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Updated almost 10 years ago on . Most recent reply

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45
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12
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Michelle Watt
  • Investor
  • Las Vegas, NV
12
Votes |
45
Posts

Opinions re: first-time home buying in Los Angeles

Michelle Watt
  • Investor
  • Las Vegas, NV
Posted

Hi everyone,

Posting a newbie question here, but wanted to get your opinions since I joined BP last week and I am still at the books/webinars research phase.

I'm currently in Los Angeles (Century City/Beverly Hills area) and my lease ends in February 2016. I've been renting for about 5 years since I haven't been sure about staying in LA until now, and my fiance and I would like to buy a primary residence. Problem is, as I'm sure you know, we keep reading that the market is insanely high right now, even for LA. That said, we're paying so much in rent anyway that it still almost makes sense to buy one of the cheaper condos in Century City, rehab it, and live in it for at least a couple of years before renting it out if we want.

Our goal is to live in LA and then invest in multi-families (and eventually apartment complexes) either in the outskirts or out of state, where our dollars will go a lot further. I initially wanted to find a duplex/triplex/fourplex in the city and live cheaper in one of the units (probably can't live rent free in this city), but I'm finding that even the ugliest of those are still around $2M+. If I just cared for owning just a few units, I could probably do that but again, my goal is to build scale.

Just wondering if you guys have any advice for me as to what you'd do in my situation? I've got to live near Century City/Beverly Hills/Westwood area for work, so I'm pretty limited in the area (again, for primary residence only). Should I keep renting for a bit if prices may come down? Buy a cheap condo in the city/rehab it? Are there any close areas with cheaper 2/3/4-plexes that I should look into?

Thank you SO much for your help in advance.

Michelle

Most Popular Reply

User Stats

260
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240
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Tom Mole
  • Investor
  • Sunland, CA
240
Votes |
260
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Tom Mole
  • Investor
  • Sunland, CA
Replied

@Michelle Watt  If you're considering buying a small multifamily in order to live in one of the units while renting the others, you're talking about something @Brandon Turner call "House Hacking". A big advantage with this approach is that you can afford to put more of your own money into the deal than you'd want to in a pure investment deal. The downside is you probably aren't going to find to many financing options besides going to the bank.

It's really tough to find properties that will cashflow in the nicer areas of Los Angeles these days. That means you need to put more of your own money into the deal. If you can raise the down payment and closing, you can buy your multi as your primary residence and consider any rent on the other units as a subsidy to your mortgage. 

This strategy doesn't really fit well into the regular investment calculators, so you'll have to invent the means to determine whether or not a deal is a great deal. There's plenty of help out here in the forums. If you find a potential deal that you need help to evaluate, send me a message and I'll show you the math I'd use for that particular situation. When you close on the deal we'll make a blog post of it.

Then main thing is to get creative. Think like an investor. A buddy of mine was trying to do the same thing you're talking about but in the Studio City / No Ho area. He couldn't find anything, so he started searching for a place to rent. He found a place that he loved in a 4-plex in Studio City. The landlord wanted to rent the place to my friend, but another prospective tenant was threatening legal action. The landlord was ready to throw up her hands. My friend called and told me the story. He said he may not get to rent this unit. I said, "don't rent it, buy it! Get the seller to carry, buy the 4-plex and use the rents to pay the mortgage." Think like an investor.

Finally, you may want to consider widening your search just a bit and consider a little more commuting. If you go just a few miles further out you'll likely find a lot more opportunities. The difference in price could more than make up for the inconvenience in most cases.

I hope this helps and gives you a couple of ideas to develop.

  • Tom Mole
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