What should my next step be?

Question

Hello BP Members,

I live in Los Angeles California, and today I have completely got rid of all the debt I have. My question is “ now that I’m free of debt, what are my options to make the most out of my situation? How can I go bigger without being out of my league? I really appreciate everyone’s input! Thanks in advance

Jo W. · Answer

@Paul Martinez

I personally think that starting with a house hack is a great way to go as you will learn a lot during the process and there is minimal risk (If you run your numbers correctly of course).

I looked on prices in your area so i can give this example: if you can put 3.5% down (FHA loan) and get a duplex for 500K and the rent covers 85% of your expenses (PITI) you already cut your monthly expenses by not paying over 2K a month in rent so you can save money in a higher rate while getting equity as the mortgage is getting paid.

Lynnette E. · Answer

House hack, but not in the inland empire.  The commute will suck!

Instead buy a single family residence with large bedrooms.  Live in one of the bedrooms and rent out the other bedrooms--elderly, college grad students, military folks, visiting nurses or doctors all do well as roommates.

I had a friend who did this and got $500 to $750 a month for each of the bedrooms he rented out, plus they split utilities.  This was in a suburb of LA.  Towards the end of doing this he rented entirely to nurses and military.  He had several houses going and made bank!  He converted all his mothers single family rentals to by the room rentals.  He managed her things as she had dementia.  Only stopped as his mother, who owned the homes, passed and the other heirs wanted to liquidate the estate.  He did make much more renting by the room than by the house.

I'll also tell you what he learned in the process.

1.  Assign each person a separate cupboard for their non-share food and cookware and  shelf of the refrigerator.

2.  Get cheap living room furniture and kitchen table and chairs. Get a great TV.  Let them furnish the bedroom themselves.

3.  Get basic cooking things--toaster, bender, set of dishes, pots and pan, mixing bowls, mixer, serving spoons, spatulas, flatware, etc.

4.  Have the residents put a set amount into a common use pool, like $25  a month for TP, dish and hand soap, etc.

5.  Hire a cleaner to clean the house, they split the cost like its a utility or lawn service.  Let the residents add on to have their individual room cleaned by the cleaner for $20 more each week.  They call and pay directly, but you are in charge of the cleaner for the common areas-LR, kitchen, RR, and you pay for that, but collect the $ from the renters with the utility split.  One housecleaner keeps the house in peace:)  And the house cleaner is a spy for you.

6.  Get excellent TV and internet service.  They pay this bill and will need  a lot of capacity as they will likely spend time in their rooms downloading stuff.

7.  Avoid anyone with sex charges or with anything violent in their criminal records....no matter how long ago they assaulted someone or with drug charges.  These folks do not make good roommates.  And either make the house a smoking house or do not rent to anyone who smokes.  It keeps the peace.

8.  Pets, really consider, if its a pet lovers house, you will get a half a dozen of them in the house with one or 2 pets per room.  And they all want to be the alpha dog.  What is your limit with pets?  Dog on the couch and no dog on the couch roommates will not get along.  My friend decided to only allow the military dogs, well trained and stayed on the floor.  But he put all the military guys in the same house.

Ned Carey · Answer

@Paul Martinez figure out what you want. What are your goals? What is the vision you have for your life?  Don't worry about the next step until you know which direction you want to go.

Jason L. · Answer

Definitely consider the commute. Even if you are willing to make the sacrifice, is it worth your time? Even if you aren't able to cover your expenses 100% living on the west side, you might be able to reduce your cost of living which is still good. You can also consider somewhere on the west but south side that has good public transportation.

Jason L. · Answer

@Paul Martinez I am from Los Angeles as well. Depending on your personal situation, I would recommend house hacking as others have mentioned. LA is a very tenant friendly location, but being owner occupied comes with a bunch of advantages that non-owner occupied investors do not have. Look into the Ellis Act for taking over a unit for personal use. This can help you turn a bad deal into an okay deal or an okay deal into a great deal!

Paul Martinez · Answer

@Jason L. Thank you, I really appreciate your input. I will be looking into the west side a little bit closer

Paul Martinez · Answer

@Jason L. thanks for comment, all the signs are pointing towards looking for property in the inland empire. The commute sucks and if that’s my only option then I’m willing to go for it. Do you know of any other options or Avenue I could look into rather than getting something out there?

What should my next step be?

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