2-4 Unit House Hack in South Bay-Los Angeles

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2-4 Unit House Hack in South Bay-Los Angeles

Josh Wallace
REDONDO BEACH, CA · Member since 2016 · 37 posts · 8 votes

Does anyone have any success stories of purchasing a cash flowing 2-4 unit property in Los Angeles? More specifically, in the South Bay. I know that this area is more traditionally a buy for appreciation market or so I have read and have been told. I am able to use the VA home loan benefit and I work close to LAX so I want to find a 2-4 unit where I would be close enough to bike to work and under $800K.

I'm not writing this looking for a deal but rather seeing if anyone has done this before. Not necessarily this same exact plan but has anyone on here been able to buy a 2-4 unit in this area (south of I-105 and west of I-405)? My thinking here is to have the other units cover the majority if not all of the mortgage to where I can live well below the market rent in the area. During the years of living there myself, I want to save up money and build equity to where I can start purchasing properties out of state that have better CAP rates and cash flow margins. Am I crazy to think I can purchase a cash flowing 2-4 unit in this region (being mindful of taxes and other costs that are relatively high in this region) or would it be best to use what savings I have now to purchase a turn key out of state that is already cash flowing while I continue to rent? As a renter I am facing market rents and potential annual increases to rent.

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Will F.
Investor · Los Angeles County, CA · Member since 2012 · 962 posts · 279 votes
9y

Start making tons of offers in your area and see for yourself is probably the best answer anyone on a forum will give you

In redondo beach you're probably priced out

It could happen in Long Beach, Inglewood Hawthorne, Lomita, Harborcity though depends on the area you're able to live in and how long.  So many variable s good luck bro

I have success stories and plenty will have them who bought in 2010-2014 or who bought major fixers recently and value-added.  Or people who bought in the nineties or eighties there's plenty of house hacking stories... depends on if you can handle the grind and willing to take the risk. In the long run 5-20 years it's hard to make a mistake in RE, unless you don't do your due dilligence initially or really don't know your stuff. 

That all being said in the short run it will probably be a ton of work, it will take $$$, time, or stress to make it work--most likely a combination of the three.  

If you're willing to it can work.  good luck either way

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  • Will F.
    Investor · Los Angeles County, CA · Member since 2012 · 962 posts · 279 votes
    9y

    You can do it but it will probably have to be heavily distressed like needing major rehab for it to work.  Don't look at current cap rates.  Anything with decent cap rate and occupancy will not fit what you're looking for.  look for vacant properties or complete rehabs. only problem is for a non performing multifam you'll have to come up with lots of cash to purchase.  Disclaimer-- but you could also get burned if you don't know construction costs etc.  If first time go for cosmetic fixer

    It's difficult to answer. You can get burned with out of state-- nothing is turn key unless it was a recent build and even those require maintainence and headaches.  Whoever is out of state you have to trust... I've been burned out of state so have many others on this forum.  But you could get burned in state too esp with the current market

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  • Will F.
    Investor · Los Angeles County, CA · Member since 2012 · 962 posts · 279 votes
    9y

    Start making tons of offers in your area and see for yourself is probably the best answer anyone on a forum will give you

    In redondo beach you're probably priced out

    It could happen in Long Beach, Inglewood Hawthorne, Lomita, Harborcity though depends on the area you're able to live in and how long.  So many variable s good luck bro

    I have success stories and plenty will have them who bought in 2010-2014 or who bought major fixers recently and value-added.  Or people who bought in the nineties or eighties there's plenty of house hacking stories... depends on if you can handle the grind and willing to take the risk. In the long run 5-20 years it's hard to make a mistake in RE, unless you don't do your due dilligence initially or really don't know your stuff. 

    That all being said in the short run it will probably be a ton of work, it will take $$$, time, or stress to make it work--most likely a combination of the three.  

    If you're willing to it can work.  good luck either way

    1Reply
  • Matthew Forrest
    Rental Property Investor · Torrance, CA · Member since 2016 · 263 posts · 132 votes
    9y
    I am currently renting in Redondo Beach and have been scouring the South Bay for the last six months to get a handle on the market and look for house hacking opportunities. In that time I have seen several MLS listings that my deal analysis suggested would cash flow if all of the units were rented out, and two that would cash flow with me occupying one of the rooms. Most of these were in Lawndale and went to cash buyers, but hey, it's possible! My goal is to keep at it and keep making offers. I know I'll get one eventually.
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  • Josh Wallace
    OP
    REDONDO BEACH, CA · Member since 2016 · 37 posts · 8 votes
    9y

    Thanks, guys. I am thinking that it might be better to start the "snowball" elsewhere. Once it picks up enough momentum and I have the leverage of a few properties, I can trade up to something here in CA that I would be able to live in and rent the other units. Or perhaps continue to purchase better cash flowing assets out of state and just let that income cover the mortgage on a SFR here or simply be another renter and let others carry the taxes and other expenses.

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  • Eugene Rogachevsky
    Investor · Long Beach, CA · Member since 2016 · 75 posts · 24 votes
    9y

    @Josh Wallace unfortunately house hacking in the area you're looking at will never cover your carrying costs. A VA loan is a great option but that low down payment comes with a much bigger mortgage. And considering the taxes and insurance on that type of property, you'll be coming out of pocket significantly. I live in LB and there is only a small number of 2-4 unit properties available and the numbers just don't make sense if financing is used. It's frustrating but that's reality in our market. This forced me to look out-of-state. I found several turnkey providers and pulled the trigger on a SFR and triplex from the same one (my first deals outside CA). Both slated to close by end of this month. I'm hoping to pick up 3 or 4 more by the end of the year. I would recommend doing something similar to build some funds. When the market softens in our area in the next 2-3 years, you'll have that money to deploy.

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  • Josh Wallace
    OP
    REDONDO BEACH, CA · Member since 2016 · 37 posts · 8 votes
    9y

    @Eugene Rogachevsky that is what I was starting to think as well. I think building my portfolio and setting myself up to be ready to buy once the market adjusts will be my best bet.

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  • Will F.
    Investor · Los Angeles County, CA · Member since 2012 · 962 posts · 279 votes
    9y

    Word of advice -- on paper things always look better out of state, but California real estate always wins out in the long run...

    For instance I bought in FL only to see the prop tax is x3 higher and the property couldn't even qualify for insurance until I dropped 15k on repairs.  Insurance is through the roof in FL.  Your repairs/improvements also go up in certain markets.  Plus you have less control over out of state... I've been literally robbed by tenants, realtors, prop managers out of state, had minor/major lawsuits out of state etc... but it could happen at home too... a lot less likely in your own neighborhood

    Anyways others told me the same and I did it anywayss... thousands of gray hairs latter and sleepless nights I finally learned... Property hass stabilized since then...

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  • Josh Wallace
    OP
    REDONDO BEACH, CA · Member since 2016 · 37 posts · 8 votes
    9y

    @Will F. yes, those are some of my fears as well. I will have to do my research and interviews to find a good turnkey company. Like they say, if this were easy, everyone would do it. I am excited for the adventure but want to do it as smart as possible.

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  • Lukas Vanagaitis
    Flipper/Rehabber · St Petersburg, FL · Member since 2016 · 44 posts · 14 votes
    9y

    @Josh Wallace how did everything turn out? Did you buy anything in your local market / out of state? 

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