New investor to the Los Angeles beast.

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New investor to the Los Angeles beast.

Lucas Allmon
Santa Monica, CA · Member since 2017 · 52 posts · 27 votes

Hello all,

I'm a software engineer in Los Angeles, and have been an aspiring investor for about 10 years, ever since I read Rich Dad Poor Dad and the deal was sealed since I played Cashflow in 2007.

In that time I have gotten my finances in order; repaired my credit, created a cashflow positive (70%+ savings rate, liquid assets) lifestyle, getting rid of 99% of debt (just one car loan left, paying down aggressively) and have close to a top paying job. 

My wife and I are starting to look in LA, but it feels insane and overpriced, with mostly speculation driving the market. Most people say cashflow is nearly (but not totally!) impossible, yet long term hold and flips are the play on multiunit residential.

We are looking to house hack, and always appreciate any other LA investors advice and mentorship, and can always offer website/digital content/technology help as a value exchange. :)

Super excited, but sometimes worried I'm not on the right track, and then listen to things like "Set For Life" and I think I'm behind. :D

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Ham Merritt
Co-Owner · New Berlin, WI · Member since 2017 · 224 posts · 71 votes
9y

@Lucas Allmon You are heading in the right direction. Just keep plugging away at your plan and be patient. If you are passionate enough about it, you will make it happen and be successful with it. House hacking is a good way to get your foot in the door to start. Nice thing about house hacking is that the rental income of the current or proposed tenant can be used for qualifying purposes. I will PM you.

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  • Ham Merritt
    Co-Owner · New Berlin, WI · Member since 2017 · 224 posts · 71 votes
    9y

    @Lucas Allmon You are heading in the right direction. Just keep plugging away at your plan and be patient. If you are passionate enough about it, you will make it happen and be successful with it. House hacking is a good way to get your foot in the door to start. Nice thing about house hacking is that the rental income of the current or proposed tenant can be used for qualifying purposes. I will PM you.

    1Reply
  • Robin Boyer
    Surveyor · Hemet, CA · Member since 2015 · 797 posts · 112 votes
    9y

    @Lucas Allmon Welcome to bigger pockets! I am also in Southern California a new investor. I am selling our family's commercial property in Corona.  Looking to become a land lord buy and hold investor.  There is so much to learn about rentals apartments it's amazing!

    0Reply
  • Manolo D.
    Contractor · Los Angeles, CA · Member since 2015 · 4k+ posts · 1k+ votes
    9y
    Lucas Allmon I think you are all set. Have a jump at it. The first step is always the hardest. If you are looking for cash flow, you need cash reserves, and go 4plex, if you want a real home, you can house hack and get cheaper living. If you account for appreciation, it will pencil out.
    0Reply
  • Bradley De comarmond
    West Hollywood, CA · Member since 2016 · 235 posts · 72 votes
    9y

    Welcome @Lucas Allmon!

    Congrats on the hard work and sacrifice you've put in over the last decade. It will surely pay off. I live here but invest out of state for cashflow and the insane local prices. 

    Perhaps a solid value add rehab project would work well especially if the market tapers off. Can you work remotely at all? If you can get just 30 miles outside of LA, the numbers drop drastically. 

    0Reply
  • Dmitriy Fomichenko
    Solo 401k Expert · Anaheim Hills, CA · Member since 2012 · 18k+ posts · 6k+ votes
    9y

    @Lucas Allmon

    Welcome to the BP family! Good to have you here! Here are some recommendations for you:

    Find and connect with other BP members that are in your area: http://www.biggerpockets.com/meet
    Set up keyword alerts to be notified of the topics that interest you: http://www.biggerpockets.com/alerts
    Read Beginner’s Guide: http://www.biggerpockets.com/real-estate-investing
    Check out BP Podcasts: http://www.biggerpockets.com/renewsblog/category/podcast/

    If you wish to tag someone in the conversation on the forum, type @ followed by their name and then select the name of that person which should appear below the comments box. He or she will be notified of being tagged so that the conversation will continue.

    Wishing you the best!

    0Reply
  • Scott TrenchPro Member
    Rental Property Investor · Denver, CO · Member since 2014 · 2k+ posts · 6k+ votes
    9y

    I'm so glad you read the book! I'd say you are definitely not behind. Sounds like you are doing everything right - earning a good income, huge savings rate, eliminating debt, and set to begin getting off to the races in pursuing assets and early financial freedom once you are at zero debt. I suspect you'll look back in 2-3 years and be hundreds of thousands of dollars ahead and very comfortable executing your plan!

    Podcast Guest on Show #223
    BiggerPockets
    0Reply
  • David Faulkner
    Investor · Orange County, CA · Member since 2015 · 2k+ posts · 3k+ votes
    9y

    Welcome! I house hacked all over LA and have built a nice little portfolio of cash flowing single family homes in SoCal as a result, even as everyone says it is impossible :) LA is a market that has seemed insanely overpriced to those that don't know it for the last 40+ years, and it has stayed that way and likely will stay that way going forward ... sometimes it is more insane than others, but it is always a desirable market with lots of competition, high demand, and limited supply of housing ... THAT is the nature of the Los Angeles beast. I wouldn't necessarily limit yourself to multi-family only, though I would not rule it out either. The other major choice you have is you could try to get something way inland for less money and better cash flow, but longer commute, live in a less desirable neighborhood, and likely lower long term appreciation. That or you could stay central/coastal and pay more, shorter commute, live in a nicer neighborhood, and likely better long term appreciation, but smaller property, worse (maybe negative) cash flow. Honestly, I have done both at one point or another in my 15 years of investing, and I've made good profits doing both, but I've made much more total profit on my higher quality, more coastal, more central properties. In either case, try to find something where you can add value to the property and force some appreciation, and don't stretch yourself too far financially because you have to make sure you can make it to the long term first before you see the long term gains ... smallest, ugliest, dirtiest, most run down property, priced appropriately, on the nicest block that you can reasonably afford has been a winning formula for me. If the location is good, then first come the hippies, artists, and bums; then come the hipsters; then come the yuppies; then come the trust fund babies ... so another good strategy if you can pull it is to buy from a hippie, sell or rent later to a trust fund baby :) Venice is an excellent example of this ...

    1Reply
  • Robin Boyer
    Surveyor · Hemet, CA · Member since 2015 · 797 posts · 112 votes
    9y

    @David Faulkner Another Southern California investor! I used to hang in Costa Mesa. What part of Orange County are you in? I'll be there on the 30th if you are around. August 31st for court in Santa Ana.

    0Reply
  • Lucas Allmon
    OP
    Santa Monica, CA · Member since 2017 · 52 posts · 27 votes
    9y

    Thanks a lot for all your feedback and positive reinforcement! Currently I'm just practicing analysis on everything that even remotely looks like a deal, which they tend to not be when it comes down to it.

    @Scott Trench I know I'm making progress, but it's been a long 10 years and I can at least see the light at the end of the tunnel. One big thing that the book (and my wife) helped me with, is viewing my investment accounts as liquid cash. I was viewing them as untouchable because of the tax implications.

    @David Faulkner Thanks for your outlook, that really helps. LA is very daunting. Since I live in a desirable neighborhood, and there are lots of desirable places around, do you think it might even be better to mine in my area instead of going inland or southeast? There's even still some B areas in West LA/MidCity. 

    0Reply
  • Robin Boyer
    Surveyor · Hemet, CA · Member since 2015 · 797 posts · 112 votes
    9y

    @Lucas Allmon I am finding foreclosures in the hemet wildomar area for about 100k I think that's were I will begin my single family investing career.  Also the rents are very high in Temecula.  Supposed to be bigger than napa in the next 4 years!

    0Reply
  • David Faulkner
    Investor · Orange County, CA · Member since 2015 · 2k+ posts · 3k+ votes
    9y
    Originally posted by @Robin Boyer:

    @David Faulkner Another Southern California investor! I used to hang in Costa Mesa. What part of Orange County are you in? I'll be there on the 30th if you are around. August 31st for court in Santa Ana.

     HB. PM me if you like ... good luck in court ...

    0Reply
  • David Faulkner
    Investor · Orange County, CA · Member since 2015 · 2k+ posts · 3k+ votes
    9y

    It depends on your budget, your willingness to work hands on, your desire for immediate cash flow or lower cost of living vs long term appreciation, time table for living there, and you personal preference on where to live. As I said I've done both inland and central/coastal, and have made money both ways but have made more over the long haul coastal ... of course, I always made sure I could comfortably afford whatever I bought, so don't try to do coastal with an inland budget :) It would require a lot of thought and long conversation to drill down to those details, but in my mind those are the major high level factors. I'm not overly familiar with West LA, so I can't advise on specific hoods, though there are plenty on here who could. Also, forgot to mention, but there is a monthly REI meetup in Santa Monica you should check out ... @Jeff Greenberg puts that one on so you should contact him for more info ...

    0Reply
  • Jeff Greenberg
    Real Estate Consultant · Camarillo, CA · Member since 2010 · 2k+ posts · 1k+ votes
    9y

    We meet the 2nd Sat of the month if you want to be put on our mailing list.

    0Reply
  • Lucas Allmon
    OP
    Santa Monica, CA · Member since 2017 · 52 posts · 27 votes
    9y

    @David Faulkner I'm mostly looking for cashflow positive, or conservative cashflow neutral long term holds. 

    I'll house hack if I it makes sense, but most of the current numbers I run, don't even make the housing costs less than my rent controlled, downtown Santa Monica apartment. The upside to house hacking, is my housing costs go into equity on my property, not my landlords. But then I just have a mortgage, and it's not really an asset, no?

    By budget, do you mean what I can afford as an investment, or what I can afford as a buyer in general? I am pre approved for 1.3million on a multi-unit, and 1million otherwise, and that's just based on my income/assets and not my wife. I think that "affordable" in the 30% realm would be $650 - $700k if I were just a house shopper.

    The market is so much a sellers market in LA right now, so when I think about being "fearful when others are greedy, and greedy when others are fearful", I come out fearful right now. Some people say buy no matter what, but that doesn't sound like investment strategy, it sounds like gambling.

    0Reply
  • David Faulkner
    Investor · Orange County, CA · Member since 2015 · 2k+ posts · 3k+ votes
    9y
    Originally posted by @Lucas Allmon:

    @David Faulkner I'm mostly looking for cashflow positive, or conservative cashflow neutral long term holds. 

    I'll house hack if I it makes sense, but most of the current numbers I run, don't even make the housing costs less than my rent controlled, downtown Santa Monica apartment. The upside to house hacking, is my housing costs go into equity on my property, not my landlords. But then I just have a mortgage, and it's not really an asset, no?

    By budget, do you mean what I can afford as an investment, or what I can afford as a buyer in general? I am pre approved for 1.3million on a multi-unit, and 1million otherwise, and that's just based on my income/assets and not my wife. I think that "affordable" in the 30% realm would be $650 - $700k if I were just a house shopper.

    The market is so much a sellers market in LA right now, so when I think about being "fearful when others are greedy, and greedy when others are fearful", I come out fearful right now. Some people say buy no matter what, but that doesn't sound like investment strategy, it sounds like gambling.

    $1M could work for WLA. The benefit would be that each and every year your rent goes up ... it may be limited in the amount it goes up with rent control, and if you can live where you are long term then that may make sense, otherwise if/when you move your rent will get jacked way up. When you buy, your housing costs are largely fixed ... 30 year mortgage payments are fixed ... with prop 13 property taxes are capped. Insurance goes up and capex goes up with inflation. So, most of the major housing expenses are largely fixed. In WLA housing is the dominant factor in cost of living, so if you plan to stay long term then locking in your cost of living is key. That can be stay long term renter in rent control unit or own ... I prefer to live in a place I own, not only for personal reasons but also so I can participate in the appreciation while fixing my cost of living. I also only buy great deals and force appreciation in the short term, which gives me a short term profit from the forced appreciation equity bump while also insulating me to some degree from any short term market fluctuations. 

    In my 15 years of REI, I've bought, renovated, rented, and sold ... I've done it in coastal SoCal, I've done it in inland SoCal, and I've done it out of state in Phoenix ... I've made money in all three places, but I've made the most and done it the most consistently in coastal SoCal. To me it is not gambling, to me going out of state in a market you are not familiar with and have to be 100% reliant on others is more gambling than that. I've never once lost a dime on any one investment property in SoCal ... there have been ups and downs no doubt, but I've never at any time had a negative total return (realized or unrealized) ... so if I'm a speculator, then I must be one damn lucky speculator.

    The more outrageously priced SoCal gets, the wealthier I get, but I'm positioned such that if it does not go up any more, I'll be just fine that way too and will be able to snatch up even more property if I choose to ... Heads I win big, tails I win small, but the house always wins, and I'm the house. I don't rely on luck, but I do consistently and conservatively put myself in luck's path ... and so in this manner, I'm a very lucky guy. I wish you the kind of luck that I've had.

    0Reply
  • Val C.
    Rental Property Investor · Los Angeles, CA · Member since 2016 · 57 posts · 8 votes
    9y

    @robin boyer i am a new invester from L.a. looking to invest in a duplex in hemet/ san jancito.  Not to familiar with the market in that area. My realtors been sending me some properties through the mls duplexes from 175,000 - 290,000 ??? Any advice or tips for me? Thank you val

    0Reply
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