House hacking vs out of market

Real Estate Deal Analysis & Advice
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House hacking vs out of market

Account Closed
Los Angeles, CA · Member since 2018 · 15 posts · 16 votes

2021 Goal is to grow to 10 doors from 1, investing for cash flow.

I currently own 1 rental in San Diego that breaks-even because I stuck my retired parents in it, it's 60%LTV with $320k mortgage, worth $545k.

I rent in Los Angeles, $2,100 per month but am considering putting 5% down on a vacant 3 unit property to house hack that has the following:

2 bd/ 1.5 ba front house

2 bd/ 1 ba back house (1 bedroom is un-permitted per title reflecting this as a 1/1) - will rent for $2k

1 bd/ 1 ba adu - not sure if it was permitted - will rent for $1500

$850k with 5% down, Mortgage will be $4600

This seems like the best next step except the unpermitted aspects give me pause.

I pulled $100k out of my San Diego home to consolidate my student loans, but have yet to pull the trigger as I’m considering ways to put this cash to work and arrive at paying those off with the proceeds. This means I still have $800/ mo student loan payments.

I make $80k base salary and have $60k in savings

So in total cash I have $160k to do deals at the moment. Any advice on what the best path forward is to help me out of analysis paralysis and start growing?

1. Continue renting and invest for cash flow out of SoCal

2. House hack at $850k plus, considerations?

Your input is greatly appreciated

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Kyle J. CooperPro Member
Investor · Corpus Christi, TX · Member since 2019 · 71 posts · 43 votes
5y

@Account Closed

Great work! You've done your research and it sounds like you've already made up you mind about house hacking. There are few REI strategies that can give you the ROI that house hacking can bring. I'd suggest moving forward with house hacking your living situation regardless of what you do with other rentals. The low down payment aspects of house hacking keeps those barriers of entry low and your CoC return high! You'd still have enough cash for a down payment on a LTR even after house hacking, you just may need to look outside of your current market as you mentioned.

If this deal will allow you to live for free in an expensive market then I would be making an offer asap! Be sure to keep a contingency around that extra bedroom that isn't permitted that could throw your numbers off for potential rental income. You are coming from a position of financial strength, even though you have a lot of student loan debt. Unless your interest rates are higher than like 10% I would be putting your funds to better use(house hacking, LTR, BRRRR, etc). Keep taking action you're so close you just have to take those first steps and you'll reach your goals! Cheers!

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  • Twana RasoulBusiness Member
    Real Estate Agent · San Diego, CA · Member since 2017 · 1k+ posts · 1k+ votes
    5y

    @Account Closed House hack the 2 unit property using fha to put 3.5% down in the Los Angeles area or surrounding...that is the best bang for your buck....I wouldn't focus on the number of doors, otherwise you can go find a little town somewhere in the middle of nowhere and buy a 9 unit building for $200k total and you would have reached your goal of 10 units (including your 1 San Diego rental)....renting is throwing money away, especially when you have the opportunity to house hack and have your money do you some good.

    Buy something similar to that duplex with that permitted/unpermitted ADU and live in the ADU and have the other 2 units cover most if not the entire Mortgage/PITI. Use that $2,100/month from rent to pay off your loan. investing OOS has its own challenges. Cash flow in Southern CA is fantastic, just not initially....it takes a few years while you grow your networth in appreciation and debt paydown.

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  • Erwin F.
    Rental Property Investor · Seminole, FL · Member since 2014 · 85 posts · 68 votes
    5y

    Wow!  Definitely house hack that.  You'll be living for free with those numbers (and you could get food delivered with that cash coming in :)).  This will be rocket fuel to your savings rate which will in turn get you the number of doors you're gunning for.  

    Good luck and keep crushing it!

    1Reply
  • Maxwell Ventura
    Real Estate Agent · San Diego, CA · Member since 2016 · 308 posts · 173 votes
    5y

    @Account Closed

    Understood. $850K will certainly get you a little further down here. There is opportunity in that range.

    0Reply
  • Jose Leanos
    Rental Property Investor · Long Beach, CA · Member since 2020 · 17 posts · 5 votes
    5y

    @Kristle M.

    Hi Kristle,

    Very motivated by your goals this year. I was wondering what type of financing you will be using that will allow you to put 5% down on a multi family property in LA?

    I am in the midst of a cash out refinance on my home and I would like to do something similar to what you are doing after converting my garage into an ADU.

    Best

    Jose Leanos

    1Reply
  • Al L.
    New to Real Estate · Los Angeles, CA · Member since 2020 · 39 posts · 14 votes
    5y

    @Peter Eberhardt

    What made you decide to not invest in columbus?

    1Reply
  • Josiah Patrick Zebarth
    Rental Property Investor · Denver, CO · Member since 2019 · 76 posts · 70 votes
    5y

    @Kristle M.

    Hey Kristle,

    Great work so far, in my opinion you should go with the 2nd option and get into that house hack. You’ll be saving money each month or at least be putting that money to use through loan paydown.

    This will free you up to better and faster invest in rental properties in and outside of California.

    Best, Josiah

    1Reply
  • Remington LymanBusiness Member
    Real Estate Agent · Columbus, OH · Member since 2017 · 6k+ posts · 7k+ votes
    5y
    Originally posted by @Al L.:

    @Peter Eberhardt

    What made you decide to not invest in columbus?

     Too bad. The Columbus, Ohio market has treated me extremely well. Below is a picture of the appreciation the market has experienced due to the job and population growth.

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  • Account Closed
    OP
    Los Angeles, CA · Member since 2018 · 15 posts · 16 votes
    5y

    Thanks for your response Alexandre. Well no, I actually will be putting a fair amount towards my highest interest student loans, so knocking off $50/60k of that. The house in SD is covered. Not worried about that. 

    My concern is purchasing in LA to house hack but the investment has some unpermitted builds. I know investing comes with risk, but I'm risk-averse at this stage in the game. So ultimately, I'd be putting up to $60k downpayment and spending roughly $1,800 towards my mortgage (with the liability of renters) versus continuing to rent for $2200/mo. 

    So the game I'd be playing is long term buy/hold and cutting the $2200 in rent and have that go towards building my own equity. 

    0Reply
  • Account Closed
    OP
    Los Angeles, CA · Member since 2018 · 15 posts · 16 votes
    5y

    Thanks @Erwin F.

    @Jose Leanos I have an awesome mortgage broker, inbox me if you want his info.

    @Josiah Patrick Zebarth the more I think about it along with everyone's kind input makes this seem like a no-brainer. Thanks for your reply :)

    @Remington Lyman what are some of the industries moving into Columbus? Looks very attractive. 

    1Reply
  • Zeke Liston
    Real Estate Agent · Columbus, OH · Member since 2018 · 1k+ posts · 1k+ votes
    5y

     Hi Kristle, Facebook and Google are both building data centers near Downtown Columbus. Columbus is also home to one of the largest universities in the nation, which is also promoting tons of growth. 

    1Reply
  • Remington LymanBusiness Member
    Real Estate Agent · Columbus, OH · Member since 2017 · 6k+ posts · 7k+ votes
    5y

    Here is a good overview of Columbus, Ohio. There is a list of notable employers as well. https://columbusregion.com/mee...

    [email protected]614-541-8475Podcast Guest on Show My Job Laid Me Off, So I Replaced My Salary with Rentals
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  • Steven Foster Wilson
    Rental Property Investor · Columbus, OH · Member since 2017 · 3k+ posts · 3k+ votes
    5y
    Originally posted by @Account Closed:

    2021 Goal is to grow to 10 doors from 1, investing for cash flow.

    I currently own 1 rental in San Diego that breaks-even because I stuck my retired parents in it, it's 60%LTV with $320k mortgage, worth $545k.

    I rent in Los Angeles, $2,100 per month but am considering putting 5% down on a vacant 3 unit property to house hack that has the following:

    2 bd/ 1.5 ba front house

    2 bd/ 1 ba back house (1 bedroom is un-permitted per title reflecting this as a 1/1) - will rent for $2k

    1 bd/ 1 ba adu - not sure if it was permitted - will rent for $1500

    $850k with 5% down, Mortgage will be $4600

    This seems like the best next step except the unpermitted aspects give me pause.

    I pulled $100k out of my San Diego home to consolidate my student loans, but have yet to pull the trigger as I’m considering ways to put this cash to work and arrive at paying those off with the proceeds. This means I still have $800/ mo student loan payments.

    I make $80k base salary and have $60k in savings

    So in total cash I have $160k to do deals at the moment. Any advice on what the best path forward is to help me out of analysis paralysis and start growing?

    1. Continue renting and invest for cash flow out of SoCal

    2. House hack at $850k plus, considerations?

    Your input is greatly appreciated


    Househacking is a great way to get started! I started this way while I was a sophomore at OSU here in Columbus OH. I used an FHA loan to buy a duplex, rented the rooms to my friends while I renovated. Then I rented it for top dollar, refinanced, and had enough money to go buy my second property, and still that duplex is net cash flowing over $1,500/month.

    1Reply
  • George Otiono
    Financial Advisor · Oakland, CA · Member since 2020 · 24 posts · 4 votes
    5y

    Wow @Account Closed this thread is inspiring! Will probably do the same thing in Oakland in a few months!

    1Reply
  • Clarence Johnson
    Real Estate Agent · Inglewood, CA · Member since 2015 · 295 posts · 150 votes
    5y

    @Kristle M. Don't rent undermined units.in LA..

    .between sophisticated tenants and tenant advocacy groups it wont end well...you could possibly live in the undermined unit to mitigate risk..always ask for the LA city inspection to see when the last time the city inspected and if they were concerned with the unpermited unit or other defects.

    0Reply
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