Please give me some advice. I want to buy in LA

[Erik Smalls]

Hello

I haven’t been here in a long time because I very rarely have money to invest.

I bought a half-duplex in Belleville NJ in 2017 for $188,000. The Zestmate is $265,520. I owe approximately $175,000. I have a tax lien of $52,000 for back taxes. I am an independent contractor. My annual salary is on average 60k. My credit score is fluctuating between 650 and 670.

For the past 3 years I have been spending winter months in Los Angeles. I rent my house out from October to March using Airbnb. It pays the mortgage. In LA I live in a single room occupancy that cost me roughly $1600 per month.

How will I be able to buy a cheap home in LA using the equity from the first home? My idea of cheap is between 200k and 300K.

I’ve just located a townhouse in Van Nuys. If it’s possible I’d rent it out during the summer months to cover the bills.

All of this is considering the U.S. comes back to a normal we once knew. I think this is a perfect time to buy.

How can I make this dream a reality?

I appreciate your help.

Erik

[Michael Belmore]

@Erik Smalls

Hi Erik, 

Tough to say given the situation but the tax lien might hinder you getting a bank loan. 

I would look hard money with a possible blanket mortgage situation. 

Good luck 

- Mike 

[Aaron K.]

This is a problem, due to the tax lien, you essentially have negative equity in your current property, not to mention pretty much everything in LA under $300k is going to have a huge HOA, or be in rough shape or both. Realistically I don't see a way to make this happen until you take care of the tax lien.

[Erik Smalls]

Thanks for your replies. How accurate is this article?

https://www.newcastle.loans/mortgage-guide/mortgagequestions-can-i-get-a-mortgage-if-i-owe-federal-tax-debt

[Aaron K.]

@Erik Smalls per the article you need to work out a payment plan with the IRS, and it will likely still be a factor for your DTI ratio. Plus this doesn't solve the problem that $300k is a really tight budget pretty much everywhere in LA County except the high desert. Not to mention that the payment plan you enter into may show up on a credit report (not sure never had a tax lien) but if it massively increases debt you owe it may hurt your score. Why do you want to live in LA in particular? There are cheaper places with similar weather as it does not appear you are moving for a job.

[Erik Smalls]

I’m an artist. I like being around like-minded people. There are more opportunities to make money in LA. I have started a talent management company less than a year ago. I think that business stands a better chance in LA. The network of friends and mentors I’ve acquired out there is priceless. Beats NY three folds.

I’m an IT field tech. I get a lot of work in LA. It’s easier to get to my jobs without the snow and ice on the ground. I’m also sweat on an actress in North Hollywood.

I bought my house for 188K. That’s not much of a house considering it’s 13 miles from Manhattan. I was raised NYC so I totally understand what’s available at that price. That is why I chose Van Nuys and San Fernando. Totally beats the SRO I live in in Arts District during the winter. Even if I buy in Compton, it’s pay dirt if I hold it for 10 years. Also, I will not stand for another brutal NJ winter.

I’m glad you mentioned, “debt to income.” I totally forgot about the 15k I get for renting my home in the winter.

I’m gonna run it by a mortgage broker in the morning. If it’s possible, it’ll happen.

Thanks