New to Real Estate · Chino, CA · Member since 2020 · 12 posts · 1 vote
Looking for advice on when/how/what to invest for first property with my current situation:
Husband + wife, 3 kids and 1 due in September. Currently crammed into 2 BR apt and need more space ASAP.
Option 1 we considered purchasing a house for us to live in for a few years and then either sell/rent later on as we move on to something else.
Option 2: since property prices are so extremely high right now, we rent out a 4BR house and wait to purchase our first home some time next year so we can save for down pmt and hopefully prices drop (live in southern CA).
Just started learning from BP a month ago and we are serious about becoming investors and change our family’s life. Wisdom & direction from current investors would be greatly appreciated.
Real Estate Broker · Los Angeles, CA · Member since 2018 · 307 posts · 146 votes
6y
@Dakota Burkeen Buying a 4 unit in Los Angeles right now is not necessarily a good idea. We are in a situation in which people are leaving LA for the suburbs, and the City has put a moratorium on evictions while they keep people on lockdown. Currently it is estimated that 26% of renters are not paying rent. If you go on apartments.com and search City Of Los Angeles, you will see that there are currently 35,000 rentals available in the City. This means a real correction in rental pricing is coming quick. CBRE estimates that rental pricing across the country will fall by 8% over the next year. As far as finding a home to live in, different story. Depends on what and where? Demand is high in some areas while other areas are offering up opportunities to negotiate. Appreciate the outside the box thinking though.
How much does your current place cost and what could you get for rent (ie will the rent cover the expenses)? Do you have money for a down payment on a new place and could you get another mortgage while keeping your first place as a rental?
Rental Property Investor · Branson, MO · Member since 2020 · 46 posts · 15 votes
6y
@Jose Guzman Have you considered house hacking? You can do an FHA loan on up to a 4 unit building, live in one unit, and rent the other 3 to cover your mortgage/ expenses. This can be a great way to learn hands on about landlording and save yourself money at the same time. If I could do it all over, that is the way I would do it.
Real Estate Broker · Los Angeles, CA · Member since 2018 · 307 posts · 146 votes
6y
@Dakota Burkeen Buying a 4 unit in Los Angeles right now is not necessarily a good idea. We are in a situation in which people are leaving LA for the suburbs, and the City has put a moratorium on evictions while they keep people on lockdown. Currently it is estimated that 26% of renters are not paying rent. If you go on apartments.com and search City Of Los Angeles, you will see that there are currently 35,000 rentals available in the City. This means a real correction in rental pricing is coming quick. CBRE estimates that rental pricing across the country will fall by 8% over the next year. As far as finding a home to live in, different story. Depends on what and where? Demand is high in some areas while other areas are offering up opportunities to negotiate. Appreciate the outside the box thinking though.
Rental Property Investor · Branson, MO · Member since 2020 · 46 posts · 15 votes
6y
@Dennis Maynard Sounds like a nightmare, this hasn't had much of an effect in my area (Southern Missouri). Thank you for the clarification! So would you suggest the OP rent or buy in this situation (assuming they live in LA)?
New to Real Estate · Chino, CA · Member since 2020 · 12 posts · 1 vote
6y
@Dennis Maynard Mr. Maynard, considering Dakota’s proposal (buying a multifamily), is buying in the High Desert wise? We wouldn’t live in the property, only invest in the property.
Real Estate Broker · Los Angeles, CA · Member since 2018 · 307 posts · 146 votes
6y
@Jose Guzman It really depends. If you can find and negotiate a fantastic deal, and then hold on to it for a while until all this blows over, make the payments while it's vacant, sure. If you need a place to live, buy a house. In your situation with that many kids, I would move in that direction. Take advantage of the great rates, live in the house as long as you need to, then go buy another and keep that one, rent it. You have your first income property. Little safer right now.
Rental Property Investor · Los Angeles, CA · Member since 2013 · 1k+ posts · 1k+ votes
6y
@Jose Guzman if you can manage it family wise, ie if you and your wife think you can do it, you can attempt a live in flip (buy a value add property and fix it up, live in it at least 2 years, sell and pay $0 of capital gains tax due to the 121 Exclusion) of house hack (buy a small multi, live in one unit and rent out the others; maybe a house for the fam and an ADU as the rental). You could even test the STR market with the house hack strategy if it's legal where you are, which will supercharge your rental income. While both strategies have their challenged with a family, they both require low down payments and are very tax efficient. I feel your pain with So-Cal prices!
Real Estate Broker · Los Angeles, CA · Member since 2018 · 307 posts · 146 votes
6y
@Brian G. Well put. Yes, all those have potential, but would be foolish to keep renting and having 6 people in a 2 bedroom apartment and not take the tax advantages of home ownership as you mentioned. With FHA, there are limitations on condition, so primarily a cosmetic to light fixer is the sweet spot. That also depends on his capital to invest which we don't have any indication on.
High Desert, CA · Member since 2019 · 319 posts · 161 votes
6y
Hello @Jose Guzman I'm a realtor in the High Desert. I can tell you it's only going to get more expensive. The median house price is $280,000 compare that to 2012 it was $110,000
Multiple bidding wars going on. But there are places you can find some deals, all depends on what you're looking for.
Chino, CA · Member since 2019 · 10 posts · 4 votes
6y
Jose I am currently getting ready to move out of my first home and rent it in Chino. It is a 4 bed 2 bath and if your looking to go that route maybe we can talk.
Contractor · Dallas, TX · Member since 2019 · 52 posts · 35 votes
6y
@Jose Guzman If paying a mortgage and paying rent end up being about the same, I would definitely work in purchasing a house to own. You'll gain equity, especially if you'll stay for at least a few years.
It's *almost* like a savings account built out of wood studs. Don't throw money to landlords if you don't have to. This is the first step to building wealthy through real estate, by tending to your immediate needs as a family.
Think. If you bought a rental to rent to someone else while you continue to pay rent, what does the profit look like? Is it a wash? More? Less? This might give you a good idea for moving forward, depending on your financial situation to afford a loan.
Someone brought up a great point about a live-in flip. It's a good idea if you're willing to entertain it. They're usually cheaper on the market, and sometimes they're just cosmetic items. you could potentially find places on BP that might be off-mls as well!
As long as the property doesn't have any major structural issues right off the bat (so you won't have to spend money to fix it in addition to providing money down for the purchase) like foundation/hvac problems or a leaking roof, everything else should be functional as a home for your 6 person household.
Rental Property Investor · Member since 2019 · 304 posts · 462 votes
6y
Dakota Burkeen, that is exactly how I got started. Once I did the first one, I refinanced and bought another 4 plex. Repeated the process until I had 5. That became a bit of a hassle managing them all so I sold them all and bought 2 large apartment buildings. The first had 22 units, and the second had 36 units. Both had live-in managers that took care of the day to day stuff. Made my life a lot easier.
@Brian G. Well put. Yes, all those have potential, but would be foolish to keep renting and having 6 people in a 2 bedroom apartment and not take the tax advantages of home ownership as you mentioned. With FHA, there are limitations on condition, so primarily a cosmetic to light fixer is the sweet spot. That also depends on his capital to invest which we don't have any indication on.
Good point regarding FHA. In So-Cal one can add a lot of value through cosmetic rehab, reworking the floor plan in a home, taking additional square footage and creating an additional bedroom, etc. many ways to create value even after an FHA purchase. The dirt is just so expensive in So-Cal!
New to Real Estate · Chino, CA · Member since 2020 · 12 posts · 1 vote
6y
Also should add that a house big enough to fit our family here in Chino, CA currently going for around $600k which would disqualify us for FHA max amount in our county. We have good DTI and both have great credit but no $ down due to economic hardship brought on by pandemic. What are your thoughts?