Newbie in LA! [Wholesale or Househack as first investment?]

Newbie in LA! [Wholesale or Househack as first investment?]

Los Angeles, CA · Member since 2017 · 7 posts · 4 votes

Hello BP fam! Joe Kim here, a newbie to REI in Los Angeles. I am currently a graphic design teacher, graphic design freelancer, and newly licensed real estate agent. My journey to the world of REI began with my personal experience as a renter, HGTV, Dave Ramsey podcasts, a desire to become an agent, and now the Bigger Pockets podcast.

I am most enthusiastic about building a portfolio of rental properties for financial freedom. I believe my love for rehabilitation, interior design, experience in leading various teams, creating systems, and managing students will lend themselves well to the responsibilities of being a landlord. I hope to generate enough income to transition into part time teaching and graphic design, while building my asset column through real estate. I also hope to experiment with using Airbnb's platform for some of my future properties.

My current plan is to continue saving up money through frugal living, hustling with freelance design jobs, and selling real estate as an agent to purchase my first house hack. However, I have been wondering if I should get into the game sooner than later, attempting to find creative financing, or using a first time home owner FHA to lower my down payment.

Any insight with these first property questions would be very much appreciated. Thank you and nice to digitally meet you all!

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Los Angeles, CA · Member since 2016 · 156 posts · 113 votes
9y
Welcome to BiggerPockets Joe!!
See this reply in the discussion

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  • Dave VisayaPro Member
    Moderator
    Audio Engineer and Investor · Cebu City, Cebu · Member since 2013 · 7k+ posts · 881 votes
    9y

    Hello @Joe Kim, welcome to BiggerPockets. It's great to have you here!

    BiggerPockets
  • Contractor · Los Angeles, CA · Member since 2015 · 4k+ posts · 1k+ votes
    9y
    Why not wholesale AND househack?
  • Los Angeles, CA · Member since 2017 · 16 posts · 8 votes
    9y

    Welcome to BP Joe. Why not do both? You can wholesale and use the funds from your deals towards your house hack down payment. Feel free to connect if you have any questions, I am in a similar boat.

  • Los Angeles, CA · Member since 2017 · 7 posts · 4 votes
    9y

    Thanks everyone for your responses! @Manolo D. and @Account Closed. My hold up is the fear that the wholesale deal will not go as planned and I will lose the down payment amount for the house hack. I'm so new to this that I don't know how the LA market is for the wholesale process. I will continue to do research!

  • Contractor · Los Angeles, CA · Member since 2015 · 4k+ posts · 1k+ votes
    9y
    Joe Kim You don't lose anything on wholesale, only time and battery, if you so choose to marketing materials, that too.
  • Real Estate Coach · Venice Beach, CA · Member since 2012 · 6k+ posts · 3k+ votes
    9y

    Hi Joe! Well you definitely sound like you will have a good skill set to get started. My best advice, as you get into it, is to answer your question--get into the game sooner than later or using an FHA to lower the payment, etc--with the numbers. If financial freedom is your goal, you might be surprised (or bummed, or both) to find out that you're unlikely to pocket any cash flow every month house-hacking in LA. Where we are in the market right now too isn't a great spot to lend to the idea of massive appreciation on a property you buy (prices are already high). So as you go along, just be sure you are focused very heavily on the numbers.

    Happy to send some numbers resources if you'd like!

  • Real Estate Broker · Temecula, CA · Member since 2014 · 992 posts · 782 votes
    9y

    Just a thought, if you want to start at a lower pricepoint you may want to consider Riverside county, specifically Temecula or Murrieta.   These are 2 areas with excellent growth, commutable to san diego (25 min)  excellent schools, etc. 

    There are a lot of opportunities for the easy flips to get you started.  The area is newer, so a lot of Carpet. paint and some lesser rehab like a bathroom or a kitchen.  Not too much need for major structure changes. 

    If you are willing to start with an easier one, you wont make the large $$, but you will learn a ton in the process.  Just an idea!  Being an agent does save you the commission expense so that is great- It does take work, but sounds like you are ready to get it done!  Good luck, 

  • Specialist · Riverside, CA · Member since 2015 · 6k+ posts · 3k+ votes
    9y

    @Christine Kankowski I agree that Temecula and Murrieta are a great place to invest but I think your commute time to San Diego is very optimistic, more like 45 minutes minimum with no traffic.

  • Kevin FoxPro Member
    Real Estate Agent · San Diego, CA · Member since 2014 · 1k+ posts · 635 votes
    9y

    Hey @Joe Kim

    Welcome to BP!

    Feel free to reach out with any questions. 

  • Los Angeles, CA · Member since 2016 · 156 posts · 113 votes
    9y
    Welcome to BiggerPockets Joe!!
  • Los Angeles, CA · Member since 2017 · 7 posts · 4 votes
    9y

    @Ali Boone thanks for the kind words! I am currently working with a lender to see how much I qualify for. I plan and hope to get a low down payment amount with a first time buyer FHA loan. And although I may not cash flow immediately, I am willing to run my numbers with the rent that I am currently paying. Not quite sure if thats a sound method or not, but I figured that I'd rather put my rent money into my asset column, rather than into my landlord's asset column. I would most definitely welcome any number resources!

  • Los Angeles, CA · Member since 2017 · 7 posts · 4 votes
    9y

    @Christine Kankowski hello! Have you done wholesale deals in Temecula?

  • Jake ThompsonPro Member
    Rental Property Investor · Albany, OR · Member since 2015 · 312 posts · 136 votes
    9y

    Hi @Joe Kim, welcome to BP! I got started by househacking and highly recommend it! If you can find roommates for your own unit even better!

  • Los Angeles, CA · Member since 2016 · 156 posts · 113 votes
    9y

    Hi Joe, My boyfriend and I are house-hacking in a duplex about 3 blocks from the Coliseum & New Soccer Stadium. I used the FHA route for the lower downpayment and FHA will also use 75% of market rents for additional units to help calculate your borrowing capacity.

    There are two BP meetings in the LA area that we attend and you might find useful to you- 

    1. Santa Monica BP Meeting which occurs the 2nd Saturday of every month at 11 AM. Usually at 3301 Pico blvd Santa Monica, CA (Unurban Cafe). Many of the investors invest out of state

    2. South Los Angeles BP Meeting which occurs the 4th Saturday of every month at 10AM usually at Vermont Square Branch  1201 W 48th St, Los Angeles, CA 90037 (under the big tree to the left. Many of the participants flip, invest, or are interested in investing in South Los Angeles. 

    Both meetings are really great and the people are friendly. 

    If you'd like to be added to the Email list for South Los Angeles BP, PM me your email address. 

    Feel free to ask me any questions about our house hacking experience, the lender, the underwriting process, etc. I think @Brandon Foster and I can write a book about the experience lol .. or maybe we'll eventually start a blog. 

    Again, Welcome to BP! 

  • Rental Property Investor · Oakland, CA · Member since 2016 · 602 posts · 250 votes
    9y

    Welcome to BP, @Joe Kim!

  • Long Beach, CA · Member since 2017 · 5 posts · 4 votes
    9y
    Hi Joe! I'm new to BP and am already hooked! I just want to absorb as much information as possible. I am in a very similar boat. I live in Long Beach and am looking to use FHA for a purchase in 2018. I have been browsing duplexes and triplexes online, to see what the market looks like now. Kysha had a great tip about FHA using 75% of market rents for additional units to help calculate borrowing capacity. I didn't know that!
  • Real Estate Coach · Venice Beach, CA · Member since 2012 · 6k+ posts · 3k+ votes
    9y

    Well be sure when you run the numbers against your current rent number... specifically calculate how much you will be paying in the mortgage interest, property taxes, and expenses on the property. Then compare just that to how much you pay in rent. 

    For example, I live in Venice. I've looked at a couple properties to potentially house-hack instead of continue renting my apartment. In running the numbers on these potential properties, the property tax alone will be double my current rent payment. Yes, if you are house-hacking you can write off that property tax (and other expenses), but just the tax alone is ballpark double my current rent payment. So less out whatever I'd get back on that on taxes, but then add in mortgage interest and property expenses, suddenly it's significantly cheaper for me to rent. Yes, I'm sending my money to a landlord's asset column, but if I buy for myself instead, I'm costing myself more money to avoid putting money in his pocket. Sooo...who is really losing there?....

    I don't say all of that so harshly to be a total buzzkill or sound like a jerk at all. It's just my own assessment of trying to do the same thing. Granted, I could potentially move elsewhere for a cheaper property than Venice (most certainly I could), but I love it here so why pay 3x what I'm paying in rent for something I then have to take care of?

    Anywho, that's my soapbox! (partially because I'd love to own in Venice and it's super irritating I can't...)

  • Los Angeles, CA · Member since 2017 · 7 posts · 4 votes
    9y

    @Account Closed Thanks for the helpful information. I'd love to hear about your process so far, because as much as I've listened to pretty much every podcast episode, and read a ton on the first house-hack, the numbers in LA are just so challenging!  I definitely hope to connect and meet people at those meet-ups. Will be sending my email!

  • Real Estate Coach · Venice Beach, CA · Member since 2012 · 6k+ posts · 3k+ votes
    9y

    My process so far has been to just buy out-of-state :)

  • Real Estate Agent · Burbank, CA · Member since 2012 · 271 posts · 79 votes
    9y

    @Joe Kim Welcome to BP!

    You should get in the game when you find a good deal and you can afford to buy it :).

    I purchased a duplex in Burbank 3 years ago for house hack with FHA financing, after starting out of state investing in 2011 because investing locally was very expensive and not worth it. I moved out of it this year and it's cash flowing better than my out of state investments.

    It's going to be very hard to buy something with FHA loan in the current market but not impossible.

    Good luck!

  • Los Angeles, CA · Member since 2017 · 7 posts · 4 votes
    9y

    @Ciprian L. Thanks for that tip! What were your conditions for out of state investing? Did you make sure you had someone you knew there to manage the property? Was it wholesale, flip, buy and hold for single family, multi-family, etc? I definitely have more capacity to purchase out of state, but does that mean my first time homeowner FHA loan will go to that sale instead of being able to do something in LA?

  • Real Estate Agent · Burbank, CA · Member since 2012 · 271 posts · 79 votes
    9y

    @Joe Kim I purchased turn key. 

    The problem are the tenants that don't take care of your property, and the turnover. If you make $100 or $200 cash flow a month and when the tenant moves out, you have to spend 4k or 6k in making the property rent ready again, how much is your cash flow if the tenant stays there only 1 year?

    I had to replace the new installed carpet in the entire house in a few properties after the tenant stayed there only 1 year. It's hard to believe how some people live. 

    No, you cannot get FHA loan for investment property it has to be your primary residence and it doesn't have to be your first loan. First time homeowner programs might be different, you should talk to a lender to get more info.

    Send me a PM if you want the contact info from the local lender that I use.

  • Los Angeles, CA · Member since 2017 · 7 posts · 4 votes
    9y

    @Ciprian L. Ah, that's good to know. I am currently working with a lender to try and find something in LA with a 3.5% down FHA first time home-owner loan to house hack. Even with that low down payment amount, it's really tough to get the numbers working. Which state(s) do you invest in?

  • Flipper/Rehabber · Los Angeles, CA · Member since 2009 · 1k+ posts · 732 votes
    9y

    @Joe Kim   , welcome to BP! I'm in L.A too. I was born here and have lived in different parts of the city. 

    I don't see anything that really makes sense as a buy and hold in L.A . 

    There was a poster recently that purchased a multi in East L.A and said they are cash flowing decently. They had to do some repairs and raise rents (East L.A doesn't have rent control). 

    Many multi family properties in L.A are subject to rent control and it seems that things in CA might become tougher for landlords too. The mayor recently mentioned he would like for rent control to apply to newer buildings too

    http://abc7.com/politics/la-mayor-calls-on-ca-to-m...

    I could see an opportunity if one could buy a multi family and rent at least one unit on airbnb. Of course it's tough to find multis with vacant units in L.A 

    Congrats on recently getting your license and best of luck!

  • Real Estate Investor · Chicago, IL · Member since 2010 · 72 posts · 9 votes
    9y
    Joe
Welcome! I'm in the Chicago area! Looking to network, brainstorm & grow my business! I just joined a great nationwide group of investors that are absolutely KILLING IT! I'm pretty excited from what I've seen so far & to be earning & learning from the best in the biz! Message me, let's make some $$! 
Steve
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