Buy personal house or investment property (Los Angeles area)

[Adolph Witherspoon Jr]

Hi All, hoping for your directional feedback here.

Early 40s, single/live alone, employed in technology, work from home, no debt aside from auto-loan. Sold my first personal home a year ago and moved into a luxury rental high rise temporarily while I determine my next move.

Currently - I’m losing my mind here with the smaller apt space (although gorgeous view) and more so the loud and rambunctious neighbors keeping me up some nights when I work in a very busy industry and need rest and safe outside space, which Dtla is a bit more unsafe during Covid.

Question(s):

I’d like to get back into the homeownership game so I’m not continuing to pay high rent and have nothing to speak for it - also, to have more space (ie spare room for home office and guest room, yard, etc...), BUT I’d also like to get into Realestate investing “soon”.

Should I focus on buying a home that’s a light fixer , so I can live in it and Reno to gain equity (and make it somewhat a long term flip or future rental property), THEN find an investment property, ie - mental health/sanity first...?

....or do I suck it up, stay a renter And dive into the investment property space to build a portfolio...?

[Jon Schwartz]

Originally posted by @Adolph Witherspoon Jr:

Hi All, hoping for your directional feedback here.

Early 40s, single/live alone, employed in technology, work from home, no debt aside from auto-loan. Sold my first personal home a year ago and moved into a luxury rental high rise temporarily while I determine my next move.

Currently - I’m losing my mind here with the smaller apt space (although gorgeous view) and more so the loud and rambunctious neighbors keeping me up some nights when I work in a very busy industry and need rest and safe outside space, which Dtla is a bit more unsafe during Covid.

Question(s):

I’d like to get back into the homeownership game so I’m not continuing to pay high rent and have nothing to speak for it - also, to have more space (ie spare room for home office and guest room, yard, etc...), BUT I’d also like to get into Realestate investing “soon”.

Should I focus on buying a home that’s a light fixer , so I can live in it and Reno to gain equity (and make it somewhat a long term flip or future rental property), THEN find an investment property, ie - mental health/sanity first...?

....or do I suck it up, stay a renter And dive into the investment property space to build a portfolio...?

Adolph,

Good questions, man. I'm an investor, househacker, and agent in LA. Lemme throw my two cents by you...

Given what you've shared about your situation, you should buy a place in LA and live there. The only question is: house or multifamily property?

Since you work in tech and rent in a luxury high-rise, you're clearly not desperate for a little monthly cashflow. I assume your schedule is such that you could tolerate overseeing a light renovation in LA, but managing out-of-state BRRRRs might be too taxing. And I assume you're investing for wealth. You're already talking about a portfolio and not just cashflow. Bravo!

So I think you should buy a property in LA, force some appreciation right off the bat with a light renovation, let more appreciation bake in over a few years, and then grow the portfolio from there. The longterm appreciation gains in LA are what really builds the wealth.

Let's explore buying a house vs. buying a multifamily property:

If you bought a house, you'd want to find a light fixer in a rapidly developing part of town. Will you eventually be returning to an office? If so, where? If not, great! The whole city is your oyster, and there are several submarkets with socioeconomic trends and infrastructure plans pointing toward a lot of growth in the coming years. I pursued this strategy across two primary residences in Echo Park from 2009 to 2019; it worked out really really well.

If you go with a multifamily property, you'd be killing two (or more?) birds with one stone. You'd be owning again, and you'd have a proper rental portfolio at the same time. Given that space and quiet are a concern, I'd recommend buying in a mature submarket; the tenant base is more predictable and longterm. If you're completely against shared walls, then you'd want to find courtyard style apartments or properties with, for example, a house in the front and two apartments over a garage (in a separate structure) in the back.

I'm living in a duplex now. I actually have a wife and a toddler, and it's working out great. Our tenants are downstairs, and it's not that we never hear them, but we don't hear them any more than we did our neighbors when we lived in a house in Echo Park. I bought this duplex vacant, so I selected my tenants, and they're really great people. It's actually been a joy to socialize with them through COVID.

The advantage to buying a house is that, when you're ready to cash in on your equity, you'll have a larger pool of buyers. The advantage to buying a multifamily property is that you can keep it and cashflow when you move out. That's the plan I put together with my property; I made sure the property would cashflow when I move out, and I plan to hold it indefinitely. As its value grows (and I've already created $100K of value via a reno), I can refinance out equity to put back into my portfolio.

What do you think?

Also, I feel you on the noisy neighbors. When I was a renter, I broke one lease because my neighbor would blast the Goo Goo Dolls all day. Do you remember that band? It was insufferable. Terrible. I feel for you, buddy!

All the best,

Jon