveda…

Example #2: East of Sepulveda

This is another remodeled condo selling at an affordable price relative to the Manhattan Beach market.

Due to the location east of Sepulveda, the rent would be discounted to about $3,000 per month. Let’s look at the breakdown assuming a 30 percent and 5 percent rate…

  • 1311 Manhattan Beach Blvd #2 Breakdown:
    • Rent: $3,000/month
      • Less:
        • Mortgage: $2,800/month
        • HOA, Insurance, & Maintenance: $400/month
        • Taxes: $750/month
    • Cash Flow: Negative $950/month

When you factor in the $650 per month loan pay-down (amortization) each month on the 30-year note, the unrealized loss is about $300 per month.

Again, not too bad especially when compared to the typical $2.4 million home and the really ugly rental numbers those homes can produce.

Conclusion

These numbers confirm that condos on Manhattan Beach Boulevard can be affordable and offer protection if the owner needed to rent the property due to a job loss, etc. And, over the very long term, the condo could potentially return a sizable speculative profit in the form of appreciation…if you’re willing to wait.

DRE: 01779425

Archives

Subscribe to our blog to get notifications whenever new content is posted.