utterly confused and need advice

9 Replies

My husband and I currently live in NYC and are relocating to Los Angeles and we need real estate/ general financial planning advice. One of our financial goals is to invest in real estate that will provide good cash flow in the future so we are not totally dependent on our current combined income. We own a coop in the NYC which we purchased two years ago. If we rent it today it will be just under cash flow neutral. Initially, our thought process was to sell this property and take our savings to buy a 4-6 unit multi-family in Los Angeles and occupy one of the units until we save for a down payment for a home. After looking at redfin/loopnet for a couple of months I am starting to get discouraged about what if anything our money can buy in LA and am starting to think that we should hold onto our NYC coop and buy something smaller in LA like a duplex, town home, condo that we would live in until we buy a home. Any advice would be much appreciated. I've been spinning my wheels for months and do not know what we should do. Please note the following considerations:

1. In both scenarios we are waiting to buy our home last because my husband is concerned that buying a home now will make it difficult to save for the investment property i.e. cost of furniture, maintenance of home, mortgage, etc.... Please let me know if you disagree.

2. We currently do not own anything in Los Angeles and so we have to figure out when/what to buy and whether we should rent while trying to figure everything out. Only annoying this is that rents on apts/condos/town homes are pretty much equivalent to a mortgage on the same.

Thank you in advance.

I think your plan to buy a condo/duplex in Los Angeles and live in one of the units is a solid plan. What you could do is sell the co-op, find a good deal below market value, do some of the work to fix it up yourselves while you live in one of the units (this will give you property management experience and build in more equity), and wait like a year then do a cash out refinance on the property with the equity you've built into the property to use as a down payment on a house you want. While you're building equity for that year I would also learn more about no money down strategies to acquire more properties to facilitate the payments on your mortgage to your new home so that you're living in your new home rent free. Just a thought though this is one options the more outside the box you think the more options you have. 

Los Angeles and NYC are tough places to get cash flow. You might consider investing in other areas where the numbers work more easily. Just about anywhere will be better than Los Angeles, but there are a lot of threads on BP about investing out of area that could give you some ideas about what areas might be best.

1. can you rent your co-op in NYC easily? I heard that it's "harder" to rent co-op.

2. Can you sell your co-op in NYC "fast"? I heard that it may take longer to close.

I ask because TIME LINE in your case plays a part

Do you need to sell NYC first bef you buy in LA?

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LA, have you contacted an agent? Loopnet is not the best place to find under 4 unit.

commercial is 5 units and up, the financing is a different monster ;p

4 units and under is still considered residential, same financing as single family.

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Have you considered a LIVE In FLIP? where you buy a property that is undervalued with value add potential, fix it up, live in it for 2 yrs, and sell it? or refinance it at new appraised value.

ex, buy a 4 bed/1 bath, turning it into a 4/2 or 3/2.... 

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I like the idea of buying a LIVE ONE, RENT ONE situation, but I probably will never live next to my tenants ;p That's just me, however. 

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WHAT WE DID, was we took out a home equity line of credit while we were in our condo. 

When we moved, we put a renter in, and kept the HELOC, we didn't tap into it, so balance was ZERO. Renter was almost zero cash flow, but maintained the property for us, no $$$ from our pocket.

We rented, for a few month and bought a property, with money saved up, we took out a loan.  LIVE IN FLIP b.c we know it was temporary move!

Since the move was a job promotion. we built up some fund after 1 year, and bought our first investment property with saved up cash and took out a 5 yr ARM. Renting at a good cap of 10%, with Triple Net lease.

Rent for the condo, increased after 3 years, we finally have positive cash flow, with the 2 lease too.

We sold our home, and relocated to a better promotion and bought our current home. we took out a loan ;p

Now, our appetite for investment is growing. We sold our commercial unit, too long a distance.

We bought CASH a replacement commercial in our new area. We tapped into our HELOC ;p CAP is 7%

We pay down the HELOC as soon as we can and pay the min balance ;p

We continue this to buy 3 more units, a flip, 2 buy holds.  

We just sold our condo for a 100% appreciation 15 yrs later ;p this wk!!!

and now we are looking to find a replacement.

That one tiny condo in boston, bought us 5 investment properties. and generated 100% return on investment.  and hopefully continue once I buy a replace unit ;p

@sherry 

@Sherry G. The answer to your dilemma is quite simple actually. Buy a 2-4 unit! You'll only need 3.5% down. If that's all you have duplex is your best option as 3 and 4 unit purchase will require you to have significant reserves in a bank (among other difficulties 3&4 unit financing creates).

If you're expecting decent appreciation on your condo in NYC do not sell it now. Sell it when you're ready to buy next investment property.

Feel free to reach out privately if you have questions.

Quick comments

#1 Market is HOT! aka prices are too high and especially in places like California and LA.  Just as fast as prices rise, prices can dramatically drop here (CA).

#2  LA is such a huge market.  When people say I live in "LA"  it could mean a billion different locales.   You can probably find cash flowing properties in LA if you wholesale or buy at huge discount in a few distinct locations ONLY.   However, it's much more prudent to buy property in LA for appreciation.  Let's be honest, that's(appreciation is) where the big bucks (big gains) are and LA is the perfect place to do it.   Unfortunately TIMING is the most important thing in appreciation more than location!  And it's a terrible time to buy for appreciation in LA....IMHO

#3  Most Californians buy cash flowing investment properties OUT of state in places like Texas, midwest, South.   Rent in LA for now and use you downpayment money to buy cash flowing properties elsewhere.   When another crash occurs in California (as it always cycles up and DOWN), then 1031 exchange or use the equity from "linear" cash flowing markets in Texas then to buy in California for appreciation.

FYI, I'm selling my only investment California property next month to catch the peak (or near peak) before possible sudden drop!

nY and souther Cal are two of the toughest markets to purchase for cash flow. It's a ton of competition. We recently sold a 4 unit in neighboring Orange County for 2.4MM. I'd consider investing perhaps in another product type maybe in another market for cash flow. For instance you could by a retail center or single tenant deal like a autozone, or dollar tree in another market make a decent cash flow with very little if any landlord responsibility.

Hi Sherry,

You got a lot of great advice in this thread. As an L.A. resident, I can concur that a 2-4 multi is the way to go. Your profile says you are/will be in Glendale. Are you committed to only this area? Los Angeles is massive. When you are here - so that you can personally view the properties - we have seen several duplexes for rent and/or as flip opportunities in Long Beach and nicer areas of Hawthorne and Lawndale in the past few weeks. (We don't do multi-units yet.) Keep your hopes up. There is so much to choose from in Los Angeles, the trick is finding the neighborhood you want to live in as the landlord!

Best to you!