Buying & Selling Real Estate
Market News & Data
General Info
Real Estate Strategies
Landlording & Rental Properties
Real Estate Professionals
Financial, Tax, & Legal
Real Estate Classifieds
Reviews & Feedback
House Hack Markets in California
Where are the best markets to house hack in California?
I've heard people saying there are a lot of great places in Cali for house hacking that aren't necessarily as expensive as the normal LA, San Francisco, San Diego, etc. I don't need to be guaranteed in finding a place that is cash flow positive, but I'd like my tenants to pay most of my PITI if that is possible. I also am fine renting out rooms in a SFR, so I am not set on multifamily.
Any suggestions?
In my opinion you are not concentrating on the appropriate financials. San Fran, LA, OC (I added OC - great city with much better roads than LA), San Diego are among the most desirable locations to live in the US (it all depends on what you value, but many people value what those cities offer). It costs a lot to live in these fine locations. My market is San Diego. We have lower wages compared to housing price than those other fine cities. The poor wage versus housing price ratio in San Diego is referred to as the "Sunshine Tax".
If you can live in any of those cities at a discount, then you have done great.
It is my opinion your goal should be to live there with a complete initial cost less than what you would be charged to rent an equivalent unit. By complete cost, I am including vacancy, cap ex, maintenance, miscellaneous charges minus rent and equity pay down.
Now you are living in a great location at a discount. You may be thinking not much return, but those 4 cities have outstanding historical appreciation. The rent and properties have gone up over the long term for decades.
The rent appreciation implies that each year the amount you pay to live there versus a rented unit continues to decrease. What you would pay to rent a unit is likely to be increasing (more savings) and what you collect in rent should be increasing (more money coming in). More savings and more money coming in; not a bad arrangement.
The historical property appreciation of those cities is outstanding. If you purchase with a 96.5% LTV FHA loan, the average return from appreciation (not including closing costs) has been over 100% for that first year. That is the average return (all these markets have experienced some depreciation cycles in the last 50 years but they have been fairly short so realize average does not imply every year will be average - there will be better and there will be worse years).
House hacking is a good strategy in most markets. But in the cities that you listed it could be the only way to live in those fine cities and own RE in those cities. Those cities have historically produced outstanding return for RE investments.
House hacking may present the best option to ever own property in those fine cities. If those cities are where you want to live, house hacking is ideal.
Good luck
@Dan H. Thank you for the great write-up! I agree that the appreciation in these markets would be great, and would make up for the negative cash flow. Also, the rents would see appreciation so the longer I keep the property the better off I will be. It definitely seems like more of a long term play.
Thanks again!
Hey @Cole Britting
House hack where you live. I don't think there is a "best" market for house hacking. It's a great option for those looking to get started investing in real estate while keeping your net cost of housing down. Find out where you want to move and then found a house to hack.
@Cole Britting You can house hack in San Diego with little to no money and have other unit(s) pay most of your PITI while you are living there...Just closed on a 2 unit property for a couple here on Thursday last week who put only 3.5% down (fha loan) and their second unit tenant will be paying the majority of their PITI. They even got all closing costs covered. I have another couple closing today on a multi-unit that put $0 down using VA loan and will have 2nd unit tenant cover the majority of their PITI as well....in more expensive markets you really get a much bigger bang for your buck house hacking when you use low money down options. You can do it with an SFR as well...for the sake of another example...I have a client closing tomorrow who purchased 4 bedroom SFR and plans on having room mates to cover most of his mortgage...also 3.5% fha loan with all closing costs covered.
Good luck!
-
Real Estate Agent California (#02026495)
@Twana Rasoul It is pretty eye-opening to see some of the examples of your clients. To be honest, I didn't really think it was possible in a place like San Diego. How is the inventory of small multifamily? It seems that there is a good amount judging on a few of your clients closing on them in a short time period. I'd prefer small multi but am definitely open to SFR if the numbers work.
Do you know how much they are typically coming out of pocket to cover the remainder of the PITI?
Thank you so much for sharing, reading your write-up has been very helpful!
@Cole Britting You can house hack any of those places... The question you have to ask yourself is where do you want to live, and why do you want to live there. California is Mass, yet the sub-cultures and character of each region is unique.
@Cole Britting small multifamily is not plentiful in San Diego, areas like greater Los Angeles and surrounding have plenty to choose from. The amount left over for you to pay depends on several factors including location of the property, number of units, type of loan and which unit you will be occupying if there are different size units. I can share a list of a dozen multifamily from the last month several months and give you an idea of how much each of those individuals is having to pay toward their PITI and expenses. I'll shoot you a pm
-
Real Estate Agent California (#02026495)
@Cole Britting
What’s up cole I’m house hacking in Stockton CA (an hour outside of San Francisco) and not only is my mortgage getting paid off but I’m also netting an extra $400 a month - So far so good
Hey @Cole Britting! Househacking is a great way to live in an expensive market while drastically lowering your cost of living expenses. I house hacked in the Bay Area, which gave me the ability to accept a high paying job in the Silicon Valley while also living for "free". As others have said, you should house hack where you want to live, it's doable in virtually any suburban area with good jobs. If you do it right, your tenants will be chill roommates and you'll all benefit from the arrangement. Best of luck with your move and let me know if you're heading up to the Bay Area!
@Allan Pilapil Wow that's awesome, congrats! Stockton is a market that I have heard good things about. Are you house hacking a SFR or small multi?
Hello @Cole Britting house hacking is definitely the way to go. Ditto to what everybody said. I'm currently doing it in Riverbank. If you're interested in the Stockton and neighbor markets, you should join our REI group. I'll shoot you a pm.
@Julio Garcia I have been getting acquainted with entering into real estate. I also am in riverbank, and while I don’t know what house hacking is as i type this out, but I will once I’m done.
How long have you been at it?
@Cole Britting
Yeah Stockton isn't too bad - was super easy to find tenants and they're all chill and pay their rent on time! It's an SFR that I bought with an FHA loan - you can look on the outskirts of major cities, there's a lot of opportunities. You can find some great deals on the outskirts of San Diego too
@Carrissa White ill shoot you a pm.
@Cole Britting hello. We have a 2744 sqft triplex in 90062 we are considering to sell. The owner unit with 2 car garage which you maybe able to make it to 4th unit by converting, will become vacant on 1/1/2021 for house hacking. It’s appraised for 825K on October 31. D class neighborhood with a lot of potential as it’s 20 min to silicon beach and 15 min to dtla. Let us know if interested.