House Hacking Rules in San Francisco or Los Angeles?

Question

Hi everyone,

Just found out about this community recently and have been trying to absorb information as much as a sponge through reading. Just graduated in 2020 and moving into tech sales. Have been doing some modest digging and was wondering what rules, if any, y'all might recommend in trying to house hack or reducing housing expenses as it applies to San Francisco (where I'm moving) or Los Angeles (South - where I grew up/live)? Or maybe advice that should be ignored more importantly in this case scenario for early financial freedom? I understand living near work is necessary to reduce expenses (job will be in the financial district), and trying to see if it's a viable option or if it's just a bite the bullet situation where I should just look to save as much for a few years and invest else where for a first property using FHA loan?

Any feedback or thoughts would generally be appreciated!

Cheers,

Dennis Constanza | LinkedIn Profile

Lawrence Leung · Answer

@Dennis Constanza San Francisco is a great place to try House Hacking, but the high price point is the biggest barrier of entry. @Michael C Williams is correct in that many places in San Francisco convert the ground level garage and storage areas into legal dwelling spaces (ADUs), but IMHO these are not the best properties to hold long term as it changes the classification of a property from a SFH to a multi unit. The great value of a SFH is its exemption from rent control. With so much demand in the city you can live in one room and not have too much trouble renting out the remaining rooms in a co-living space arrangement. Certainly look for properties with space to expand on the ground floor to create additional bedrooms and living space to rent out, but not necessarily to create an ADU.

Ali Boone · Answer

You're talking about possibly househacking in two of the most HCOL (high cost of living) cities in the U.S. My advice--run the numbers. And more specifically, know exactly how it is that you plan to profit if you do that.

Here's some general househacking considerations:

https://www.biggerpockets.com/...

I'm down in LA and have run househacking numbers a ton. Can't find any that make sense, but more importantly I don't want to live anywhere in LA where they are even in the ballpark of making sense. So I rent where I want to live and invest just in straight investment properties.

Michael C Williams · Answer

Hey Dennis. I can only speak to San Francisco but many of the home here have converted garages/downstairs areas that qualify as in-law units and can be rented without issue. These unit are still desirable, especially if they have access to the backyard space and can help cover around 1/3 of the mortgage in most instances. Feel free to message me if you are looking for some specific housing data for particular neighborhoods.

Dennis Constanza · Answer

@Michael C Williams

Dennis Constanza · Answer

Stunned at the quality and detail of responses. Wow.

@Michael C Williams okay so focus on existing potential space that may be renovated into additional bedrooms. I understand, thank you for the context Michael! I appreciate you and would love to chat more about the information of respective neighborhoods. I will go ahead and ping you.

@Ali Boone I'll make sure to clarify the aims of the investment. I'm trying to 1.) reduce my housing expenses as much as possible and commuting time [not sure if they're both compatible or even possible as you mentioned due to HCOL] 2.) reap the tax depreciation/'paper-loss' benefits, and fingers crossed for 3.) an eventual 1031 exchange/take advantage of the $250k primary residence exemption for capital gains if possible. In gratitude for the article you shared & how to properly crunch the #s to help do that -- will make sure to use this information going forward. I appreciate you!

@Lawrence Leung understood. I hadn't considered local rent control & change in the classification of property, so thank you! Will double-down on the look out for area remodeling but not at the expense of a different property class. I appreciate you.

House Hacking Rules in San Francisco or Los Angeles?

House Hacking Rules in San Francisco or Los Angeles?

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