Newbie from Los Angeles, CA

[Adrian Teng-Amnuay]

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

[Nick Hedberg]

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.