House Hacking in Los Angeles- SFV

[Jeffrey Chen]

Hi BP forum! 

I will be moving into the San Fernando Valley in a few months, and will either be purchasing my first property, or renting while patiently looking for deals as the pandemic continues. Either way, I have my first property in my sights and my goal is to eventually scale up as a REI. The locations I am considering, in order of preference: Woodland Hills, Tarzana, Encino, Sherman Oaks, Calabasas. All of these areas seem to have appreciated significantly in the past several years, except Woodland Hills, which is why this is my focus(please tell me if I am wrong about this).

My goals:

1. Buy an under-value property, fix it up, house hack. 
2. Purchase price @ 70-79% of ARV(shout out to Graham Stephan and Meet Kevin, who is a successful Youtuber and REI in the neighboring county. The LA market is tough and by analyzing his deals I figured he generally purchases at ~75% ARV, then puts in 10% of PP repairs, so this should be a reasonable target)
3. Looking for a house with an ARV value of about $700-800K
4. BRRR and cashflow sooner than later.

Obstacles: 

1. VA and Physician loan requirements for the condition of a property- may limit my options for fixers.
2. Limited capital - though my new job should provide steady income
3. The obvious LA market.

I have been pre-approved for the VA Loan(0 down 3.2% interest) and also have access to Physician Loans. I realize that cashflow in LA is tough, and I don't have enough capital to do a real BRRR, so I am looking to start by house hacking. I've been doing research for the past 6 months, and I'm trying to learn any important lessons before jumping in. I would appreciate some insight/pointers from the BP community. Thanks!

Questions I have specific to the area:

1. Any insight into finding a good fixer? House size, # of BRs, Logistics, location recs?
2. How is the rental market?
3. How could I make a turnkey property a good “investment” in this market?(assuming fixer limitations from my loans)
4. “North” vs “South” of the blvd as far as investment outlook? North is cheaper, but the communities are generally less desirable. South is more developed and expensive, but I’m not sure if it’s a good rental/investment market. 
5. Tax question: If I buy a 600k House, and after repairs it is worth 750K, When, do I pay taxes on the 600k vs. 750K?

I know, that’s a lotta info and questions. Thanks in advance!

[Aaron K.]

1. Know what your lender will and won't approve in terms of fixers, also understand that people like Graham are making quick close cash offers with minimal contingencies which gives them a leg up. Also 70% ARV is really really tough in SoCal. A great example of this is one of the deals Graham shared he bought it by being quick with a cash offer even though he got outbid, also it was listed as two 1 bedroom units which he was pretty easily able to turn into two 2 bedroom units to force that value add. Look for things like that, they are less common in the SFV though because it was built as the suburbs for the most part.

2. Rental market is fairly strong for SFRs you're probably looking at the mid to high $3k range in most of SFV a bit more in the cities you listed.

3. Find the properties that are like 2 bedrooms but 1400 sqft, there's another bedroom in there that you can find with like $5k of drywall and proper permits.

4. This is more of a question of where you want to live as this is a primary

5. Depends if you don't do things that require permits it'll be the purchase price if you are doing major work, you may be re-assesed because LA county kinda sucks that way but it likely wouldn't be to full ARV it would be based off of what you did.