All Forum Posts by: Jon Schwartz

@Stasik Popov, you can do this, but don't overcomplicate things by forming an LLC. No need.

You and your colleague can buying a house or multifamily together. Your incomes will be combined when you qualify for the loan, and both your names will be on the deed as “tenants in common.” This means that you each separately own 50% of the property.

As for who lives where when, nobody’s going to care so long as at least one of you moves in after escrow closes. The rest is between you and your colleague.

Good luck!

Best,

Jon

@Matthew Paul, if you drew a Venn diagram of people who crossed the southern border illegally and people who want to and can afford to buy a home, you won't have significant overlap.

I think the biggest impact is on the very low end of the rental market. Undocumented residents do need a place to live, and that will drive up rents on the low end. And there's an abundance of low-end rentals that skip background checks.

@Michael LeBlanc, it's 100% unnecessary to open an LLC on a house hack.

If you want protection, ask your home insurance provider about an umbrella policy. This is an insurance policy that sits behind your home insurance policy and cover to a much higher limit. But since it doesn't go into effect until the home insurance policy is used, it's very inexpensive.

I house hacked a duplex in Los Angeles. I bought regular home insurance, just like for a regular house, then a $2M umbrella insurance policy on top of that for just $500/year. That way, if something ridiculous happened -- like a neighbor's dog attacked a stranger on my duplex's front yard and the stranger decided to sue me -- I was insured up to my entire net worth.

In my opinion, insurance provides better protection than an LLC.

 Angela, 100% this! In my opinion, house hacking in LA is all about choosing the right submarket. The question is: which neighborhood (without creating an absurd commute) is going to appreciate more than its neighbors in the decade to come? This will lead to appreciate gains and rent gains while you own.

Right now, there are promising pockets all over the city. I *love* the northern part of Inglewood, but there are also NELA pockets like Cypress Park and El Sereno that offer a tone of value.

And all of these pockets, almost entirely, are in NACA-qualified tracts. Honestly, the NACA program is such an amazing hack for savvy buyers in diverse mega-markets like LA.

Also, NACA's really good about counting rental income toward your own income when you purchase. You should absolutely target a fourplex.

Good luck!

Best,

Jon

 Your W2 income is $135K/yr. How much money are you looking to borrow?

@Julie Haggerty, do mid-term rentals require a different kind of insurance? I'm aware that short-term rentals aren't covered by traditional home insurance, per se, but is such the case with stays over 30 days?

Thanks,

Jon

@Mark V., you should first look into traditional financings as you'll get the best rates with a conventional loan.

Despite your six months off, if your new job is in the same field in which you have 16 years of experience, I believe you only need 3 months on the job to qualify that income.

Lenders will want to look at your 1099s for the last two years. So, question: what do you 1099s average for 2022 and 2023? If there's a huge jump between 2022 and 2023, that'll count against you (the 1099 income will be heavily discounted because it's inconsistent). For the 1099 income, you'll also need something like a profit-and-loss statement for 2024 to show that that income is continuing.

Rental income from a roommate? I don't think that can count as income, nor do I think future income from roommates will count. If you were buying a multifamily, you could count income from the other unit(s). But I don't think roommate income is a thing, and existing roommate income definitely isn't a thing if it's an apartment you're renting.

I recommend you find a local mortgage broker who does conventional loans, give him/her a call, and ask to have a conversation about your borrowing limit *before* going through the pre-approval process. A good mortgage broker will have that conversation with you. Share your details (though you'll also need 2022 details) and ask how much you can be approved for, give or take.

Good luck!

Best,

Jon

@Brandon Persell, two thoughts for you:

1. Don't be afraid to make lowball offers. Right now, in my market, I'm seeing a lot of multifamily properties that don't work because the sellers aren't accounting for the new cost of borrowing. With rates at 7%, investors need better pricing to make a deal work. Sometimes, the only way to hammer this fact into a seller's head is with a low offer. Find an agent who's content making lowball offers for you.

2. Raising rents really depends on the laws in your state. I'm in California, so we can't raise rents more than 4% per year or evict lease-abiding tenants. In other states, you can raise rents as much as you want and evict tenants when leases end. I suggest you find a local real-estate investor meetup, attend, identify an old-timer who owns a few buildings, and ask him how to go about raising rents and/or evicting tenants in your local market.

Good luck!

Best,

Jon

@Noa Zell, here's the actual language defining MR1 zoning:

https://codelibrary.amlegal.com/codes/los_angeles/latest/lap...

I'd study this and see if any allowable use would generate more rental income than auto repair shops.

@Mike Gratzmiller, I've worked with a few clients in LA doing this. Here in LA, we're allowed to build studio apartments out of our garages (they're called ADUs). I've worked with a few young clients who bought a house in order to live in the ADU and rent out the house. The advantage is that, by living in the smaller unit and renting out the larger one, you generate a lot of rental income! Go for it! This is 100% house hacking!

Good luck!

Jon