Should I househack a condo in N. Hollywood or Long Beach? At all?

Question

Hey Guys, Newbie here about to make the plunge! I'm thinking of buying a 3br 2 bath condo in north hollywood/Panorama/arletta, taking one room and renting out the other two... First off, is this generally allowed in condos as long as I occupy the unit as my primary residence?

Secondly, what do you think about the idea altogether? My Mortgage/Ins/tax/hoa will be about 2k and my income from the other 2 will be about 1800.... I know that condos can be volatile in price but being that i get to almost live for free, am I making the right choice given the location? Or should I be concerned about something(s) I'm not thinking about?

Thanks for the help guys!

Matt R. · Answer

@George Torres If you can live for free in LA or close to including hoa this is not a bad idea. Rooms rent for around $1000 and that is not going to go down IMO. Make sure you professionally screen roomies. I can understand Davids hoa issues but lets flip that for a moment. There could be some security with the hoa in regards to not getting killed with a sewer line or some other outside expense..old tree falling, earthquake damage. Sure you could have some assessment still. At your price point any sfr would need major work. If you could do the same with a sfr cool. Perhaps get that fha 203 loan and maybe see what is out there for 350k? The sfr is likely superior of course. Otherwise unless you want to rent this condo is the next step up. BTW Noho is hotter than a pistol last check. I certianly don't expect that to change long run on the demand side.

David Faulkner · Answer

I hate HOAs ... the fees eat into your cash flow, fees can go up but won't go down, for what the fees are you could hire a gardener etc to give the same service on a property w/out HOA, they limit your ability to renovate (i.e you can't fix the exterior or add on to a condo), they may have now or in the future limits on using as a rental, you generally have less control over your investment and the land (which is really the valuable part of RE over the long term). Give me a single family, or duplex, triplex, or fourplex with no HOA over a condo with one any day of the week.

House hacking is a great strategy ... just find a great deal in an area that is not too ghetto, preferably with no HOA. Great deal on the smallest, most beat up property on a nice block type of thing gives you lots of upside.

House hacking is a great strategy ... just find a great deal in an area that is not too ghetto, preferably with no HOA. Great deal on the smallest, most beat up property on a nice block type of thing gives you lots of upside.

David Faulkner · Answer

Go where you can afford to hold as a primary indefinitely. Beyond that, go where you find the best deal (i.e. let the numbers be your guide), and that will likely be wherever you are most familiar with the market. If you believe as I do that cash flow and appreciation tend to be inversely correlated, then in general the lower the cash flow, the higher the opportunity for forced appreciation. Beyond that, I'm not familiar with any of those areas ...

David Faulkner · Answer

Go East, young man! If you want to buy and hold, and you aren't finding satisfactory properties in your price range that will produce sufficient cash flow, go East and perhaps a bit North too. Go distressed, young man! Get something that needs work and get a discount accordingly, then roll your sleaves up and put in some sweat equity. Not everything needs to be repaired day 1 ... you fix up as time and money allow. I personally would apply both these methods on a non-HOA property over a condo.

If you do decide to go the condo route, though, then I'd say consider it more of a live in flip than a long-term buy and hold. I think it would work better as an active forced appreciation play shorter term than a passive cash flow play longer term. Roll your sleaves up and put in some sweat equity ... live there for a year or two. Rent rooms while you live there if you like and can once you fix up a bit. If you live there for a year, cap gains taxes go from short term (at your tax bracket) down to long term (15% I believe, but check with a CPA). Live there 2 years or more and the first $250k of capital gains are tax free ... Either way, you roll the profits into your next place. Make sure you can afford to hold indefinitely as a primary, in case the market is not conducive to selling after a year or two.

Any way you slice it, sacrifices will be required ... just a question of which sacrifices. I hope this helps give you some more options ... good luck!

Greg Scott · Answer

George:

There are plenty of people that sell turnkey rentals in almost every state.  If you do your due diligence, you can find a good one.

When I started investing, I didn't want to invest in Detroit because real estate prices go up and down with Automotive and I work in that industry.  I wanted something counter-cyclical.  I bought several properties across the US from Jason Hartman's organization.  They are a quality outfit.  Google them.   They always have lots of inventory online so you can look at what they have to get an idea what I'm talking about. It should help you wrap your thoughts around a broader set of options.

Good luck!

Greg

Greg Scott · Answer

In 1995 I moved from Brentwood to the Detroit area.  I spent more on rent in a 1 BR apartment in Brentwood than I did on my mortgage on a 2000 sq ft house, with basement, in Michigan.  LA real estate can be pricey and goes up and down like crazy.  I consider it very risky.  I own rental property in several states and would suggest a different approach.   Instead of going for a $300K condo, why not invest out-of-state in a much-cheaper SF rental?   You can get good cash flow, much less risk, and help pay your rent in LA.  Alternatively, move out of LA.  You might be pleasantly surprised at how your lifestyle improves.

Greg Scott · Answer

George:

I have owned a condo rental.    Some additional things to consider.

Please pay careful attention to the HOA fees.  They can destroy cash flow.  Be sure to request historical information to verify.  Often HOAs will charge a fixed amount per month, but then hit you with "special assessments" for big projects.  Before we were married my wife had a condo with $200/mo fees but every other year had a $2000 special assessment.  Ouch.

Condos can also have restrictions on rentals.  Last thing you want to do is buy something as a rental and then find you can't rent it.  Do your due diligence!

Lastly, if the HOA is embroiled in a legal battle, it can cause havoc for all the owners.  You should probably talk with the HOA president to understand all of the above items.

There are numerous other HOA headaches, but all minor and not worth mentioning here.

Generally, I find condos are not as good as single family both in terms of cash flow and total return.  That said, if I found the right deal, I wouldn't hesitate to buy it.

George Torres · Answer

Great advice, @david faulkner. I'm 90% sure I'll go the Condo route. What in your opinion is the best area to invest in around LA to get the best chance at appreciation? Inglewood? Van Nuys? Culver City?

George Torres · Answer

HAHAHA!!! Can you tell I'm new at this @greg scott? Thank you for clearing that up, makes a lot more sense now :)

Richard Dunlop · Answer

I think he used SF to mean single family.

I also moved out of the rat race to Detroit glad I did it has been incredible.

Should I househack a condo in N. Hollywood or Long Beach? At all?

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