Creative Primary Residence Purchase Options - in SoCal

[Jake Grenier]

Hello!  My fiance and I are looking to purchase a primary residence in Orange County, CA, where it is very expensive!  We love the area and aren't considering anywhere else, so we're looking for ways to get the absolute best value, and lower our monthly mortgage/tax/insurance payment.  Here is a list of things to know about our situation: 

- We have adequate funds for a down payment and other costs like renovations, closing, loan, etc. - max of $300k

- We don't want to pay any more than a $2.8k monthly mortgage/tax/insurance bill

- We don't want to rent out rooms in a house, as we're starting a family soon

We're looking for creative ways to get a great deal on either a low price home that needs work, or a duplex/triplex that needs some cosmetic touch up. I think we have the funds to avoid mortgage insurance and increase equity, but we're also looking to buy under market value to improve our long term bottom line.  We're considering hard money lenders for all cash offers, 203k rehab loan, using a wholesaler, etc. for the financing.  So any information or things to look out for that you guys have for that type of process would be greatly appreciated!

Then I'm also considering making postcards to put in mailboxes of home's we like, so looking for other ideas like that to help us find a great deal (and good property) under market value.  

Thanks if advance for your help and ideas!

[Jon Schwartz]

Originally posted by @Jake Grenier:

Hello!  My fiance and I are looking to purchase a primary residence in Orange County, CA, where it is very expensive!  We love the area and aren't considering anywhere else, so we're looking for ways to get the absolute best value, and lower our monthly mortgage/tax/insurance payment.  Here is a list of things to know about our situation: 

- We have adequate funds for a down payment and other costs like renovations, closing, loan, etc. - max of $300k

- We don't want to pay any more than a $2.8k monthly mortgage/tax/insurance bill

- We don't want to rent out rooms in a house, as we're starting a family soon

We're looking for creative ways to get a great deal on either a low price home that needs work, or a duplex/triplex that needs some cosmetic touch up. I think we have the funds to avoid mortgage insurance and increase equity, but we're also looking to buy under market value to improve our long term bottom line.  We're considering hard money lenders for all cash offers, 203k rehab loan, using a wholesaler, etc. for the financing.  So any information or things to look out for that you guys have for that type of process would be greatly appreciated!

Then I'm also considering making postcards to put in mailboxes of home's we like, so looking for other ideas like that to help us find a great deal (and good property) under market value.  

Thanks if advance for your help and ideas!
 

Jake,

I'm house hacking a duplex in Hollywood with my wife and 3yo daughter, so I understand the dilemma of investing with family in mind.

Long story short, I think you should go the duplex/triplex route.

Joe makes some valid points about hard money, wholesalers, and postcards. These are all great tactics if you're flipping, but the results won't be great if you're looking to live in the home. The response rate when reaching out to owners is so low that if you rely on wholesalers or postcards, you're extremely unlikely to find a home you in a like in a place you want to live. And hard money comes with a lot of timeline stress.

Given your interest in keeping your monthly expenses down, I think going the duplex/triplex route will get you where you want to be. If you buy a house, regardless of how you do it, you'll be constrained by the fact that you're not collecting any income to offset the mortgage. As such, I think you'd have to use hard money and a wholesaler, then finance, to make your plan work with an SFR. This will take a lot of time to find the right property (if ever), then a lot of headache and stress.

If you buy a duplex or triplex, though, you'll have rental income to offset the mortgage and expenses, so you can buy bigger. So long as you have reserves to cover a vacancy period, I think you should go as big as you can while projecting a net monthly cost of $2800. I built a spreadsheet to help me analyze properties in this way when I house hacked my duplex last year; happy to share it with you.

Also, Costa Mesa is a great multifamily market! I'm helping a client find a multifamily around Irvine, and I'm loving what I'm seeing in Costa Mesa. Just inland from very expensive SFRs are some really well-priced multis!

All the best,

Jon