Help with strategy: Buy/hold MFH in high-priced regions for cash-flow

[Jenna Y.]

Hello BiggerPockets -

I’m new to real estate and am starting to model out numbers. I’m in brainstorming mode right and would appreciate any input.

:: GOALS ::
In five years time, replace my salaried income with RE income, where I am no longer trading my time for money and giving me freedom to pursue my own interests. If I can accelerate this, all the better.

:: BACKGROUND AND RESOURCES ::
I am based in Los Angeles and have around 50k earmarked for real estate investment. I have full time salaried job. Great credit score, other personal reserves. Private money via family is available down the line.

My boyfriend and I have just completed a major renovation of a triplex he owns out of state. Since we are based in Los Angeles will be remotely managing that and another MFH. He’s owned/managed these for many years, so we are fairly familiar with the numbers at this point.

:: VALUES AND PREFERENCES ::
We would prefer to invest in Los Angeles city, as the boyfriend and I could be doing the networking, scouting, rehab and initial PM ourselves (him more full-time). We both enjoy being on the ground, getting our hands dirty, and we have a knack for finding/building wonderful things on very tight budgets. As such, investing out of state/city is seems to be a less desirable option.

Pride of ownership is also important to us, and we are strong with aesthetics, so we would like to add value by creating charming aesthetically-pleasing properties.

We would owner occupy in the property most advantageous to achieving goals, fine with moving a few times.

:: POSSIBLE STRATEGY ::
A strategy I’m considering is buy-and-hold in Los Angeles, starting with residential. Would love to move into the commercial/mixed-use space as my experience grows. We could use same strategy as previous two - buy an under-priced fixer upper MFH in an up-and-coming neighborhood, add value, rent out, cash-flow, hopefully (not betting on it) have properties appreciate. Hopefully use existing equity to finance future investments.

Plugging my numbers into various spreadsheets however, I’m having a tough time having the numbers work well in my favor as a cash-flow operation for Los Angeles.

With 20% down, I can afford in the 200-240k range, with around 10-15k in rehab costs. The only MFH priced in that range are duplexes in C areas. I’m already eyeing a few up-and-coming pockets.

Market rents in C area 1 bedroom are around $1000, but with rent control, I’ve seen listings as low as $650 (would not consider those).

So that means:
- Average duplex purchase price + financed rehab: 200k + 10k
- Cash outlay: 42k down + 3.5k closing costs
- Assuming market rents: $1k per unit: $2,000 monthly gross
- Monthly expenses would be roughly 30% (doing own PM): Less $600
- Mortgage - 30 year fixed at 4.2%: Less $851
MONTHLY PROPERTY CASHFLOW: $549
# of similar doors to replace monthly income: 26

Obviously, should I go forward with this plan, it would have to be much more fleshed out and researched. Financing and rent control (all of Los Angeles city), are major considerations that would need to be grappled with.

Thoughts? Some questions:
1. Considering my goals, values, and resources, what other strategies should I consider to complement or replace this one?
2. Regarding the above strategy - what factors am I missing/ should I be considering?
3. Am I on target with these numbers? Are these kinds of numbers workable as a buy hold investment strategy?

Thanks for any insight you can offer.