House Hack/Rental Investment in Pasadena

[Sharon Cheng]

Hi Everyone! I’m new to RE investing and hope to get some advice from local experts here on the best way to do house hacking or rental investment in Pasadena.

Why Pasadena, you ask?

1. My current job is in DTLA, so the commute will be good (I’m WFH now, but I imagine that will end someday)
2. It’s a great area to live in – charming, houses/neighborhoods with character, good food and many things to do. When I first came to LA for school, I had lived nearby and fell in love with the area ever since.
3. It’s efficient to have a focused area when I search. Hopefully, this also makes it easier for you to narrow down your answers to my upcoming questions.

In terms of price range - I have $100k cash, and can do <~$3,500/month for monthly payments. My thought is to get a traditional loan of up to $750K, making the totally home price $850K and monthly payment around the $35K range. This is how much I can afford though, I won’t mind a cheaper option if there is one. I’m also open to other suggestions including up my budget. (Don’t want to be too risky though in case I can’t fill vacancies due to Covid or other unexpected situations)

My questions:

1. What would you do if you were in my shoes? I have a full time job and no experience in renovation (though willing to learn and start from small things). From what I read on the forum, house hacking or buying an SFR and add/convert an ADU seems to be the way to go, but I have questions for both routes:
2. If I go the House Hack route, what's the best property type to buy in Pasadena? There are not many SFRs within $850k in this area, and even fewer multi-families. Should I stick to SFR in my current budget, consider Townhouses/condos, or raise my SFR budget?
3. How’s the demand in Pasadena in house-hacked units (i.e. bedroom for rent)? Are there enough demand for it? Any specific area I should look for/avoid? Makes a difference if it’s in a house or condo?
4. If I go the SFR w/ ADU route, what specific things should I look for in a SFR for ADU potential? I assume the lot size have to large enough, is there a square footage minimum? Or should I look for an existing structure/ADU that can be converted or fixed up?

A final note, I understand Pasadena doesn’t have the highest investment potential when it comes to cash flow (or appreciation), but I really want to live there and am willing make some sacrifices in returns, as long as the overall numbers isn’t far off. E.g. if necessary, starting with a small negative cash flow to build equity. After all, it still beats throwing $1550 rent money away every month.

Ok, that's it and thanks for your patience in reading thus far. I know this is a loaded post, but hopefully more info is better than less info :)  All things considered, what would you recommend?