I'm brand new to the world of real estate investing and am looking to get started with investing in the Los Angeles market. While I'm most interested in starting off with renting single family homes, I've heard its difficult to generate positive cash flow from rentals in this market (not sure if this is because of the high entry cost to LA real estate?). My alternative strategy would be to buy and hold a property in an up and coming city/neighborhood and live on the property for a few years. I'm hoping a few of you guys can share your experiences with these strategies. Although every situation is different and the possibility to succeed using either strategy is possible, I'm curious to hear the opinions of experienced investors to form a realistic view of the market before I go ahead and purchase my first investment.
House hacking is a great way to go!! Yeah, the high property costs makes it hard to cash flow @Cody Mau but if you go the small MFH route or house hack by creating extra rooms in a big house and rent out or even ADU it's possible or get really close. Definitely at least get your mortgage covered. DM me any questions that I might be able to help answer; I'm a big fan of some neighborhoods in south bay down by Torrance where you are.
@Cody Mau Welcome to BP! I would actually argue that its not hard to generate positive cash flow. I have a single family house in Torrance and built an ADU on the property. The property definitely cash flows, but the return on equity isn't great. Regardless, the experience alone in helping me getting start in REI was worth it.
Hi and welcome! If you do not currently own any real estate you will qualify for an FHA first-time buyer loan and purchase a home with only 3.5% down payment. As Jason Hsiao mentioned I would then house hack and rent out as many rooms in the home as possible, and possibly creating more rooms by getting creative. This will allow you to not only buy in an expensive market, but also to cover you living expenses. After one year you can repeat this process, and rents will likely be higher which will allow you to fully rent out that home and purchase another as a primary residence.
That great news that you've been able to find success with your Torrance investment. Do you think the low ROE will eventually force you to move on from that property sooner than you would like? Or is the cash flow good enough to warrant keeping the property for as long as you want?
My only concern would be that with such a low down payment of 3.5% the monthly mortgage payments will be too high to cover even if house hacking. I suppose that would reinforce the idea of finding the right/best deal available.
Cody if you're looking for a house hack or buy/hold I would def be looking in San Pedro. There is an explosion in Public/Private investment in the waterfront, SpaceX is moving to town, and the area is catching all the overflow from the south bay communities of Redondo/Hermosa/Manhattan. I could honestly see some properties doubling in value over the next 5 years.
@Cody Mau Right now its a house hack and the income covers the PITI (ex vacancy and maintenance) which isn't bad for the area. I expect rent increases to help out the ROE and appreciation to allow me to pull cash out of the property eventually so I am comfortable holding on to it.
@Cody Mau House Hacking in the LA area can work to reduce your living expenses while building up your wealth. It may not cover the entire mortgage, but if you factor in the savings from other people people your living expenses and the wealth building that is going on, plus tax savings, and appreciation, - then it's totally worth it. Remember, you won't retire tomorrow. You just gotta be in the game and put your money to work.
@Cody Mau House hacking is definitely the way to go! My wife and I are Realtors and real estate investors, and have helped clients employ this strategy to either significantly decrease their housing cost or eliminate it completely by having others pay for the mortgage. As others have said, you need to get a property in the market to benefit from the great appreciation we have experienced in the South Bay.