Advice for a newbie in an expensive city

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Advice for a newbie in an expensive city

Mary Seo
Member since 2019 · 7 posts · 5 votes

Hi everyone, I'm relatively new to the BiggerPockets Forums (although I've been listening to the podcasts for over year now). I'm a software engineer located in Los Angeles and my goal is to start investing in (ideally) multi-family homes and if not, then single-family homes through house-hacking and possibly flipping (although i know flipping may not be the best idea during a recession). I don't have a ton of savings at the moment and I'd like to know if anyone has advice on how to get started in such an expensive city. The reason I'd like to stay in LA is to qualify for an FHA loan/live in the unit while renting out.

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Kyle Spearin
Real Estate Agent · Boston, MA · Member since 2016 · 446 posts · 214 votes
6y

@Mary Seo--welcome to the community! Even within expensive cities (I'm from Boston and live in Denver), you can find good deals. LA has areas that are on the up and coming that might give you opportunities to invest in an area that will have good appreciation as it gentrifies. I'm not familiar with specifics there, but if you look for trends, you will be able to see. You can contact local agents and investors for more insight in that respect.

In terms of not having a lot of savings, I highly recommend reading The Richest Man in Babylon and Set for Life. These lay out good strategies depending on your circumstances, but essentially they will tell you to save money first, then invest once you have enough capital built up to deal with the inevitable problems that occur in a house.

Good luck!

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  • Kyle Spearin
    Real Estate Agent · Boston, MA · Member since 2016 · 446 posts · 214 votes
    6y

    @Mary Seo--welcome to the community! Even within expensive cities (I'm from Boston and live in Denver), you can find good deals. LA has areas that are on the up and coming that might give you opportunities to invest in an area that will have good appreciation as it gentrifies. I'm not familiar with specifics there, but if you look for trends, you will be able to see. You can contact local agents and investors for more insight in that respect.

    In terms of not having a lot of savings, I highly recommend reading The Richest Man in Babylon and Set for Life. These lay out good strategies depending on your circumstances, but essentially they will tell you to save money first, then invest once you have enough capital built up to deal with the inevitable problems that occur in a house.

    Good luck!

    2Reply
  • David BarnettPro Member
    Rental Property Investor · Cambridge, MA · Member since 2016 · 634 posts · 415 votes
    6y

    I would personally take your higher than average income (since LA is a high cost of living area) and plop it into a more reasonably cost area.  For example, I'm from the Boston area and use my income (that is higher here due to the cost of living, etc.) and purchase properties in the Twin Cities where prices are a bit more reasonable.  

    I would get the savings rate up and then start identifying markets that are more reasonably priced.  Good luck!

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  • James CarlsonBusiness Member
    Real Estate Agent · Colorado | stan.store/JamesCarlson · Member since 2014 · 2k+ posts · 2k+ votes
    6y

    @Mary Seo

    Good for you for taking a leap. It can be a bit tougher in expensive cities, but it's possible. (We're in Denver, for context. We own a a few rentals ourselves and help a lot of investors and first-time homebuyers.) 

    If you don't have a ton of cash, I'd opt for some version of house hacking. If done right, you drastically reduce your monthly housing costs and can save that money to repeat in a year and within a few years, you own a few properties. (As an example, here's a deal diary of some Denver clients who were paying $1500 in rent and then bought a place, house hacked and were actually living for free plus $700 in cash flow. That's a $2,200 swing in monthly expenses.) 

    What kind of house hack you do is up to your comfort level. In general, the more privacy you want, the less revenue and the inverse is true as well. If you can afford a small SFH, then great, buy that and take a few roommates to offset your mortgage. I don't know what the housing stock is like out in LA, but in Denver and Colorado Springs, we find a good number of homes with basements that have a separate entrance so you can Airbnb or rent it separately while you're there. (The latter option gives you slightly less rent but more privacy.)

    If you don't have the cash for a SFH, go for a condo. Our first few purchases were condos and they did us well. You can still take a roommate as a house hacking option.

    Either way, find a good investor-friendly agent and go for it. Good luck!

    [email protected]720-460-1770
    James Carlson Real Estate
    WebsiteView Page
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  • Mary Seo
    OP
    Member since 2019 · 7 posts · 5 votes
    6y

    thanks so much everyone, this was super helpful! I'm reading David' Greene's long distance real estate investing book now while simultaneously analyzing deals in LA for house hacking prospects, so I'm glad I got some feedback on both of those options! 

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  • Lee RipmaPro Member
    Rental Property Investor · Prairie Village, KS · Member since 2015 · 2k+ posts · 2k+ votes
    6y

    @Mary Seo

    I invest in both LA and out of state in Kansas City. If you want to go the house hacking route in LA only get MF delivered vacant. You can also do house hacking with SFH. You don't want to deal with tenants rights in LA as a newer owner-occupant which is why SFH is often a better option but MF works if delivered vacant. Which areas of LA would you want to live in? There is a nice delivered fully vacant triplex in highland park on the market right now that I like for a house hacker.

    Podcast Guest on Show #373
    1Reply
  • Mary Seo
    OP
    Member since 2019 · 7 posts · 5 votes
    6y

    Thanks @Lee Ripma! Yes i saw quite a few MF in LA that already had renters occupying them at low rents and I was worried about how to handle that with all the rent control in the LA area so good point. I currently work in the South Peninsula (Rancho Palos Verdes to be specific) so if I was to house hack it would have to be within an hour drive from there. Can you link to the MF in highland park you're referring to? I'd love to check it out.

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