All Forum Posts by: Jon Schwartz

@Nancy Noe, is the property listed? Or is your agent fielding off-market offers?

@Shane Costa, I highly recommend staying at your 9-5 until you have a lead-generation engine in place.

The issue right now is that sales volume is extremely low -- 4.04M sales per year just reported by NAR. There aren't many buyers who can afford today's prices, and there are even fewer sellers interested in selling.

So if you quit your 9-to-5 and start from 0, you'll have a long road to seeing income. And, sure, grit and life lessons and all that stuff -- but you can't pay rent with grit!

Identify your avatar client; who's going to buy or sell with you in the near term? Then start creating the online persona that will attract those clients. Make YouTube videos for you them, IG posts for them, TikTok shorts for them. Build up a body of content that suits you and speaks to your avatar buyer or seller.

When you get an inquiry from a potential buyer or seller about working together, then and only then consider quitting the day job.

Or if you want to go the boiler-room route, spend 2 hours a day making cold calls until you get an appointment. Then and only then consider quitting the day job.

Good luck!

Best,

Jon

@Micah Shirley,

LA is a market unto itself. Most of the advice on BiggperPockets applies to smaller, less expensive markets.

LA is not a cashflow market. A large down payment is required for a property to actually cashflow -- and that's one reason why well-heeled investors flock to LA (and places like NYC and Miami). It's really expensive to get in and not pay ongoing negative cashflow.

But what LA offers that most markets don't is outsized appreciation. The slow, steady gentrification of LA neighborhoods have made a lot of investors a lot of money over the last few decades.

$50K is a very tight sum for getting into the LA market, but if you're going to try, your best bet is house-hacking a duplex in a gentrifying neighborhood. You won't experience cashflow, but your additional cost-of-living over renting will be paid back in appreciation in the years to come.

Buying in a gentrifying submarket is especially important now that the market has cooled.

Good luck!

Best,

Jon

It really depends on the ADU. The cheapest ADU, more or less, is a converted garage. I have a client who's having her garage converted into a studio for $120K. That's the reasonable low end.

From there, the sky's the limit. A lot depends on the finishes you select, as well as how fancy you want to get. I'm building an ADU from scratch with an architect on a hillside. Nothing fancy, trying to save costs, but nicely designed. We're targeting 800 sq ft and a total budget (inclusive of everything) around $600K.

@Alec Jacobs, there's no amount of time you "HAVE" to live in your house hack. There's no law you're breaking (not directly), and nobody's going to come and check.

Here's what it comes down to: when you sign an owner-occupant mortgage, you're agreeing to live there for at least 12 months. That's the paper definition of "owner-occupant."

Again, nobody's going to check that you live there, and if you move out in three months, nobody's going to care. You have to keep paying the mortgage, of course, but so long as you do, your lender won't care where you physically live.

An issues arises, however, if you want to get another owner-occupant loan within 12 months. Your original lender probably won't even accept an application from you. And you're likely to fail underwriting with other lenders. Why? Because by applying for another owner-occupant loan within 12 months, you're clearly demonstrating that there's a serious risk you won't stay in this second home for 12 months. Lenders don't like that.

After the 12-month-mark, most lenders will be fine giving you another owner-occupant mortgage.

Good luck! I house hacked in 2019; best move I ever made.

Best,

Jon

James, there are a lot of ADU design-and-build firms in LA competing for business right now.

Google to find a few, then call your favorite 2 or 3 and ask them to come out and assess your project.

They'll gladly do it in pursuit of your business, and you'll get all the information you need -- free!

Gotta work the system!

Best,

Jon

Gabriel,

Pardon me for diving into the basics, but to answer your first question, we really need to know your income.

What is your annual income? And have you had that income for two years? When you get to the house hacking part of the equation, the amount of money you'll be able to borrow will be based on your income. So your fix-n-flip proceeds can go toward the down payment, but you'll need two years of income history to support the FHA or USDA loan.

Assuming you have income, I'd suggest starting with the house hack. I think you'll have trouble securing hard or private money with no flipping experience. Have you reached out to lenders to see about getting funds? Most want to see some experience.

If you start with the house hack, since it'll be your primary residence, you don't need any investor experience. You just need the income to qualify for the loan.

AND -- your house hack can count as your experience. I found hard-money lenders were totally interested in working with me even though the entirety of my experience was renovating a duplex before moving into it.

Good luck!

Jon

Hi Grant!

Picking a great market is the first mission-critical step.

Tennessee and Texas are not markets; they're states.

Columbus is definitely a lot stronger than Cleveland. My vote's for Columbus.

Best,

Jon

@Harsh Chawla, I suggest looking into Long Beach and San Pedro. They're both in LA County, but not far from Irvine, and they're the only decently priced coastal areas in SoCal (as far as I know).

Now that I think about it, actually, also look into Costa Mesa in OC.

Your $150K down payment is really going to cripple you, though. As an investor, you'll be required to make a 25% down payment, so you're limiting yourself to a $600K purchase price. That won't go far in SoCal!

Have you considered house hacking a multifamily property?

Best,

Jon

With rental properties, increasing income will increase value. Buy the most run-down duplex in a decent neighborhood, bring both units up to today's standards, then re-rent the units are market rents. You'll end up with a building worth much more than the one you bought!

Good luck!

Jon