Is this a good deal in LA (near USC)

Is this a good deal in LA (near USC)

Los Angeles, CA · Member since 2019 · 6 posts · 2 votes

Hello!

I just wanted to ask if this is a good deal, based on my plan to house hack.  

This property is a duplex near USC (5 mins by car and 20 mins by walk)

It is listed for $744,900. (2,939 Sq. Ft/Lot size: 4,799 Sq. Ft./Built: 1912)

It's been on the market for around 100 days.  

Unit #1 has 5 Bedroom 3 baths

Unit #2 has 2 Bedroom 2 baths

I was planning to rent out unit #1 to college students attending USC (rent it out per room) and in the meantime live in unit #2 with my family.  

Since this will be my first home, I was planning to use FHA loan of 3.5% down payment ($26,072),

Expected payment per month will be $4,818 according to Redfin (principal and interest $3,444/Home owner's insurance $137/Property taxes $788/Mortgage Insurance $449).

I am not sure if these numbers are correct or trustworthy (can someone verify??)

If I rent out 5 rooms for $1,000/person or $700/person (if they want to share the room), I think it will be enough to cover all the payments and basically live for free.  

first of all, I want to know if the numbers are right based on the market.

secondly, I want to know if this is a good deal for house hacking based on my plan.

Thank you so much ahead of time for your replies!   

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  • Attorney · Oakland, CA · Member since 2019 · 27 posts · 22 votes
    7y

    Hi Min,

    I just took a quick look at your post, and while I am unfamiliar with LA and rental costs there, given that it is close proximity to USC, I think the price for rooms seems reasonable, but someone else here can confirm.

    Regarding whether it is a good deal, assuming the numbers are accurate, I think it is an excellent deal, especially for a duplex! Your mortgage is essentially covered while you live there. Also, if and when you decide to move on and rent out the other 2bdrm unit, that will be pure cash flow! 

    If everything checks out and you can get it with FHA I say go for it! Good luck!

    DJ

  • Los Angeles, CA · Member since 2019 · 6 posts · 2 votes
    7y

    Thank you for your reply DJ!

    I was thinking of living there for a year and rent out the rest to more students.

    While I am living there, I was planning to do some rehab and add some more value so that I can later on refinance and get all my money back since I think the property can go up to $900k or even more. 

  • Real Estate Agent · Pacific Palisades, CA · Member since 2018 · 43 posts · 14 votes
    7y

    Have you checked local occupancy laws?  Assume a neighbor will call the city when you try packing a bunch of people in there, college students are notoriously rowdy and will easily draw a neighbors ire. I know the cities have been concerned with parking as well which is greatly impacted by situations such as what you are proposing. 

    I'm not saying you will find problems, but if I were you, research it yourself and be extra thorough. 

  • Rental Property Investor · Los Angeles, CA · Member since 2017 · 2k+ posts · 5k+ votes
    7y
    Originally posted by @Min Sik kang:

    I was planning to do some rehab and add some more value so that I can later on refinance and get all my money back since I think the property can go up to $900k or even more. 

    Sounds like 2005 all over again. I'll buy it, slap a coat of paint on it, and it'll go up in value.  

  • Real Estate Appraiser · Isabella lake, CA · Member since 2018 · 628 posts · 491 votes
    7y

    A lot of the small income properties around there are very old. How is the condition of the property? The neighborhoods are pretty varied too. If it is in LA City you are probably subject to rent control. I would investigate how that might affect your plan.

    If it is the one south of USC with the blinding lime green bathroom, it looks mostly OK in photos. Appears to have been repiped about 20 years ago. And yes, is subject to rent control.

  • Real Estate Agent · Hawthorne, CA · Member since 2015 · 96 posts · 20 votes
    7y

    As others have stated, you need to look into local occupancy laws.  In addition, you should check to see if the property is in a Rent Stabilization Ordinance area, which can restrict your options for rentals as well as the % you can increase rent each year.  My wife and I are both Realtors and real estate investors, so I'm happy to help with any other questions you have - feel free to reach out on this thread or via message.

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