Househacking in LA on single income public school teacher salary?

[Kara Lorenzana]

Hi BP community,

First post ever! I've been reading up on the forums and listening to the BP podcasts, and switch from feeling really motivated to doubtful.  I am a total rookie and would appreciate any insights into my current situation :)

I am gearing up to purchase my first condo this August 2023 when my lease ends. I currently live in a fantastic townhome with 2 of my friends in the SGV area, and I pay $750 for my room and about $50 for utilities. My decision to buy instead of continue to rent is because one friend is moving in with her partner and the other friend is moving back to her home state. I decided that if I am going to pay significantly more for housing, it should probably be my own home at this point.

My plan is to slowly build a rental portfolio starting with a 2 bed 2 ba condo; live in one room rent the other out. I am pre-approved for $350,000 which doesn't get me much in LA, but some condos in the San Fernando Valley, particulary Van Nuys, North Hills, and Panorama.  My first question is: are those good areas to invest in or are there other neighborhoods worth looking at?

After living in the condo for 2-3 years and if the situation is ideal, I plan to take on a HELOC and use it to buy a second rental property. I'm sure there are more things to consider but as a rookie, this is about as far as I've gotten.

I guess my second question is: Is it possible to carry out this plan on my single income (I make about $73,000 a year gross) in the current Los Angeles County market? Or am I too much of an idealist??

Thanks in advance to anyone and everyone who can give me some nuggets of wisdom!

[Richard Sheppard]

I've been working with a coach on this specific issue and live nearby in Orange County. When I first moved out to the LA area I lived over in Canoga Park and I've had many friends over the years that have lived in the Van Nuys and North Hills area. My general impression of it is that there are some really great parts and some other less great parts, plus the neighborhoods tend to have a lot of turn over with people moving in and out all the time. That means as an area to rent it's pretty good and you'll find a lot of opportunities to rent the second room.

So your immediate plan holds a good amount of weight. Personally I might look at the neighborhoods north of the 118 or 210 as the prices rise a bit, but the less desirable issues also disappear. So it's a matter of what you value and need more in your life since you plan to live there.

As for your second part of your plan, this partially depends on what kind of down payment you make. Essentially on a $350k mortgage for 30 years at about 5% only about 5.1k at would go to the principal the first year, 5.4k the next year, and 5.8k the year after. So three years would leave you with about 16k plus your down payment and any added value from property price increases as you equity. A HELOC is lower interest, but it's still another payment on top of the existing mortgage and then a third mortgage for the new place. This can make things tight if you're just looking at the $73k that you make, but here's the nice thing, the rent money you take in gets added to you as your income.

My suggestion would be to start with the existing plan. Buy the place you want and rent out the second room. When 2-3 years are up and you feel you have adequate equity for the HELOC, go ahead and get the next place, but with a twist. Fully rent out your condo to take care of that payment and move into the new place as an owner-occupied rental and find something with an ADU or a duplex for you to stay in one and rent the other. Keeping in mind that the amount you rent everything for (both the condo and the new place) will be part of your income, so you're not just making $73k on a teachers salary. You may also want to open a LLC to help protect your investments at this point, but that's a different topic.