I bought my first home a few years ago in Orange County, Ca, and recently sold it. Unfortunately, the company I worked for laid me off recently due to COVID cutbacks. So, my plans have changed.
Currently, I'm cash-heavy from the recent sale, and I feel that house hacking a small multi-family is a great way to start for me. But, I'm not sure if it's realistic for the following reasons:
1) Can I secure financing without employment? If so, how?
2) Is Los Angeles, Ca, a profitable small multi-family market for a new investor? The purchase prices are so high that I'm discouraged
I am looking forward to the discussion and learning from the BP community.
Long Beach, CA · Member since 2019 · 18 posts · 4 votes
6y
Hey Nick, financing without employment will be a challenge. Possibly a hard money lender? Are you able to find a co-signer (parent, family?)? It is definitely profitable to invest in multi-family in Los Angeles if you are able to identify the right property. Purchase prices are high but rents are also high to help you as a landlord so don't be discouraged. Millionaires are made in LA all the time.
I bought my first home a few years ago in Orange County, Ca, and recently sold it. Unfortunately, the company I worked for laid me off recently due to COVID cutbacks. So, my plans have changed.
Currently, I'm cash-heavy from the recent sale, and I feel that house hacking a small multi-family is a great way to start for me. But, I'm not sure if it's realistic for the following reasons:
1) Can I secure financing without employment? If so, how?
2) Is Los Angeles, Ca, a profitable small multi-family market for a new investor? The purchase prices are so high that I'm discouraged
I am looking forward to the discussion and learning from the BP community.
Thanks,
NC
Nick, what you want to do is get a commercial loan on a commercial building. Lemme explain (and I apologize in advance if you already know all/any of this -- I swear I'm not trying to be pedantic!):
Residential multifamily means duplexes, triplexes, and fourplexes. They are financed like SFRs: the lender looks at your income and debt to make sure you can pay for the property.
Commercial multifamily means 5 units or more. Commercial buildings are financed with commercial loans, which looks at the income and expenses of the buildings to determine whether the building can pay for itself. Your income, while not irrelevant, isn't the primary factor.
If you're cash-rich, I would start looking at 5- and 6-unit buildings in gentrifying neighborhoods like Inglewood and Hawthorne (my personal favorites). The bind with commercial buildings is that you can't borrow more than the building will support. (There's an equation, it's called debt service coverage ratio, and basically, a basically net income must be 120% of the mortgage payment.) So, sometimes, to get a great building, you have to make a large down payment. If you happen to be cash-rich and income poor, this is the situation you're looking for!
I'm actually training to be an agent now. I'm not an agent, so I can't buy anything for you, but I'd love to help you find a building or a neighborhood. What's your budget? Let's keep the conversation going here or message me if you're interested in chatting further.
Hey Nick, financing without employment will be a challenge. Possibly a hard money lender? Are you able to find a co-signer (parent, family?)? It is definitely profitable to invest in multi-family in Los Angeles if you are able to identify the right property. Purchase prices are high but rents are also high to help you as a landlord so don't be discouraged. Millionaires are made in LA all the time.
Hey Chris,
Yeah, I've thought about a hard money lender. Thankfully, my wife is employed and supportive of this dream, so a co-sign is possible if needed.
There are opportunities in the LA market. In the meantime, my goal is to learn from a local expert about small multi-families. If you know of anyone that has this expertise, please let me know!