House Hacking in Orange County, CA

OP

(n/a) · Member since 2018 · 41 posts · 10 votes

8y

Thank you

@Aaron K.! I truly appreciate your honesty. In your experience, what do you think would be the minimum amount to be pre-approved for in Orange County in order to House Hack? $350,000? $500,000?

Joshua Hively

Columbus, OH · Member since 2018 · 218 posts · 134 votes

8y

Full disclosure, your market is very far away from mine. I have been reading a lot of house hacking post recently. Recently a lot of folks, when discussing house hacking, are referring to multi family properties. Let us not forget that house hacking single families is an option as well.

4 Reply

Andy Cracchiolo

CA · Member since 2018 · 22 posts · 5 votes

8y

I don’t think there are many duplexes out here. And the prices are so high not sure if you could House hack one. An option could be to buy a SFH and get roommates. Let’s check the math. 250k home - does not seem to exist in OC that I know of, but for a bit more of a drive you can get a 3 bedroom condo in San Bernardino or riverside. **this is only an estimate, each property you analyze you must do dd Monthly Expenses PITI + HOA ~1750$ Maint ~ 150$ So that’s about 1900$ of expenses with a bit liberal estimate. Maybe you can save on maint as well by doing it yourself. If you can rent two of the 3 bedrooms for about 750$ a month or so, that’s 1400$. Ideally you can drop your rent to about 500$ and have equity building in an asset. When you move out, you could maybe rent it for 1650$. Which keeps you cash flow negative, or the other option is rent your former room out for another 750$. Then you would potentially be cash flow positive. While I would not do this myself, you may be able to do something like this in your current situation. If I were you, I would start picking up rental properties in other states that are cash flowing and rent somewhere out here. The Credit requirements are not the same as your primary residence. Also, there are first time homebuyer programs, I believe they allow for as little as 3% down, not sure if that was considered in your financing quote. Anyways good luck!

Andy Cracchiolo

CA · Member since 2018 · 22 posts · 5 votes

8y

Ps. Those numbers are napkin math, so please, please check stuff out before you buy. For example, 750$ a month was a number I’ve heard, but never tried to rent a room. You may want to check craigslist to get an idea.

OP

(n/a) · Member since 2018 · 41 posts · 10 votes

8y

@Joshua Hively Thank you for responding to my post! I understand that SFR is also an option to House Hack, most of my research has been done on multi-family. I feel like the big difference is living with roommates, as opposed to a duplex where even though you live next to the tenant, you still have the convenience of living in your own home. Regardless, I'm certainly open to SFR house hacking, just need to find a house thats within my budget.

OP

(n/a) · Member since 2018 · 41 posts · 10 votes

8y

@Andy Cracchiolo Thank you for the reply! I appreciate how in depth it was with the math. Ill have to look into doing that. My pre-approval was based on an FHA loan which I do plan to utilize in this sort of deal. I will certainly conduct more due diligence with a deal like what you described above. Investing out of state is also another big thing I have looked into, but most of my research has led me to believe that 1) you need to know the market, and 2) you need to have boots on the ground. Ive looked at a lot of places in the midwest and could more likely purchase a SFR or Duplex, and get it cash flowing but that would be with a conventional loan of 20%, because FHA requires you to live in the property for at least 12 months, and I couldn't make a move like that at this time.

Whitney T Redfield

Huntington Beach, CA · Member since 2018 · 47 posts · 14 votes

8y

OC median SFR price is $400-750k. Median MF price is $1m+.

Riverside is the closest RE market that you'll get to OC that you can afford, and that's an hour drive on the 91 going WITH traffic.

FHA loans have yet to pencil out for me to make a profit, at least initially. The property may make money after a refi, but that's after a year of high monthly payments. Good luck saving.

This is a sellers market. My advice, keep saving. Live below your means. Wait for a better market, or when you finally have that 20% for an out of state purchase. Ohio has SFRs and MFs for $60,000. 20% of $60k is $12,000. 3% of $250k is $7,500. If you can get preapproved for $250k at 3% down, try saving a bit more and put down 20% on an out of state. OR, find a partner here on BP that lives in that area to be feet on the streets. 10% of $60k is $6,000 and just figure out how else you can contribute to the deal. Maybe some repairs money, or you do all the paperwork, or you manage the property managers while your partner looks for the property.

Best advice is this... be creative. There are plenty of ways to make money if you can be creative!!

3 Reply

OP

(n/a) · Member since 2018 · 41 posts · 10 votes

8y

@Whitney T Redfield thank you for the advice. Ill be doing more research for sure. Seems that investing out of state at this point is probably my best option to receive some positive cash flow. Ill be saving up, and hopefully within the next year or so prices start to go down so that I can afford a house hack here in CA...

Account Closed

Garden Grove, CA · Member since 2017 · 50 posts · 19 votes

8y

When you say house hack do you mean specifically a 2-4 unit?

Can you qualify for an FHA loan, can you get a co-signer?

Can you handle a fixer?

Have you looked at a condo? Fix and hold for a year or two and move up etc.

Here is my OC house hack idea that I am mulling over.

The price of multifamily has hit overvaluation. rents are going up but its really tough to get something to cash flow. And qualifying is tougher too. Unless you can find something to get an FHA loan on like a 4 unit but the PMI is high.

The average cost per sq foot for multifamily is approaching $400 per sq foot.

The average cost for a large house is around $325, see the arbitrage coming.

CA has a new law that allows any SFR to convert to a multifamily, legally.

So if you found a 4 bed sfr you can convert to a 2bed, and 2 bed duplex.

The challenge is you have to qualify for the 4 bed house and the income on the other unit is not going to count towards your income.

The other way is to find a small SFR with a large R-3 yard and do an fha rehab loan to add units. Up to 3 more possibly, Then you have a 4 units. You house hacked for less. Its alot of work and lots of moving parts but where do you think that will be in 5,10, 15 years.

Works the same to find a 4 unit fixer with an FHA rehab loan.

And dont forget about AirBNB

Aaron K.

Specialist · Riverside, CA · Member since 2015 · 6k+ posts · 3k+ votes

8y

@Account Closed what is this law that lets you convert any SFR into multifamily I have never heard of it and frankly I'm very skeptical. I would appreciate a link or the specific code that you are referencing because I would like to learn more about this option if it is available.

Amanda Fallon

Real Estate Agent · Corona, CA · Member since 2017 · 39 posts · 13 votes

8y

@Jon Khalil Congrats on making the decision to purchase. With appreciation over 8% per year in OC & Riverside counties, it's ALWAYS better to purchase than to attempt to save and continue renting. You'd have to save $2000 per month just to keep up with the appreciation in the market in order to purchase the same $250,000 property. If you wait, you will likely be priced out completely or until you can find a co-borrower. I have worked with first-time homebuyers in the area who decided to house-hack a single family home by renting out a room, effectively reducing their mortgage payment to the same or lower than their previous monthly rent! I'd love to help you get a plan together, and to partner up with my wealth advisor who will give you a second opinion on your pre-qualification and calculate your ROI on your future house-hacked property versus renting.

Account Closed

Garden Grove, CA · Member since 2017 · 50 posts · 19 votes

8y

Aaron its called an Accessory Dwelling Unit. There are rules and setbacks but seems pretty liberal.

http://www.hcd.ca.gov/policy-research/AccessoryDwellingUnits.shtml

3 Reply

James M.

Rental Property Investor · Seal Beach, CA · Member since 2016 · 115 posts · 85 votes

8y

I’m going to be completely honest with you... 250k isn’t going to get you a duplex anywhere in Southern California, let alone a condo. The bottom end for any decent duplex in the la, oc area is really about 650k. I own a duplex in Long Beach and there are still some deals I see pop up every now and then. For now, I’d save your money focus on getting done with school and securing a job which will get you a decent salary. You can have a job without a duplex but can’t have a duplex without a decent job. Put your head done and focus on finishing school. One step at a time

Aaron K.

Specialist · Riverside, CA · Member since 2015 · 6k+ posts · 3k+ votes

8y

@Account Closed ADUs are not that simple, usually they are converted garages not a split of large home the cost of going through the process might not be worth it in the end especially if you end up with a funky floorplan or a small studio unit etc.

Account Closed

Garden Grove, CA · Member since 2017 · 50 posts · 19 votes

8y

For sure but some houses it can work. It might work for some and multi generational families

OP

(n/a) · Member since 2018 · 41 posts · 10 votes

8y

@Amanda Fallon I am interested in getting to learn more from you about that possibility! Please send me a PM so we can discuss this further!

Claudia Morales

Santa Ana, CA · Member since 2018 · 5 posts · 1 vote

8y

Hi I live in Orange County and condos start at that price. I don't see where in OC you'll find a duplex for $250k.

It's insane out here.

Khiem Nguyen-Trong

Santa Ana, CA · Member since 2018 · 4 posts · 3 votes

8y

It sounds like you're enamored with the idea of house hacking with multi family... but at your age/income level, house hacking should be done on a much smaller scale like buying a 2 or 3 bedroom condo, and having roommates pay you rent, which will then reduce your monthly mortgage payment.

Once you do that long enough to save more money (and with hopefully appreciation working in your favor), then you can trade up and house hack 2-4 units... then go even further up from there.

I understand having roommates isn't as glamorous as owning duplex and having your own unit for privacy reasons... but that's probably what you'll be able to afford at best at this time if you are dead set on "not waiting" for a downturn.

Peter Hanson

Flipper/Rehabber · Orange, CA · Member since 2012 · 68 posts · 63 votes

7y

duplexes have not been $250,000 in Orange county since 2010...unless you have a time machine you need to rethink your strategy because prices wont be that low in many many many years, if ever again...

I just looked on the MLS, the cheapest duplex in Santa Ana is $550,000. $250,000 just isn't a realistic number, go East to the Riverside or San Bernardino counties if you only have $250,000 to work with

Jazmine S.

Fort Lauderdale, FL · Member since 2016 · 146 posts · 27 votes

7y

Partnerships, partnerships, partnerships! Plenty of people on BP, local REIA's, and Meetup that are actively investing in the area. If someone matches you you're already at 500k. If someone puts up more capital and you take less of a split, your parameter becomes limitless. If you feel that you can prove your value go out and start networking! :)

Kayla Elliott

Foothill Ranch, CA · Member since 2016 · 34 posts · 8 votes

7y

I highly doubt you will find a duplex in coastal SoCal for 250k or less and if you do, give me a call I'd love to partner. However another option is to buy a property with an ADU (Additional Dwelling Unit) on it in an older part of town preferably near a landmark or University that has high rents. What this does is allow you to rent the additional unit out and helps cover the monthly cost of the mortgage, but you should expect to pay at the least 550k and that the most 750k for a place like this.

Happy hunting!

Brian Larson

Investor · San Jose, CA · Member since 2018 · 313 posts · 230 votes

7y

@Kayla Elliott - Is right. I think the ADU option is the next "gold rush" in California Real Estate. The loosening state and city regulations have allowed a lot more opportunity to develop SFH in urban areas. Try looking for a property that you can "create" a duplex upon.

Enrique Huerta

Investor · Los Angeles, CA · Member since 2015 · 213 posts · 162 votes

7y

@Jon Khalil , I used to sell real estate in OC with some business in LA/IE. You will NOT find a property at $250,000 at this time that is habitable in any part of LA/OC/IE. Someone alluded to Hemet/Victorville/Apple Valley, "the high desert." That will be your best option if you decide you want to buy now. But that drive is farther than Temecula from Irvine.

I commend you for being responsible enough to be in a position to buy so soon and at your age. Nonetheless, the best option is to keep saving or increase your income so you qualify for a larger amount. Once you approach the $400,000+ range, you can find a solid condo/townhouse. It still won't be multi-family, though.

Rob Massopust

Real Estate Broker · Santa Ana CA [South Coast Metro] · Member since 2016 · 459 posts · 202 votes

6y

ADU Laws have changed for 2020 and have become very flexible Now it is much easier and less costly.