Los Angeles - Trying to get Started

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Los Angeles - Trying to get Started

Alberto Izarraraz
San Antonio, TX · Member since 2016 · 19 posts · 6 votes

Hi Everyone,

I've been reading a lot about investing here and it has been great. The part that is difficult is my location.

My current issues are these. I only have $13k saved up and I live in a very expensive market, Los Angeles. In other places, you could just go into a worst neighborhood and find something but here that's not much of a possibility.

Now, here is what I perceive to by my options:

1. House Hack - Get an FHA that allows 3-5% down, find a condo in $300k range (most likely only 2 bedrooms) and rent out a room. This seems to be taking into a lot of debt and I might be paying about $1000+ myself a month after renting out a room. I currently pay significantly less.

2. Look really outside the market. I'm considering the Phoenix area. Save up a bit more money and do the 6 hour drive to Phoenix whenever I need to be more hands on in managing. I'm sure there are insurance, property management fees and I'm still trying to figure if it is worth it. But property is between $80 to $120k.

Is there a better option I am missing?

Also, getting through Millionaire Real Estate Investor. Is there a good second book that people recommend for a beginner especially in my case?

Thank you in advance,

Alberto

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Nicole C.
Realtor and Investor · North Hollywood, CA · Member since 2015 · 49 posts · 25 votes
10y
Hey hey we are in the LA market and your money is good here. • if you buy a condo the hoa fees will eat you alive and you will not make profits •You have enough money to perhaps put up front costs on a flip and use a private or hard money lender. If you find a good deal in the outskirts of LA say sb county or Lancaster •Team up with another investor if you would like to stay and flip in LA county •Use the money to create a wholesale business and make more money •Buy a note.
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  • Nicole C.
    Realtor and Investor · North Hollywood, CA · Member since 2015 · 49 posts · 25 votes
    10y
    Hey hey we are in the LA market and your money is good here. • if you buy a condo the hoa fees will eat you alive and you will not make profits •You have enough money to perhaps put up front costs on a flip and use a private or hard money lender. If you find a good deal in the outskirts of LA say sb county or Lancaster •Team up with another investor if you would like to stay and flip in LA county •Use the money to create a wholesale business and make more money •Buy a note.
    1Reply
  • Abraham Arteaga
    Real Estate Agent · Los Angeles, CA · Member since 2016 · 11 posts · 7 votes
    10y

    Hey Alberto,

    There are plenty of options out there, it's just a matter of looking and seeing what works best. What comes to my mind at the moment is Income-producing property. You could buy a property  (given that you would be pre-approved for a loan of x amount) and rent it out. The goal of the income producing property would be to gain a positive cash flow from said property by renting/leasing it out. It's an investment, given the right circumstances it shall grow and prosper. I know, it sucks not being able to live in something you worked so hard to earn. Although, that would be a great step in the right direction. I'll explain.

    Theoretically speaking here: If you were to purchase an income producing property that would give you a positive amount of cash flow at the end of the month, you'd be set! (not so fast!) Say you purchase a property in the 300k range and you rent it out for the average X dollars of rent in the area. Lets say you have a positive income of $500 after all costs associated with owning said property. Now, you're mortgage is getting paid off by your tenants and you have a positive income of $500 on said property. Each month you're getting $500, plus (hopefully) appreciation on the property, and you're tenant is paying your mortgage! Of course, you are the landlord so you must deal with the problems that arise with your property. Here's where I suggest throwing the Phoenix area out the window. Property managers cut into your profits, and if you're going to hire someone in another state that you have little to no regulation over... that's looking for trouble. What guarantees you, said property manager is doing the job and not just taking your money? I would recommend staying within the Los Angeles area, or California at least. Try going outside of the LA county, one of my family members just bought a house out in sylmar for $320,000 that produces $500 in positive income a month. It's definitely possible! 

    Let's say after a year or two of having an income producing property, you're property appreciates $50,000 from purchase price. You buy the house for $300,000 and in 2 years it's worth $350,000. If you decide to sell that same house, you would now have a nice build up of equity. Which you can use to re-invest, buy a bigger property which produces better returns, or keep the property and let it appreciate in value while you continue on having a positive cash flow.

    If you need any more help or would like to talk about what other options you have, feel free to email me or give me a call on my info page! 

    P.S. I would recommend reading The Millionaire Mind great read!  

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  • Alberto Izarraraz
    OP
    San Antonio, TX · Member since 2016 · 19 posts · 6 votes
    10y

    @Nicole C. Thanks for the ideas. I always had the idea of buy and hold and this is mainly because I have a full time job. However, flipping might be another way to get another revenue stream while I work and have a full time job. Like always I can sacrifice time and put in some sweat equity in a place.

    I do like the idea of buying a note. I have been looking into it now but I do not know much about it. So I will research some more. But for all purposes it seems like you are the bank and you get a certain rate while the person pays it back. I would have to do this at micro level.

    @Abraham Arteaga your scenario is exaclty what I would like to accomplish. However, with anything you need 20% down if you are not living in the location. That's why I was thinking of the FHA route but like you mentioned a lot of it cuts your cash flow. I'll have to figure out another funding way.

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  • Jesse Sasomsup
    Property Manager · Los Angeles, CA · Member since 2013 · 58 posts · 9 votes
    10y

    Hello @Alberto Izarraraz,

    I do agree with @Nicole C. HOA fee can run between $350-$1,000 a month and you have no control over it. We manage many condos that rented between $3,500-$4,500 and the owners barely having a positive cash flow because over 25% of gross rent is going into the HOA.

    I would look into the mid west area with your current capital and hire a property management company which will take around 10% off your gross rent but be sure to do your due diligent.

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