Newbie from Los Angeles, CA

9 Replies

Hello!

My name is Adrian. I'm a Los Angeles native, age 27 and I currently work in Santa Monica as a software developer. I've always been a big saver by habit, but these last few years I've spent a lot of time reading and learning about personal finance, which has led me to up my 401k contributions and invest most of my net worth into stock index funds tracking the market.

I subscribed to Audible earlier this year and came across Brandon Turner's "The book on rental property investing" audiobook a few months ago which has, in addition to getting a few laughs out of me, strongly convinced me that real estate belongs in my portfolio.

I'm an extremely cautious person by nature which is why I'm hesitant to jump into into real estate right away. My plan is to continue going through the literature, analyze deals for practice, and hopefully grow my network on the BiggerPockets forum over the next year before pulling the trigger on my first property.

Based on my research, I've found that properties in LA are comparatively expensive and don't seem to cash flow very well. That has left me with a conundrum: For a newbie's first project, do I pursue a local house-hacking project or do I look into investing remotely in cheaper, more investor friendly areas?

I've started socking away money every month to save up for my first property and ideally I'd like to spend ballpark $20k-$50k. I accept that I may make some valuation mistakes starting out, so this is an amount I feel comfortable risking for my first project.

I'm looking forward to the replies and hopefully you'll be seeing more of me around the forums from now on!

Cheers,

Adrian Teng

Hey Adrian

I am LA based investor who made my first deal last year in LA. It is challenging in LA compared to other areas. However, I believe house hacking is still possible for n LA. Feel free to DM me if you want chat. 

Best wishes

Vinay 

Hi @Adrian Teng-Amnuay

This is a constant conundrum for investors in the LA area. If you look at properties in LA they look terrible if you look at a one year snapshot. It only makes sense to invest in LA if you are going to hold it over a period of time. If you factor in consistent rent increases, appreciation, tax breaks and depreciation expenses; investing in LA starts to make a lot more sense.

I know people that bought in Venice  years back for $500k and their home is now worth $1.5M and they can rent it out for $6000 a month. Investing in LA only makes sense if you are willing to hold onto the property for a long time, or can add value and force appreciation. 

You can househack in LA for $20-$50k but it will be tough in Santa Monica or West LA. In Santa Monica your only option would be a condo where you have a roommate. Below is a link to the cheapest condo in Santa Monica which is listed at $620 which is a ~$20k downpayment with an FHA. However your mortgage payments will hurt.

If you plan on staying in the LA area I think you should consider house hacking. I would recommend being very clear with your requirements for a living situation and how important living in West LA is. 

Hi Nick,

Thanks a lot for the informative reply. 

I can see myself staying in LA long-term and house-hacking is definitely something I am considering. As for living in the west-side, I am willing to commute up to an hour or so which opens up south LA and Long Beach so I have been researching those areas as well.

My budget of 20-50k isn't set in stone but it was an amount I felt comfortable spending to "get my feet wet" in real estate so to speak. I realize that is pretty low for an LA house-hack that I would be comfortable living in, so I will definitely re-evaluate it.

Best,

Adrian

Welcome to the Bigger Pockets Community and Congratulations in forming the beginnings of an investment plan.   You will learn a lot from the resources available here and the experience of others in the Community.

Welcome to Biggerpockets! Yes cap rates are low here but you can still find other useful methods to invest in RE such as house hacking a SFR or finding a multifam in a transitioning area (preferably in a non-rent control area such as Long Beach). As Nick mentioned, the real value of owning real estate in Southern California is holding for long term. Best of Luck !

Hey Adrian! I'm not far from you...just over in Venice.

Unfortunately $20k-50k won't get you much for house-hacking around here. Even if it did, here's things to think about-

https://www.biggerpockets.com/renewsblog/considera...

Other than a duplex I bought with some partners this year in Venice, I've always stayed focused out-of-state for cash flow and cheaper areas. 

A lot of the answer depends on what your goals are. What are they specifically?

Welcome @Adrian Teng-Amnuay . This was the same problem I've had when I first wanted to get into real estate investment.

In general, if you are looking for long-term appreciation hold, then properties here can make sense. House-hacking like you mentioned is a great way to get started so the rent from the other rooms can help pay off the mortgage. However, due note that we're nearing the peak of a housing cycle - or at least it appears to be. 

For cash flow, the market here isn't very good unless you find a four-plex - then it could potentially work. Even then, it will cost quite a lot to cover even the down payment. I personally am looking for out-of-state investments like in the mid-west for cash flow.

@Adrian Teng-Amnuay

If you have some flexibility with location that will certainly open up your options. I think quality of life will be the tough hurdle you will need to factor in with location. Personally I love Long Beach and their are some great areas. By the beach is generally better, and around Naples is an incredible area, but its pricey. I would drive through Inglewood and see if their are any pockets that might work. I think Inglewood has incredible potential, but it would be a big shift from West LA.

Also View Park, Leimert Park, Park Mesa Heights, etc. area is great but would be pretty tough with your budget. You could get a small place but would need some extra cash for renovation.

My guess is you will increase your budget if you decide to stay in LA. Once you increase your budget and feel comfortable with the fact that LA is an appreciation market your home search will really take off. Plus the fact you can add an ADU in R1 areas really increases your options.

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