Analyzing deals in expensive market

[Angel Ricardo]

Hello everyone, I am new to real estate so pardon the lack of knowledge. I'm trying to learn how to analyze properties and run the numbers. What is the easiest way to find what insurance and property taxes are and how to calculate rehab costs? Secondly, is it possible to house hack in Los Angeles and still be able to cashflow if you put less than 20 percent down payment? Houses are really expensive here to be able to put down 20 percent but because I have to experience, I find it hard to invest elswhere.Thank you all!

[Jon Schwartz]

Originally posted by @Angel Ricardo:

Hello everyone, I am new to real estate so pardon the lack of knowledge. I'm trying to learn how to analyze properties and run the numbers. What is the easiest way to find what insurance and property taxes are and how to calculate rehab costs? Secondly, is it possible to house hack in Los Angeles and still be able to cashflow if you put less than 20 percent down payment? Houses are really expensive here to be able to put down 20 percent but because I have to experience, I find it hard to invest elswhere.Thank you all!

Angel,

Hi! I'm an investor and househacker in Los Angeles.

First thing's first: Bigger Pockets is awesome, but LA is a different beast that the rest of the country, so take any advice from an out-of-towner with a huge grain of salt. They don't know what they're talking about.

Taxes: In the city of Los Angeles, the property tax rate is 1.27%. If you're in LA County but not the city of LA, your tax rate is probably between 1.15% and 1.27%. I use 1.27% for all of my underwriting, even areas outside of LA.

Insurance: Insurance is relatively inexpensive in LA because it's based on a rebuild cost and, in LA, most of a property's value is the land value (which doesn't factor into the insurance cost because the land isn't insured). For example, I lived in a $1M home with a $800/year insurance bill because the house itself would have cost only $300K to rebuilt. If you're looking at small duplexes that cost less than, say, $700K, I'd underwrite $1200/year for insurance.

Rehab costs: This just takes experience. Fortunately, when you're buying a property, you'll have an inspection period during which you can get quotes from contractors.

Cashflow: You will not find a duplex in LA that cashflows with less than 20% down. I don't think you'll find a duplex that cashflows with even 20% down. However, that doesn't mean you shouldn't househack a duplex. My duplex doesn't cashflow, but compared to owning a house down the block, it lowers my cost of living by $4K per month. So worry less about cashflow and consider more how househacking will effect your monthly cost of living.

Where in LA are you looking?

Best,

Jon