My wife and I are moving to LA for two yrs. Looking to buy and hold investment property to start building long-term wealth. I am low risk, like stability, and plan on getting a property manager early on when needed. This is my first property. We plan to live in a safe area, 3 bed 2 bath.
I don't need the cash flow currently, but I don't want to pay 84K in rent over 2 years when I could be building equity. I have the VA loan, so downpayment isn't an issue.
Any good resources to decide multi-family vs single family home? Or any advice? I have already reached out to a few realtors and property managers in LA (waiting to discuss with a few this week), and read "Long Distance Real Estate" currently reading "Real Estate investing for dummies". I know that single family has more stable and long-term renters with less turnover, not rent controlled in LA? (I read this on Norada website), likely appreciates more, and is easier to sell. For this reason, and the fact that my wife would rather live in a single family than a unit in a multi-family, I am inclined to single family. I am just trying to get as much input as I can to make the decision.
So there can be pros and cons to each and opportunities in both. When it comes to single family homes vs duplexes not all are created equal and each neighborhood will provide different feels as well as different laws that you have to follow depending on which choice you make. Ill list a few of them below.
1. Budget. If you are looking for an already existing duplex in say, Pasadena, and we are working with a budget of 1M, your options will place in you specific areas that may not be at the top of your list. You take that same budget and you look for SFH's and now you may be closer to the amenities you enjoy.
2. Cash flow. SFH will not have cash flow, like you said above you are paying down equity but that same 1M budget will effect your total monthly payment when you have someone else paying for a portion of it.
3. Some duplexes are two single family homes on a lot. These will often carry a heavier piece tag in comparison to their shared wall companions, but they can provide you a similar tenancy you would expect out of a single family home like you mentioned above.
4. ADU's are a big thing in CA right now. Depending on how you decide to spend your money, buying a SFH and essentially turning it into a duplex is something you have the capability of doing out here. This same law also applies to duplexes so essentially creating a triplex +. These scenarios all have their own potential issues when it comes to appraisals and such but thats a much longer conversation.
5. Rent control exists in many parts, and the eviction moratorium exists with expiration dates that keep moving. Issues with some multi's right now is adopting tenants, and adopting the rent roll that comes with it, the sales price sometimes matches those expectations but not always, and if you adopt a troubling tenant, we are not a friendly landlord state. Many prefer to choose their own tenants and screen them themselves.
I am happy to provide links to ADU laws, and which areas may be higher in demand now and in the future, and I know we are talking tomorrow, but its a good questions and I am sure others will get value out of this. There are plenty of investors who specifically invest in SFH, others who only do small multi, those who only do commercial and for some they dabble in them all. There is no right answer, because each of these investors have their own success stories and preferences, but as you go further into what type of investments you like/ are comfortable with, you will settle into the route you want to take.
Investor · Los Angeles, CA · Member since 2016 · 72 posts · 55 votes
5y
I like the idea of duplex or triplex and having tenants cover part of your mortgage. You can live in the main unit and rent out the rest, just don't buy a multi-unit that has existing super long term tenants. Existing tenants are OK, as long as the rents their currently paying are kind of close to market. You can set up the property where you aren't bumping into your tenants every day as well.
Regarding Single Family vs. Multi Family...there is no right or wrong way, just what is best for you and your family. It is good that you are seeking information first so that you can make the best decision for you.
Your analyses on the single family home is accurate. And it may be the best option for you guys. I would say that you can find a duplex or triplex with one of the units being a 3/2 and in a safe area. And I dont think you will have any issues selling your multi unit down the road either. In my opinion buying a multi family is not risky. In fact some could argue it is less risky than a single family home.
My wife and I bought a multi family first, lived in it for several years and now rent it out. No regrets!
Basic Multi Family Pros:
1. Rent helps off set your mortgage payment
2. When you move out you will be collecting more rent then a single family home (in most cases). The rent collected should at least cover your PITI once you move out.
3. If one tenant move out you still have one or two others in place and paying you.
Real Estate Agent · Orange County, CA · Member since 2020 · 20 posts · 19 votes
5y
Since you only plan to stay in the area for a few years, your best bet would be to buy multifamily. This way you will keep those units as investments and grow them over time. As mentioned above, LA has strict rent control laws, however, if the rent collected covers your expenses, you should be fine. Good luck!
Investor · Pasadena, CA · Member since 2015 · 269 posts · 189 votes
5y
@Nabil Suleiman has some great responses so I won't repeat them here. I'd say a couple other factors to consider @Michael Avillion are:
Privacy - having neighbors in a MFH setting isn't everybody's cup of tea
VA loan - anticipate some headwind with using VA loan right now. A lot of sellers don't want to bother with the red tape and longer timeline. You might have less issues w/ that with MFH properties.
Reading btwn the lines a bit, it's probably more of a qualitative decision then quantitative. Happy wife, happy life I'll just leave with that ;-)
No better househack than with a VA loan but like Jason added, the market is hot right now and there's lots of room for indirect discrimination against VA borrowers. That said, taking the time to find the right property to then have tenants pay your mortgage is a very worthwhile investment. Keep in mind that despite rent control, you'll be able to get a tenant out to owner occupy and doing so strategically can help you get rents to where they need to be.
