Buying First "House-Hacking" Property in Los Angeles.

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Buying First "House-Hacking" Property in Los Angeles.

Cary Phillips
Studio City, CA · Member since 2016 · 2 posts · 0 votes

Hi everyone,

Absolute newbie here wishing I found this resource a few months ago! I was hoping you guys could chime in on my first investment property in LA I'm currently in escrow for, which is also a house-hack (I will be living in one of the units). On paper, does this look decent or should I pull out while I still have a chance? 

A little about me:

29 y/o, recently moved back to Los Angeles from Boston. Was initially going to buy a townhome as I no longer want to rent, but felt as a single guy with no major obligations, turning this into an investment oriented approach felt like a better move. I started reading up on owner-occupied or "house-hack" properties and decided to go down that route to build equity in the property while also lowering my own rent so to speak. The problem is, the Los Angeles housing market is very overpriced, so finding a property that was in at least a semi-decent area proved to tough, not to mention the issue of rent control for any property built before 1978. The best rehab projects going for under 500k were in areas I simply wouldn't be comfortable living, such as South Central or Compton. After a few months and a lot of searching, I found a property in the San Fernando valley (Van Nuys) thats move-in ready and my offer was accepted at 60k below asking. Here are the details/terms:

Purchase Price: $635,000

Property Type: Triplex, all units 1+1

Lease Status: 2 units on month-to-month rented at $1100 each (about $100 below market). Third unit delivered vacant

Mortgage, Insurance, Taxes: $2850 (4.25% rate on conventional 30 year)

Down Payment: $150k (Was considering FHA, but since the property price tag is quite high, the monthly MI premiums would have been killer)

Rental Income: $26,400

Based on these numbers, is this a viable option for me? Any words of advice?

Thanks!

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  • Aaron Cullen
    Real Estate Broker · Portland, OR · Member since 2015 · 201 posts · 98 votes
    10y

    Hello Cary,

    Did you run the numbers through the Rental Property Calculator? 

    I would do that, it's under the Tools menu. As a regular member you can analyze a few properties for free. It will give you a better sense of the parameters that effect your deal. 

    Is it a good deal or not? You should ask for comps from your realtor to make sure you are not over paying current market price. I would ask yourself is this a good deal for you? I would factor in other expenses as well such as water, landscaping, maintenance, vacancy, and capex. After adding in those expenses would it still be worth it to you if you were paying $1,500 a month to live there? Is commuting going to be a problem? (I see you are in Culver City, make sure you drive the area and walk around to make sure you would enjoy living there) If the market goes down and your property is worth less are you still ok holding it? If you moved out down the road are you ok breaking even of the property? You wouldn't have postive cash flow most likely, just building equity through loan pay down and possible appreciation. Does that work for you?

    These are some of the questions I would ask myself before buying. I'm in the same situation as you and I've been looking to do exactly the same thing. For me, now that prices have gone past the 2007 high I'm holding off until I find the right value add opportunity or the market softens again. I've decided that it makes more sense for me to invest my cash into rental propeties in another city where I can get postive cash flow and just rent here in LA. 

    Hope that helps. Best of luck!

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  • Cary Phillips
    OP
    Studio City, CA · Member since 2016 · 2 posts · 0 votes
    10y

    Thanks for the suggestions.

    Running this analysis, when considering maintenance and expenses, I'm still clocking in at about $-900 in monthly cashflow, which is still much lower than I would pay for rent myself. 

    Can I ask what your system is of investing in properties in other cities currently? 

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