House Hack in LA/NYC or Buy Out-of-State First? 🤔🏡

[Steve T.]

New to REI & BP, and debating my first move.

My Background:

• 30, single, no kids, no property, high income, fully remote worker
• $300K to allocate toward real estate (+ $100K/year after tax)
• Currently renting in NYC but planning to move back to LA (hometown) in summer 2025 or the following year
• Tired of paying rent and want to start building equity

My Dilemma:

1️⃣ House Hack in NYC – Stay a couple more years here, buy a small multi-family now and offset costs with rental income. Concern: NYC’s strict landlord laws, high purchase price would tie up capital & be in less desirable area, would likely not cash flow (not good when I leave)

2️⃣ House Hack in LA – Move back, get a small multi-unit, and offset my mortgage with rental income. Not expecting cash flow, but at least my housing cost would be similar to renting. Concern: LA’s landlord laws, headaches from self managing, a good deal may still have tenants occupying it, if I ever leave it's an alligator so it costs more than the income it makes

3️⃣ Out-of-State Rental – Get skin in the game sooner by buying a cash-flowing property elsewhere. Would get a property manager. Concern: Remote investing as a beginner, higher risk. (I have read the Long-Distance Real Estate Investor, so have some ideas)

4️⃣ House Hack Anywhere - Due to remote work, I could find a market that has a profitable house hack, get great financing. Just need to spend a year somewhere I may have no desire to live.

Hybrid Plan:

• Keep researching out-of-state markets and act if a great deal appears.
• Move back to LA, live in Airbnbs in to get a feel for neighborhoods (open to suggestions), and house hack once I find a deal.

Would love to hear from those who’ve house-hacked in LA or NYC or started with out-of-state rentals—what would you do in my shoes? 👀

[Rick Albert]

I'm a 2x house hacker in LA and a case study in the Bigger Pockets Book, "The House Hacking Strategy." I also invest out of state.

The concerns you bring up are valid. Keep in mind studies have been made to where rent control actually lowers vacancies and increases rents. For example I have a unit in Nashville that has been sitting on the market for months. My ADU here in LA rented in less a week (the tenant moved in three days after the painting was done). I had multiple applications and inquiries were still coming in.

Also keep in mind your goals. An argument can be made that you build wealth FASTER with higher priced properties. You have larger loan buy downs and the appreciation dollar amount is higher. For example a 3% appreciation on a $1,000,000 asset is $30,000. That same 3% appreciation on a $100,000 asset is $3,000. The same rule applies to rising rents. And because you can put so much less money down, your Cash on Cash Return is even higher. You put 3.5% down and you almost make up your down payment in one year. Of course values fluctuate and this is over a long period of time.

What LA and NY also have that other markets may not is high paying jobs mixed with no land to build more housing. So even though there may be a decline in population, it almost doesn't matter because there isn't enough housing to go around anyways. They just talked about this in the latest BP podcast episode.

You could also do what I did and what some of my clients have done, which is we use our LA properties as a vehicle to buy more properties. We use HELOCs because of the larger appreciation and use that as down payments. With the exception of the property I'm about to enter escrow on, I haven't done a down payment of my own since 2015. Between a 1031 Exchange, HELOCs, and a partnership, I'm up to 15 doors including my personal residence. To be fair I did ride the low interest rate and high appreciation train, but you get the idea. You can also do a different strategy than what I did to get started.