House hacking with condo in Los angeles?

Question

I’m interested in house hacking in Los angeles, but with price points I will likely only be able to get a condo. I think there’s good areas that can cashflow, but I’m willing to pay the first two years and move in tenants after that for cashflow. Would it be better to buy in a different state or is it bad to buy a condo for first property / HH? Any advice helps!

Rick Albert · Answer

It really depends on the property. My first house hack was in Los Angeles and it turned out to be a major home run. Because of that condo, I haven't done a down payment on a property since 2015. I have clients who house hack condos all the time.

It depends on (1) the area and (2) the type of condo. I have a client who bought a fixer 3 bedroom condo in Chatsworth. He just finished the remodel and already has built in equity. In a few years, he will likely sell it and scale up.

That's where condos/townhouses in LA can help. It can be an equity play. So in a few years, it may make more sense to sell than keep it as a long term rental. It really just depends.

A duplex can work if you can find one that is vacant. Never take on one if it is fully occupied as right now it will be nearly impossible to evict and if you can evict, it would be very expensive. Going the house with ADU route is preferable in my opinion, but based on what you said you don't qualify to purchase one (most lenders don't count ADU income).

Anthony Ramirez · Answer

I 100% agreed with the person above. Look into a duplex with a detached garage that you may later convert to an ADU.

Joseph P Finkelstein · Answer

In your analysis for affordability, were you working with a lender and did you ask the lender what it looks like if you bought a duplex?  I only ask because most lenders can count the income from the second unit as part of the underwriting, so if you can find a duplex with a strong-paying second tenant, it might get you over the hump.

This is 100% a generalization; everything is deal-dependent, but condos are typically challenging for cash flow. Single-family in LA already trades at a premium from a rent-to-purchase ratio, and once you add in HOA payments, it can eat up a lot of what is left. (Although, you do get a discount on gardening, maintenance, etc)

That said, run the numbers. If you can find a solid 3 bed,2 bath condo, and rent out the individual rooms, you could very easily get ahead of the cost of renting while starting to build up ownership equity.

Dan Portka · Answer

it depends on your current living situation, if you can live for less by house hacking then its definitely the way to go. buying a condo and renting out the other rooms is a great way to get started. my first property was a condo I purchased in Torrance in 2016 that has since doubled in value, my out of state rentals haven't appreciated nearly as much. I've since moved out of the condo and its now a nice cash flowing rental. I have a heloc on the property too which has helped fund other deals.

Jen Day · Answer

Hi Paulina, congrats on being ready to buy your first property in LA, that's awesome! I own a property in LA that started as a house hack and has now turned into a rental. I had the same reservations of the price point and looking at having to cover most of the costs for several years.  I was able to bring in more revenue by furnishing the house and renting out each room as short term rentals to traveling nurses. Since you are open to sharing your space, this would be a good option because traveling nurses are looking for 3-4 months on average, they are paid very well, and they are really just looking for a quiet safe place to sleep, so they don't complain or throw raging parties.  Also, because it's shared living, you can choose all female roommates (for example) and not worry about violating Fair Housing Laws as a landlord.  If you need to stay in LA, I think it's better to own your property and have someone else help pay down your mortgage. The long term play in an expensive market like this is definitely faster appreciation. You can refinance in a few years when the interest rates go down and even pull cash out to reinvest.  I own multifamily property as well, and if you can get a duplex or triplex it's a really great investment, however, if you want a good deal you will likely need quite a bit of reserves for repairs & maintenance. Roof, plumbing, & electrical issues are very expensive and that is one of the great benefits of paying that HOA fee.  Having those bigger issues covered is super helpful when you are just starting your real estate journey. I'm an Agent and I'm happy to share some of my thoughts based on my experience working the the LA county RE market.  I also love analyzing deals, so if you have a property you're looking at, or you'd like me to help find you something in your desired location, I'd be happy to do an analysis for you and we can go over it together. Please get in touch when you have some time, and best of luck to you Paulina!

Paul Pratt · Answer

It depends, you will probably not have any vacancy issues in LA. But you mentioned another state? If you are open to moving out of state obviously your options will increase tenfold. Could probably buy a 4-plex out of state and have a full unit to yourself for the same price.

House hacking with condo in Los angeles?

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