House Hacking in Los Angeles: Rent vs Buy Fourplex Multifamily

[Colby Wise]

Hi BP Community!

My spouse and I are moving to LA in 5 months and need the wisdom of BP'ers on our housing decision. We are coming from NYC and trying to determine whether to rent a condo/house or house-hack by buying small owner-occupied multifamily? Our unique factors are below - would love your thoughts or questions!

Consideration #1

We own our NYC condo, purchased 1.5yrs ago and have a friend who will be renting it out. We bought it at a good price with solid (NYC) carry but with rent declines from COVID our monthly carry is slightly negative. Constraint #1: in LA we want to keep our all-in rent equal to the NYC carry costs so our absolute living expenses per month are roughly flat = $3500-$4000 max rent in LA

Consideration #2

We'd like a minimum at 2br/1b in LA but ideally, 2br/2b or 3br/2b since my spouse will be WFH for the majority going forward post COVID plus in-laws may want to come over (low priority lol)

Consideration #3

We understand traffic is horrendous but haven't truly experienced it. Given we're moving for a new job with uncertainty on the work schedule we don't want a wildly heavy commute. Ideally, we are ~30 min from Hollywood - say this Lat/Lon (34.096458, -118.320901). Friends have told us good neighborhoods to rent: West Hollywood --> Fairfax, La Brea, or north of Hollywood e.g. Laurel Canyon

Consideration #4

We are a fairly big investor in multifamily (commercial) currently and are sensitive to how much capital we need to commit to personal residence. We are not sure what to expect for downpayment/LTV given income levels (higher end). We've read 4-20% range but we're not first-time homebuyers and income is high so not sure what to expect. In NYC we put 10% via WellsFargo HNW which is gone I believe. Additionally given low cap rates in LA like NYC (3-4%) we know we're going to get a similar return as our commercial investments e.g. 15-20% syndicate returns from 7-9% caps. Any help on how to think about this such as 1/ lowering our housing costs, 2/ tax efficiencies, 3/ exposure to LA multifamily appreciation would be helpful! We don't want to put a ton of capital down on a place given above and risk being at a new job in a new state. We're really considering this from a lower housing cost vs money down vs rent target perspective considering $3500-$4000 current rent target which seems high for LA. We are fortunate and could go up to $15,000+ per month but don't want to since we consider personal housing very low on our wealth-building priority list. So really this is about 1/ lowering our $4000 rent target if possible, 2/ what we get at that price point, 3/ downpayment needed

Any recommendations on how to think about this? Should we rent for while at ($3500-$4000) or even lower if possible to get 3br/2b cheaper? Should we use a little capital for a house hack tri/fourplex and what size units do you think possible at what price points? What about the area - I know these are not the most cost-conscious areas in LA...?

Bonus: If you are a real estate agent or bank feel free to send us a direct message! Happy to chat 

[Shiva Bhaskar]

Hi Colby, I am an LA multifamily investor. At first glance, I would suggest renting for at least a little while. Get to know the market. There are many good areas for buying one unit and renting others. I know a great agent for folks looking to househack if you want the referral. 

We buy multifamily in very different areas (from where you mentioned) in LA County. We are still seeing strong deals and returns, but the neighborhoods are of course very different.