Real estate investment strategy: Purchased home in Los Angeles 🏡

[Joseph Schmitt]

Hello Bigger Pocket! 🎉

I would love some help and guidance!

I purchased a home in Dec in Los Angeles specifically Woodland Hills Ca. This purchase was not originally an investment, but my new goal is to use this as my first investment property.

Since I purchased the home I made critical updates like new roof, windows, new exterior paint and landscaping. Here’s a quick number overview.

Purchase: $650k

Mortgage: $611k

Exterior Appraisal last week: $660k

Updates $30k

2 bd

1 bath

Detached two car garage

House - 950 Sq. Ft

Lot Size 8,458 Sq. Ft

I've began my research and things like BRRR seem like a potential but I'm not sure the economics makes sense on this current home. I've looked into converting the garage into an ADU. Los angels has recently loosened up their ADU requirements due to the house in crisis in California.

I would love advise on the best strategy given my current situation and possible ways to finance.

My high level focus is building passive income. And would like to purchase my next property in Dec/ Jan.

Thanks in advance!

- Joe 🏠

[Dan H.]

Originally posted by @Joseph Schmitt:

@Jonathan Schwartz

Thank you so much for the insight! This was very helpful.

To follow up on some of your mentions.

- The majority of the surrounding homes are at least three bedrooms but they’re ranging from $800k to $1m.

- Regarding The current economics of the mortgage. I agree there’s little to do with pulling out equity. One of the reasons the house was just re-appraise is because we were looking at refinancing with the rates dropping. We’re looking at saving $400 a month on our mortgage, drop a percentage point and the cost of refinancing $12k rolled into the mortgage.

- Thank you for the AUD info I will look into this. I was quoted around $100k for a full conversion. And also looked at a few pre-fabricated options.

-  In regards to the next acquisition the plan is $40k. Any thoughts on any of these scenarios?

- Acquiring a house outside of Los Angeles that better aligns with current budget? Or find alternative ways to finance this next property. 

Or other thought is:

-  Acquire another property in the Valley or South Bay due to cost. And rent this current property out for a wash or little cash flow.

Thanks again! Also happy to direct message.

Thank you

Joe - 🏡



At your current LTV. this home not only would not have any positive cash flow but would have huge negative cash flow. I suggest you educate yourself on residential buy n hold expenses. 

> One of the reasons the house was just re-appraise is because we were looking at refinancing with the rates dropping. We’re looking at saving $400 a month on our mortgage, drop a percentage point and the cost of refinancing $12k rolled into the mortgage.

Someone is willing to refinance you at your current LTV with $12k rolled into the loan? I am surprised, but I mostly deal with non owner occupied financing.

>I was quoted around $100k for a full conversion.

this seems slightly low, but close enough. It will help your cash flow if you keep the property.  if you plan to sell it, the appraisals on ADUs are typically coming in lower than the hands off construction costs.

Your lot is large enough that it may be able to support a detached ADU.  This would cost more, but could be worth considering. 

Good luck