Newbie Military Investor in Los Angeles

12 Replies

Good morning BP community!

I am active duty Air Force with 20 years and have been stationed at Los Angeles AFB for two years. We bought a condo in north Redondo Beach using a VA loan when we first moved here in 2016. The market has been pretty good to us over those two years, and we have gained a considerable amount of equity in the house. We've also been renting out my wife's old house in Tallahassee, FL for the last six years.

Now that I've reached my 20 year mark in the Air Force, I've just now started to think about what I want to do when I grow up! :)  With the equity gained in both our homes, I've been researching different strategies on how I can further invest in the real estate market, hence, how I came upon your community.  Needless to say, after just soaking up a small fraction of the info gold mine you have here, I've caught the real estate investing bug hard!  

I do know that I want to to do "something" in real estate investing after my life in the Air Force.  My goal is to gain enough passive income to where I can supplement my military retirement and work for myself by the time I'm 50 (in 8 years).  However, finding positive cash flow properties in this area seems to be like finding a pot of gold at the end of a rainbow!  

Is it a bad idea to buy and rent out properties in LA even at a small loss?  We are looking at buying and moving into another property and renting out our current condo.  It would be at about a -$500/mo loss (not including maintenance and repairs), but I almost feel like its worth it in this market.  Of course, I'm just a newbie and that's why I've come to this great community!  Look forward to learning and helping in any way that I can!    

- Ian Bautista

@Ian Bautista

Redondo Beach is an awesome area. Glad to hear you are doing well with your condo.
The more losses you take on board the more you lose for your passive income amounts. If i have $-500 but can offset the cost on rentals then maybe it would be worth it. Moving out to be $-500 in the hole is not a great way to start. I always try to at least break even. I know southern california market is extremely difficult especially today, but i'm sure youll find some deals. they are out there. Stay with it.

Thanks for the replies!

@Brian Mcmenamin

Yeah, most of what I'm reading is telling me not to bank on appreciation, but its really hard to not be tempted!  We are starting to look at duplexes and triplexes in the South Bay to possibly do a house hack.

@Nabil Suleiman

Absolutely! My PITI is $3350 with a $360 HOA. I'm pretty sure I can get rent between $3000-$3200 based on the other units rented out in our community. We are looking to purchase a single family residence next, however, we do understand that we'll have to look at the Torrance/Hawthorne/Gardena area to get something within our budget. Like I said above, we are also considering house hacking with a multi-family unit. The question we're trying to decide on is whether or not we should sell the condo we're in, or rent it out for the next three years and gain a little more appreciation on it.

@Ian Bautista

First off, thank you for your service

Second, If you can sell the unit to get into a multi-family, that would be the route I would explore. Condo's have a slower curve of appreciation and a quicker drop in any corrections. (statistically speaking). 

The other benefit you can take advantage of when selling is using the VA loan again to purchase a multi-family since you can only have one at a time (to my knowledge)

a -500 cash flow is pretty hard to justify, even in that good of an area. it could potentially be a -710 cash flow if you can't rent it for 3200, and end up renting it for 3. The risk/ reward in that becomes more of a liability than an asset to me. 

You have owned your condo for more than 2 years, and have lived in it, so you will not be taxed on 250k or less in profit from selling it (I'm not a cpa or tax expert, but I believe this to be true)

Take that profit, by a duplex + that needs some love. Put as little down as possible with the VA (or whatever makes sense for your mortgage), and use the profit to fix up the place to your standards.

These are my opinions alone, and some may disagree, but those are my two cents

@Ian Bautista

oh and ps, if you are hitting the @ symbol, make sure you are clicking on the person's name, and it shows up in the light blue color. Otherwise, I will not know you replied. Only knew because you voted on my reply 

@Nabil Suleiman Thanks for the posting tip and definitely appreciate your input! I’m starting to agree with you more and more about avoiding the negative cash flow even in this appreciating market. My wife is from Tallahassee, FL, so we are actually looking at investing in some single and mult-family properties out there where we can get some decent positive cash flow.
@Ian Bautista Thank you for your service. No, do not buy a property at a loss. There are deals out there that cash flow. We’ve purchased multi family units in the Bay Area that cash flow on hard money. The ones that do we refI and keep. It’s possible to find these needles but you have to be patient. If you want to chat more PM me and we can talk and hopefully I can help you out.

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