All Forum Posts by: Jon Schwartz

Quote from @Adolfo Herrera:

Hello everyone! It's finally here the moment where I actually have enough to buy a nice home and be able to house hack...potentially! 

I'm struggling to decide what a good option for me is, and would like someone's opinion. I have been pre-approved, and I believe I have a pretty good budget to work with. The issue I'm facing is that house prices in the areas that I have been looking for are right at the edge of the total loan amount I qualify for. Would it be a good idea to go utilize almost all of the amount I qualify for? 

Truthfully, If it was just me living in the house I would be able to "survive" paying it off my myself, but I think I would really be gambling it lol, but once I get roommates it should be fine. FYI, I don't really have any other expense or debt besides my car. Any input would be appreciated please and thank you!!

 Adolfo, I know how you feel -- I was in your situation once!

I recommend you do max out your loan -- provided that it affords you more rental income *and* that you add more savings to your six-month emergency fund to cover the full mortgage for six months.

If buying a more expensive home means you have an additional bedroom to rent out, do it. It feels riskier, but it actually puts you in a better position because, once you have tenants, you'll have a lower cost of living.

Once your cost of living is reduced, plow money into your six-month emergency fund until you can afford to live without any income or tenants for six months. Having an fully funding six-month emergency fund is really all the protection you need. In a market like Denver, you'll never go six months without tenants.

Best!

Jon

Hi LA colleagues,

I'm exploring a deal and need some advice...

A seller has an 8-bedroom, 4-bathroom house near USC that he's renting to 8 students on 8 leases. The house is in very good condition; it's definitely not a slumlord situation.

I'm trying to determine how safe it is to buy this property and continue renting the 8 rooms to students or, alternatively, as monthly rentals on Airbnb.

The zoning is RD2, which limits the number of "guest rooms" to 3 based on the parcel size. So by that standard, I can only have 3 leases in place.

I've read elsewhere that LA Dept of Building and Safety has indicated that a single-family home can be rented to 5 unrelated parties; so that would allow for 5 leases.

By another metric, LA Dept of Building and Safety uses a "2+1" rule to determine maximum occupancy: 2 people per bedroom plus one more. By that standard, even if I'm technically only renting 3 "guest rooms," I'm still technically allowed to rent them to 7 people.

And finally, I've also read that LA Dept of Building and Safety doesn't enforce rules about unrelated leases so long as the space is habitable and not overcrowded. With the housing crunch in LA, LA DBS will allow eight people to live in a large house with 8 real bedrooms (and this property has 8 bedroom on assessor records).

So, does anybody have experience renting an LA single-family home by the bedroom, either to individual students or on Airbnb? Please weigh in!

Thanks so much!

Jon

Hey Lucas!

Two suggestions for you:

1. Google "California AB 1482" and familiar yourself with our statewide rent control laws. Except for a few exceptions, no-fault evictions are no longer permitted in California. That means you can only evict a tenant who's at-fault, meaning they've failed to pay rent or broken the lease in some other meaningful way (by selling drugs from the property, for example). So, kicking out the tenants isn't an option. At best, you can buy out the tenants, but they hold all the power in the negotiation.

2. Find a new agent, one who's heard of California AB 1482 and can give you good advice.

Good luck!

Jon

Quote from @Jordan A.:

Selling a property this month.

Currently renting for 8k, mortgage is $4500. 
Profit of about $3500 monthly but selling due to market and some personal issues.
profit will be 400-650k pre tax (if I do 1031 exchange). 

trying to figure out where to put these funds to maximize cash flow or flipping x2 profits in a short time.

any local so cal people looking for investors on new construction, flips or multi unit?

 You'll find plenty of operators and developers in LA who are always looking for funds and can work with 1031 exchanges; I'm happy to connect you to some!

If you're interested in a powerful multifamily investment, I suggest Inglewood. Inglewood's getting a ton of new investment and infrastructure ahead of hosting the 2028 Olympics in Sofi Stadium. Plus, you're right in the price point for a 5- to 8-unit building. The timeframe is slower than flipping, but I'm very bullish on the gains to be realized in the next 5-10 years. Happy to discuss more.

Best,

Jon

Quote from @Andrea Ochoa:

Hi everyone. My names is Andrea and looking to see what people are currently doing in regards to pulling your money out to move on to the next property. Just did a rehab I already on a property that has 2 homes in one lot and I am debating if I should do a HELOC or a refinance since interest rates are going up and will continue to go up with in the next months. Looking to get the most LVT possible.

Also interested to get leads on financial institutions which you have use for either refinance or HELOC. What LTV did you get?

Thanks in advance .
Andrea

 Andrea,

I think it depends on what your plan is.

HELOCS are great because you only pay interest when you draw from the line. I'm in the process of opening a $500K HELOC on one of my properties; it's basically my opportunity fund. If a great opportunity comes my way, I have quite the bankroll to work with. Until then, I'm not paying any interest on the money.

However, if you have a project in mind, or if you know you'll deploying the capital within a few months of taking the loan, go with an equity loan. You'll lock in a low, longterm rate -- and if you put the money to work quickly, it won't be a problem paying interest from day one.

I shopped around for my HELOC and found Third Federal had the best rate at 80% CLTV (that's "combined loan to value"). A NorCal lender called First Tech could go to 85% CLTV, but the rate climbs at that leverage. And a bank called Bethpage has a killer rate, currently 2.99%, but at only 65% CLTV.

Good luck!

Jon

Quote from @Matt M Antonio:

Is anyone in this awesome community done 1031 (who exchanged a small multi/SFH to 5 units and above and house hack one unit)? or maybe know someone who I can reach out to either an investor, RE agent or lender that specialized in 1031?

 Matt,

House hacking commercial property isn't really a thing... I mean, I'm sure it's doable, but here's the skinny:

House hacking a house through a fourplex is advantageous because you can get an owner-occupant residential loan on the property. You'll get a lower rate, and if you go FHA, you can put down as little as 25%.

When you buy a commercial property (5+ units), there is no discount or lower down payment for also living in the building. So you'll be stuck with 25% down and a commercial loan (higher rate, shorter term) whether you're house-hacking or not.

In fact, the lender would probably prefer than you *not* live in the building. Commercial lender underwrite the property, not your personal income. If you're living in the fifth unit and not collecting rent from it, the lender won't be happy. You might have to own the building in an LLC and actually pay the LLC rent to satisfy your lender.

Has anybody here owner-occupied a small commercial building?

Best!

Jon

Quote from @Jackson Smith:

Hey all! 

I'm looking to acquire my very first investment property where I live in Salt Lake City and I'm looking to find a property with a separate apartment of some sort or a duplex. I'd love some advice from anyone that started real estate investing with house hacking and how they moved on to other their 2nd, 3rd, and 4th+ properties. How did you finance those deals after you put money into your first property? Did you house hack BRRRR? Or did house hacking allow you to save enough to pay for the next deal quickly? I'm planning on doing a low down/FHA for this first property, and Ive heard David talk about getting a new house hack every year. I'd just love some advice on more details of that strategy. Thanks a bunch!

 Jackson,

I'm in the midst of this transition now!

While I'm still living in my duplex, I opening a HELOC to access all the equity I have in the building, after $500K.

I'm going to move out and into a rental, rent up the second unit, and then when I have no debt on my balance sheet and $500K in a line of credit, I'm going to buy the next property!

I'll tell you what, though: rather than focusing on steps 4, 5, and 6, focus on step 1 and take action! Get that first house hack under your wing before worrying too much about the second and third. Real estate is very rewarding over time.

Good luck!

Best,

Jon

Quote from @Jonathan Greene:

San Diego is a pretty tough house hack market right now in my opinion. Unless you can find an uneven one, like a one-bedroom unit for you, and a cash-out four-bedroom to rent out, I can't see the metrics working on the price points.

How do you mean? Rents and home prices are quite high in San Diego. The original poster will be paying an arm and a leg to live in San Diego in either case. If a $60,000 down payment reduces her cost of living by even just $500/month, that's already a 20% return on investment -- not to mention the principal paydown and longterm appreciation.

Quote from @Kenneth Honer:

Hello Everyone, 

About a year ago, I purchased a duplex in which I currently occupy using 10% down FHA financing. It's going very well so far and I'd like to repeat the process again with an owner occupied conventional loan.

I'm looking for a 15% down conventional to purchase a second duplex. I have contacted just one lender so far on doing this and they said that the move would have to "make sense" (like better school district, closer to work etc...) AND also be the same sq footage or bigger and same or higher price point. This is going to be near impossible as my current duplex is probably in the 95th percentile in size and has 7BRs. Moving down from my currently duplex ($340k, 7BRS) to one more typical in the area (4BRs, $250k) would be almost impossible, even if the move "makes sense", in their opinion.  

So my question to anyone is, am I stuck here or do I have ways around this? Has anyone been able to "house-hack" twice with MF properties and get around this? Just not looking for being relegated to needing 25% down and higher investment property interest rates. 

Any guidance helps.

Thanks, 

Kenny

Kenny,

I was in a very similar position when I house-hacked my duplex because I already owned and lived in a single-family home -- which I didn't sell until *after* I closed on the duplex.

My mortgage broker had a hard time finding a lender who believed that my family was moving out of a SFR that they weren't selling and into a duplex, but eventually, he found one.

I would start calling mortgage brokers until you find one who thinks he can get the deal done. I'd also write a letter explaining your move for the eventual underwriting that will take place.

Good luck!

Jon

Quote from @Uri E.:

Hello,

I buy, hold and rent out single family residences. Each new acquisition I then depreciate using a standard straight depreciation - total cost of land improvements. I recently learned that I could expedite some of the depreciations through cost segregation which can be then depreciate over 5,7, or 15 years, depending on the item.

Asking for your advice and guidance on the following:

1. Is there a downside to doing cost segregation, to expediate depreciation?

2. Hiring someone to do the cost segregation analysis and report can cost $10K-$15K. When is such expense of hiring a team to do the segregation analysis, actually worth it?

3. Can I do these cost segregation estimates myself?

4. If I do these estimates myself, will that be in violation of IRS rules?

5. And finally, can I do cost segregation to expedite depreciation for properties I already owned for a few years?

Thank you!

Uri,

I own a duplex in Los Angeles and used diycostseg.com to get a logarithmic cost seg analysis for under $1000. It racked up $76K in suspended losses for me. Killer deal.

Best,
Jon