Rentals in LA

[Jake Glassman]

Lived in LA virtually my whole life and I want to get into multi-unit investing, live in one of the units and take out an FHA loan with hopes of living rent free or making some cash flow. Is it even reasonable to find an arrangement like that in LA? I'd prefer westside neighborhoods, but not extremely expensive: Inglewood, Crenshaw, Baldwin Hills, Ladera heights, Fox Hills, maybe Culver City. Anybody here with experience on rentals in LA that can give me advice?

[David Faulkner]

Originally posted by @Manolo D.:

@Jake Glassman Check out @Logan Allec's posts on house hacking. He is in Santa Clarita, and I believe that is the only distance you need to travel to get cash flow. I don't see your areas to be more affordable to cash flow,

A little further than Santa Clarita ... like Antelope Valley (Lancaster, Palmdale, etc). You could possibly cash flow in Santa Clarita if you are darn good at acquisitions and rehab, but not likely with a newbie with FHA financing I'm afraid.

Also, please be advised that there is no free lunch ... every mile East you go and every extra dollar you gain in short term cash flow you are likely giving up many dollars in future appreciation. For example, I own in Lancaster & Palmdale as well as Huntington Beach. I know and am ok with the fact that my properties in Lancaster & Palmdale are cash flow plays ... I know that appreciation in those neighborhoods will be limited. I know this because when I look around, I see vast swaths of vacant land which is a potentially limitless future supply of homes. I know this because the school districts stink and much of the population is, shall we say, "special".  I bought there and lived there because it is what I could reasonably afford at the time and have since moved to the beach and turned them into rentals; I've made money and don't regret it then nor now.

On the other hand, in Huntington Beach, cash flow when I bought would've been negative (and I got a smokin' under market deal at the time), but I used it as my primary residence and I could comfortably afford the mortgage (thanks in part to my cash flow from Lancaster & Palmdale). When I look around, I see no vacant land and the only way to go to increase supply is up (which they are doing). I see affluent, well educated people killing themselves to try to break into the market. I see beautiful beaches. I see high paying jobs. I see good schools. The weather is perfect year round.

I've owned in both places over the last 5 years and have made money in both places (and you can too), but I've made much more money in HB. Today, due to rent increases, HB would cash flow more. During the last downturn, HB prices did not get hit as hard. These trends have been the same for the last 40 years, so I'd be hesitant to call it a fluke ... and HB is nothing special really (though I love it), the same holds true for just about any and all coastal SoCal cities. I understand that this contradicts advise of most others and most other markets ... coastal SoCal is not like other markets. The trick is you have to be able to get in so that you can stay in ... long term appreciation and cash flow do you no good if you don't make it to the long term.