Considering to invest in LA Market for my 1st Real Estate Deal

[Peter Glenn]

Hi All,

I’m 27 years old first time home buyer, living in Los Angeles, CA. I’ve heard about house hacking on BP podcasts and believe this will be a good strategy for me to start up with in real estate investing in LA market (I’m currently not interested in out of state investments).

Purpose:

• Pay less on my rent while building up equity (current rent – $1,500/month)
• Tax shelter for my W2 income
• Gain experience in real estate investing and being a landloard

I have about 60k saved up and plan to use FHA loan to finance the property with 5%-10% down payment. The areas I’ve been searching in include Van Nuys, North Hollywood, Burbank, etc. where prices range from 400k – 600k for duplexes. I have several concerns listed below and would appreciate if you could let me know your thoughts around these and the overall strategy.

Concerns:

• I understand LA investments may not be great when it comes to cash-flow. One of my concerns is having to pay out of pocket when I eventually move out (after 2-3 years) and bring a tenant to take over my unit. All the deals I’ve analyzed so far will require me to do so. Are there any areas in LA county where numbers will make better sense?
• On one hand, it seems we’re approaching another real estate bubble hence not the best time to invest. On the other hand, mortgage rates will likely go up, so waiting for the next crash may not be the right approach either. If my plan is long term, buying and holding, should the fact that the market is hot now be a concern?
• All the areas I’ve searched in (except Burbank) are rent controlled. I understand that this will mean that I will have hard time in the future regarding rent increases, possible evictions etc. Is this is big concern? Should I conceder paying premium for non-rent-controlled areas like Burbank?

Thank you!