I'm hoping to purchase fourplex in Los Angeles to owner occupy at some point in the near future and have some questions regarding the unit I'll be living in and what I would need to be putting in "rent" wise. Let's say the monthly mortgage payment is $5000 and the rent from the three other units cover that. Then let's say the unit I'm living in would rent out at $2500/month, would that then be considered as part of my cash flow, meaning I would have to put $2500/month into savings? Also, what if my monthly budget to go towards "rent" is only $2000, would it be unwise putting in only $2000 towards savings instead of what that unit is actually worth?

Cashflow is the number you come up with after paying the mortgage (PITI) and also accounting for expenses like vacancy, capex, maintainence, utilities and management. So the 2500 is not cashflow because you are missing those other expenses.

In the situation of a house hack quadplex things are a little bit different because your goal is to live without the expense of a mortgage. In these situations the live in landlord will typically cover the cost of maintainence, vacancy, management and utilities.

Bottom line is you want to analyze the property the same either way. If it makes sense as a cashflowing property it will make sense as a house hack. You may desire to move out after a few years so it needs to make sense as a stand alone investment. Keep in mind you are going to have to live there so make sure that it doesn't impinge on your personal lifestyle. 

Hi Shamim,

Shamim the 2500$ that the unit that you live in can possibly make you is not consider cash flow because you're not making that money yet. And if you can save an extra 2000 dollars a month because thats what you were paying for rent that is also good too. If you decide to leave the apartment and fully rent it and it makes you extra cash after all the bills are pay that is consider cash flow. But if it covers that mortgage and you don't pay nothing out of pocket and you can save 2000 dollars you're doing good my mans. Thats is more than a lot of people can save monthly. Thank you :)

@Joseph Weisenbloom @Luis M. Frias

So, in theory, if the tenants are covering the mortgage and all other expense, but not a penny more, that would mean the cash flow zero. Would that make it a bad investment? Or because I'm essentially living rent free and saving that $2000/month that would typically go towards my rent, does that make it a good investment?

Originally posted by @Shamim Toufighian :

@Joseph Weisenbloom @Luis M. Frias

So, in theory, if the tenants are covering the mortgage and all other expense, but not a penny more, that would mean the cash flow zero. Would that make it a bad investment? Or because I'm essentially living rent free and saving that $2000/month that would typically go towards my rent, does that make it a good investment?

 That would make it a great investment.

I can agree with Dana.

But I can also say it depends. Like is there other 4 family unit on the market in the area and can they rent for more or are they cheaper? If you can answer yes to that look into those. However, if thats not the case and you can save 2000 a month. You do have a good investment. 

@Dana Whicker @Luis M. Frias

Then let me take it a step further. Let's say the tenants are only covering a portion of the mortgage/expenses, and I have to pay $1000 out of pocket. Meaning I only save $1000/month. Is that still considered a good investment? What if I'm only saving $500, or $400, etc.... at what point is it considered a bad investment?

Shamim,

For me and I mean this when i say it for me is not consider a good investment if you buy a 4 family house and you have to put money out of pocket to pay the mortgage. I don't care if is only 1 dollar. I learn this from a gentle a while ago. You want to have 3 type of income when buying a property. Rental income, mortgage income (meaning the tenants are paying down your mortgage) and appreciation income. If I am not getting all 3 is not consider is a good investment. Now against it depends how you see the situation.

@Shamim Toufighian Whether something is a good investment or not is all relative. I would say if you are saving $2000/mo in rent from comparable apartments that would be considered a success. What I dont want to happen is that you live there a year, get tired of landlording then after you move out you have a terrible investment on your hands.

Honestly it depends on your goals. I am currently own 7 soon to be 9 single family homes. Our next purchase will be a quad plex that we will live in one unit and rent the rest. Personally I am examining it in two ways. The first way my total expenses minus my total cash rate with my downpayment. I have a cash on cash rate goals. So I would want the investment to meet my rate of return goals. 

From there it really is your preference on where the money goes. Every spare dime we saved when straight into our "investment account". This was what we used for the next houses. 

I would analyze it as if you aren't living there. So when you move out you stand to make $2000/mo cash flow or $500/unit. That's a great deal in my book.

Originally posted by @Joseph Weisenbloom :

@Shamim T. Whether something is a good investment or not is all relative. I would say if you are saving $2000/mo in rent from comparable apartments that would be considered a success. What I dont want to happen is that you live there a year, get tired of landlording then after you move out you have a terrible investment on your hands.

That's understandable. I own a rental property in Atlanta that I have been landlording for over 10 years, many of those years being long distance. So I have a good idea of what goes into it and what to expect. Also, a lot of it has to do with being emotionally invested, and I definitely am at this point in my life. I'm ready and excited to take my real estate investing to the next level.

Originally posted by @Elizabeth Colegrove :

Honestly it depends on your goals. I am currently own 7 soon to be 9 single family homes. Our next purchase will be a quad plex that we will live in one unit and rent the rest. Personally I am examining it in two ways. The first way my total expenses minus my total cash rate with my downpayment. I have a cash on cash rate goals. So I would want the investment to meet my rate of return goals. 

From there it really is your preference on where the money goes. Every spare dime we saved when straight into our "investment account". This was what we used for the next houses. 

Yup, anything extra will definitely be going into our "investment account" as well. Thanks for walking me through your thought process.

Originally posted by @Shawn M. :

I would analyze it as if you aren't living there. So when you move out you stand to make $2000/mo cash flow or $500/unit. That's a great deal in my book.

 That's a good way to look at it. Thanks!

@Shamim Toufighian

In addition to your goals I'm sure the top two points on your list include where you want or better yet need to live (for work, family etc) and your preferred price point. 

If you don't already, this site..

www.rentometer.com

became my best friend and most helpful aid my in-state and out-of-state investing. It's great for rent price comparables for a clearer picture for your miner crunching. Sometime realtors came back confirming rents on the higher end of the scale. 

You can go basic or all the way to pro level depending on your needs. 

Judging from the responses you pretty much have all you need to hit the ground and start searching. 16 months ago, it took me 6 months of sometimes painful grinding to locate a duplex suited my needs in Los Angeles. Gas the car up and put on your comfortable walking shoes pal! All the best.  

@Francis A.  

Thanks for the rentometer suggestion. I'll definitely put that to good use!

I would love to hear about your process on how you found a duplex here in LA and for how much, if you're willing to share.

Originally posted by @Shamim Toufighian :

@Francis A. 

Thanks for the rentometer suggestion. I'll definitely put that to good use!

I would love to hear about your process on how you found a duplex here in LA and for how much, if you're willing to share.

@Shamim Toufighain

It took me 6 months to find a duplex that I liked. A few just as nice or nicer ones escaped but I am happy with what we ended up with. I saw three 4 plexes that I should have gone for but I wasn't as knowledgeable as I am now and I'm still learning. Your working situation may dictate where you end up buying. There are variables too numerous to get into without knowing where your head is pointing towards.

PM me your questions and I'll do my best to answer what I can. 

@Francis A.

The good thing is that I work from home, so I'm pretty flexible with where I can live. Although I'm somewhat limited to remain in LA, since my wife wants to stay close to her family. We're really hoping to find a place in Frogtown or Cypress Park.

I'll PM you.

@Shamim Toufighian

We have a fix and flipper who just finished this in Cypress Park.

https://www.redfin.com/CA/Los-Angeles/601-Romulo-S...

It's an SFR but you can see the nice work @Will F. is doing down there.

If there are 4-plex deals to be found @Will F. might be kind enough to point you in a few directions.

@Francis A. Yup, @Will F. and I have been chatting it up and he's been very kind with offering advice. Everyone's so friendly here! :)

Hi thanks for mentioning me.  @Francis A.

Yeah just to chime in I'd agree with a lot of the above advice. You technically would not put the hypothetical $2000 that you're saving from rent into the NOI. Technically this is not "income" or cashflow...but you're house hacking so it's kinda a gray area!

so for your own analysis you could just put that into it, or not ...just be conservative.

A dollar saved is a dollar earned. So if you are dilligent about savings and you  stick that money right back into the property you are definitely-- WINNING

So if you don't put it into the NOI it will not look like you're getting as good of deals, but really u are saving that money as it would have been wasted making some other landlord rich...

Do it.  I really think NELA is a fantastic place to invest if you're thinking about holding long.  It might take 5 years, maybe 10 but the place is rapidly changing and improving. 

Cypress Park is great-- it's not as known as larger neighborhoods in NELA because it is simply less population.  But the streets are treelined, and quiet and people are friendly. Same goes for elysian valley/frogtown

 The houses there tend to be older-- some what historic, and many do need a good amount of work, so make sure you do your due-dilligence with inspections especially on those pre 1950s homes.

Originally posted by @Will F. :

Do it.  I really think NELA is a fantastic place to invest if you're thinking about holding long.  It might take 5 years, maybe 10 but the place is rapidly changing and improving. 

Cypress Park is great-- it's not as known as larger neighborhoods in NELA because it is simply less population.  But the streets are treelined, and quiet and people are friendly. Same goes for elysian valley/frogtown

 The houses there tend to be older-- some what historic, and many do need a good amount of work, so make sure you do your due-dilligence with inspections especially on those pre 1950s homes.

 Definitely looking to buy and hold as a primary for my family and I. We drove through over the weekend and are really enjoying the area and the potential of what I can become.