How to utilize my condo as a starting point to a real estate care

Question

Hello all. Im brand new to the site. I own a condo in the heart of west hollywood. Purchased the property in 2014. Paying around $5200/month with HOAs and everything. I want to take a more hands on approach to real estate investing and curious if it would make more sense to rent my unit out as a starting point. Maybe rent something else or take the equity and purchase another apartment or multi family property in the LA area. I feel like in this area, I can always rely on longterm appreciation, so not sure selling is shortsighted. Wondering how I can use my leverage in my current property to begin a career in real estate?

Nabil Suleiman · Answer

@Aaron Friedland

A. Damn

B. depends on what you consider surrounding, but if you go about 2 hours outside of LA in most directions you could find it.

C. You can either research online using rental websites to see whats going on in your area, I can run what has been rented in your area and send you those numbers. Feel free to PM me

D. I am a buy and hold person myself, so I am with you on that.

Aaron Friedland · Answer

@Nabil Suleiman

Yes, been living here since day 1.

A. I would definitely be interested in managing an airbnb situation, but the HOA has prohibited it, unfortunately.

B. Is there anywhere in the surrounding LA area that could garner at least 5-6%?

C. Not sure what it can rent for. Don't know what the rental comps are like. Whats the best way to find that out?

D. Id rather hold on to the property if I can since the area seems to be getting more desirable year after year.

Thanks for your time.

Nabil Suleiman · Answer

@Aaron Friedland

Are you living in the condo? If so, yes it's a great time to sell but a horrible time to buy if you are planning on reinvesting that money in close proximity to West Hollywood.

These are my thoughts.

A. Air Bnb competition in the area. What are similar units being rented out for on a daily basis? Could you create a system that allows you to cash flow a lot higher than your PITI +HOA? and does your HOA have any rules against doing Air BnB/ would you want to manage that?

B. Cap rates in LA are embarrassing right now. If you are planning on taking a loan to purchase a multi-family and possibly a manager, you will likely be negative each month, if you haven't managed property before, dealt with multiple tenants, set aside funds for cap - ex surprises, this can make people dislike real estate real fast.

C. If you want to rent it out to a tenant, what can you rent it out for? Does that cover PITI + HOA, and is where you choose to rent saving you money by making that choice?

D. Equity is always an option but I always advise being careful with how you borrow against your home and making sure it does not put you in dangerous waters if our market changes directions for any reason.

Anyways, just a few thoughts that I hope gets the questions boiling and gets you closer to your goals.

Good Luck

Samuel Pawlitzki · Answer

Hey @Aaron Friedland,

It would be a good time to sell right now since inventory is low, and prices are high.

If you took the proceeds and did a 1031 exchange (talk to a tax expert to make sure that's the right thing for you) you could leverage the money and buy a bigger investment property.

Have you checked how much equity you have in the condo since you only bought it in 2014? Some areas have gone up as much as 30% over the last 3 years. I'm sure you'r condo probably has done pretty well as far as appreciation.

I'm a Realtor in the area. Happy to talk more :)

How to utilize my condo as a starting point to a real estate care

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