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