Why Should You Buy Property in Sherman Oaks, CA

Why should you buy property in Sherman Oaks, California?  Let me give you a number of great reasons!  First, Sherman Oaks is a lovely community along the foothills of the Santa Monica Mountains, just over the hill from Beverly Hills.  The main east-west corridor, Ventura Boulevard traverses Sherman Oaks and is lined with trees, hanging flower baskets, quaint boutiques, delicious restaurants and shops to meet all needs. 

There are a variety of ethnic restaurants and shops, from Japanese, Chinese, Indonesian and Thai to Latin American to African to European.  The globe is pretty much covered!  Sherman Oaks is a low rise community, and none of the buildings on Ventura is over 3 stories high, contributing to a small town look and feel. 

Sherman Oaks' proximity to Beverly Hills, adjacent areas of the San Fernando Valley, Hollywood, The Studios, and Los Angeles make it a centrally located, easily accessible city.  Commutes to these areas are also easier than other locales situated farther away. 

Property prices remain more reasonable in Sherman Oaks than in Beverly Hills, West Los Angeles and other areas of the City.  Values are there and a variety of neighborhoods abound giving choices of price and ranges of price.  Condominiums in Sherman Oaks are available in the mid to high $200,000's to estates in the multi-million dollar range.  Apartment buildings, residential income property is on the market from about $250,000 per unit and up.  Duplexes, triplexes, four-plexes and larger apartment buildings are scattered throughout Sherman Oaks. 

While some of the older residential income buildings, apartments, are under the City of Los Angeles Rent Stabilization Ordinance, many newer buildings are not.  Buildings constructed after 1979 are not subject to Rent Control, while buildings built before 1979 are under Rent Control. 

Prices for income property though have continued to rise over the years.  Sherman Oaks remains a highly desirable place to live and as a result, demand has remained high, supply low and prices are generally at a premium. 

Commercial property in Sherman Oaks consists mainly of retail, medical and office space.  In a rent survey I did for a client in the Fall of 2007, I found that retail property on Ventura Boulevard ranged from a low of $3.50 per square foot to over $7.00 per square foot, triple net.  While not a lot of commercial property was for sale, the buildings that were for sale ranged in price based on anywhere from a 4.5 CAP to a 6 CAP.  So, what are triple net's and CAP rates?

When a tenant leases a commercial property, rents are generally either "gross" or "net".  Gross rents are where the tenant pays a fixed lease amount and the landlord pays all the expenses associated with the property.  In a net lease, the tenant is responsible for a varying number of the expenses, with triple net meaning that the tenant pays all costs in addition to the base rent.  As an example, in a triple net lease, the tenant will pay for all expenses related to the property including maintenance, insurance, property taxes, roof and structure. 

CAP rates refer to a capitalization approach to determining the sales price of a commercial property.  In determining a capitalization rate, one takes the NET rent after all expenses for an entire year, then divided that number by the cap rate, represented as a decimal number in hundredths.  For example, if a property rents for $1,000 per month, then 1000 x 12 = $12,000.  $12,000/ 0.05 (cap rate of 5) = $240,000.  So, a building with an income of $1,000/month net after all expenses at a cap rate of 5 would have a value of $240,000.