House Hacking in Southern California

[Nicholas Garcia]

I’m looking to House Hack a Single Family Home in Southern California near a college campus (Los Angeles and surrounding area within 30 mile radius).

I’m a single 25 year old, have about $30K in liquid cash reserves to work with that I’m comfortable with spending and have a stable income.

The elephant in the room is Los Angeles prices and the surrounding area range from $400K - $2 Million. I’m definitely no Kylie Jenner-baller, so I’m staying out of the main city and have come across some potentially good 3 bedroom houses for $440K-ish deals.

Im planning on going with the CalPLUS Conventional Loan Program that allows me to put down 3% and I can wrap my closing costs into a silent 2nd loan that grows interest free.

The problem is I keep getting outbid. There’s always that baby boomer near retirement that raises the purchase price up by $30K-$60K and it’s something I can’t compete with.

Am I doing something wrong? Any area I can improve?

Second question, once I get the single family I technically won’t live for free. Max I can rent out the rooms is about $700-$900 each and that’s only covering about 2/3’s the total monthly expenses. Should I look for a distressed single family and do a house-hack live-in flip after a few years?

Sorry for the multi-question and slightly length post! Btw, I’m open to hearing what you guys would do in my situation. I’m always a student at heart and I definitely am a guppy in shark infested waters.

[Jon Schwartz]

Nicholas,

I'm a house hacker and a realtor who works 100% with house hackers. I'm actually in escrow on a property with a client very much in your situation.

My recommendation: buy a 4-bedroom townhome. The HOA fees will be more than made up for by the rent collected on the 4th bedroom, and HOA fees cover exterior maintenance, anyway, so there's actually not such a drain. (When underwriting a condo, I lower capex reserves by a few points because that's essentially what HOA fees are).

Are you sure you're being outbid by $30-60K on these properties? It's possible you're losing bids because of your loan product. Are there any additional appraisals or inspections required with your loan product? If so, sellers are going to be less interested in your offer.

Also, have you combed over what's already on-market? New listings are competitive by nature, but you won't have any competition with the old listings. I recently found a great duplex (a house plus an ADU) for a client by taking my time with the stale listings. This gem was hidden amongst the garbage, and we got it for an amazing price.

Let me know if you need any help!

Best,

Jon