Is it worth buying a Multi family in Los Angeles County

[Veronica Solorio]

Hi, total newbie here so apologies if this is answered elsewhere. Briefly, 35F, married to 33M, both ER physicians. Currently, living in Houston but planning to move back to California in 2-3 years. We are well compensated but will take a pay cut moving back, I’d guess a combined income of $500k/yr. My student loans will be paid off and his will hopefully be forgiven after 10 years of public service. I would really like to live in the South Bay but don’t want to be house poor. Wondering if it is at all advisable to buy a multi family property in a less expensive neighborhood and then hopefully purchase a “forever home” a few years later. Or should we just save the down payment, buy the forever house and invest in stock rather than trying to invest in LA real estate hoping for passive income later? Hope that makes sense and thanks for reading! 

[Jon Schwartz]

Originally posted by @Veronica Solorio:

Hi, total newbie here so apologies if this is answered elsewhere. Briefly, 35F, married to 33M, both ER physicians. Currently, living in Houston but planning to move back to California in 2-3 years. We are well compensated but will take a pay cut moving back, I’d guess a combined income of $500k/yr. My student loans will be paid off and his will hopefully be forgiven after 10 years of public service. I would really like to live in the South Bay but don’t want to be house poor. Wondering if it is at all advisable to buy a multi family property in a less expensive neighborhood and then hopefully purchase a “forever home” a few years later. Or should we just save the down payment, buy the forever house and invest in stock rather than trying to invest in LA real estate hoping for passive income later? Hope that makes sense and thanks for reading! 

Veronica,

LA investor and house-hacker here.

Are you talking about buying and living in the multifamily? That's what I'm doing: house-hacking a duplex for a couple of years before moving into the forever home. I'm in a similar situation, similar joint income, similar aspiration for a forever home that would basically bankrupt us!

If your timeline is at least 2-3 years before buying the forever home, I think it's a great idea. In that time, market rents will grow faster than expenses, so your property is likely to cashflow when yo move out. You can then keep the property and open a HELOC for additional down-payment funds on the forever home, or sell the property when you move. Because of rent control, multifamily properties with vacant units sell for more here. You'll get top dollar for a duplex with one unit as near-market rent and the other unit vacant.

Plus, the cost of living in LA is so high, that if you rent or buy a starter home, your housing cost will be in the thousands. You'll save money in the meantime by house-hacking a duplex, triplex, or fourplex.

Good luck!

Best,

Jon