re: Southern California Rental Market

12 Replies

Here's a great read on the state of affairs in the rental market in Los Angeles.  I am a property manager in LA, and I have seen rents skyrocket here in the last 3 years.  Los Angeles is one of the most least affordable places to live in the country.  

Here's the link:

http://projects.scpr.org/longreads/high-rent-few-options/

But it's still one of the most anti-landlord markets in the nation. Rent control, long evictions, etc. 

Aristotle Kumpis, yes, you are correct.  The rental laws here do favor residents.

Hank,

Thanks for posting that article!

I've been living in Japan for the past 10 years and I'm returning to So.Cal this month (May 30th). My wife is Japanese and my research has shown me that Torrance has a very strong Japanese community, so our plan is to move there. However my plan was to do a "house hack" and buy a four-plex using a FHA 3.5% down payment loan and live in one of the units and rent the other 3 out as Josh and Brandon talk about in their beginners guide. However after looking at properties on Realtor.com in the Torrance area there doesn't seem to be anything realistic I could get (that isn't a dump) that fits in my starting budget (I've got about 12,000$ now and plan to buckle down and hopefully save). After reading the article you just posted it's not sounding too likely that I'm going to find anything reasonable.

What advice would you have for me?  Should I keep plugging away at Torrance? Do you see a housing crash on the horizon any time soon where properties might become abundant and affordable? OR... As I stated, I'm moving from Japan to the US.  I'm in a position where I could land anywhere in California or the US for that matter.  I read an article in Forbes saying that Sacramento was a previously not-so-great area but is on the rise and becoming a good place for real estate investors.  What have you heard?  Anywhere in the US you know is "hot" for real estate investing?

Thanks for your time and your article post! Any advice you have would be greatly appreciated!

Brigg


Torrance Beach is great. Hollywood Riveria, South Torrance, Walteria even PV or RB maybe rent something and figure it out and save vs jumping in. Your current price range is more 1 bedroom area perhaps. Rents are going up so your idea will work nice in LA. Perhaps investigate something in a non rent control location. 340k LA quad IDK exist? The other options could be seller financing or all the non traditional stuff.

Housing crash stuff is anyones guess. I am not seeing it. Perhaps plateau more likely.

@Brigg Sabol undefined

Good luck with your search!

Thanks Matt! My wife will stay in Japan for about a year while her immigration processes. So I have a year to "mess around" (in a real estate sense, of course). I'm thinking of trying to get that 4 plex in an entirely other area in Cal or maybe even outside of Cal (Arizona, Nevada?) Then see where I am financially, see where her visa is at, then maybe try and see if can put a larger down payment down on another FHA load or standard bank mortgage loan and see if I can do the 4 plex thing again in Torrance then.

Because I'm just starting out (and moving back to the country after 10 years, so I have no credit) I might have trouble getting a seller financed loan or another non traditional method.  Do you think a seller finance loan would be realistic for a newbie like me?

Brigg, also keep in mind that you will need to have reserves for the other 3 units. You don't want to just have the down payment. That's how a lot of investors end up in a bad place. On a 4-plex of around $450K, you should have at least 3-4%. That will cover expenses and vacancies. Keep that in mind.

Originally posted by @Aristotle Kumpis :

Brigg, also keep in mind that you will need to have reserves for the other 3 units. You don't want to just have the down payment. That's how a lot of investors end up in a bad place. On a 4-plex of around $450K, you should have at least 3-4%. That will cover expenses and vacancies. Keep that in mind.

As for the loan officer I've been working with, he requires 6 month's rent reserves for the loan.  

4fam signal hill buildings here in socal go for around 1.1M

4fam long beach buildings (Even in the crowded/filthy streets) go for around 950k!

the COASTAL rents are high as they should be for the luxury of coastal living, but of course not as high as upscale coastal neighborhood rents, and there are still pockets of coastal socal that are terribly transient/run down like well, compton, for example although new construction buildings tout luxury and are doing their part in raising compton's appearance of living.

what is happening though is less and less people are qualifying for mortgages (less and less ppl are saving!) and buildings (whether 1 unit or 50 units) even in upscale areas are being bought out by INVESTORS so the ratio which used to be around half renter half owner neighborhoods, seems to me to be headed towards like 95% renters and and just a few owners in socal here and there. and renter areas tend to be dominated with extra cars, extra baby mommas, crappy landscapes, and littered, noisier streets.

where are the socal owners moving when they sell out to investors? seems to me to be cheaper areas like g grove, santa ana, and inland OC, but i'm not sure.

@Brigg Sabol You can do well with REI anywhere. I am still new but yes there are more seller financing deals done in Cali vs any other state besides Texas. Well over 10,000 last year in Cali. I think you can pull it off but it is going to require some out of the box methods. I know a Japanese person and the South Bay is a good American match. There might be other spots in LA or out of state but probably not much better.

Aristotle, Lee , Neil and Matt, thanks for your input.  I'll take that into account.  Aristotle and Lee, thanks for the heads up on the reserves!

Hi Brigg,

SoCal is a great market if you can find a deal.  We tried to get a Venice property with another investor about 2 months ago, and we just wouldn't allow ourselves to go over a certain price point, and the selling price eventually went @ $350K north of our absolute max.  It was a value-add property, and if you can find a good value-add property in Los Angeles, that is probably your best bet because prices are so high here to really make it worth it, unless you can put in a sizeable down payment (I.e. 30-40% down, and I wouldn't want to do that on a 2-4 unit.)  I am still looking in LA, but I have started looking elsewhere like Texas and North Carolina.  I am familiar with those two areas because I am from Texas (Houston), and I lived in Charlotte, NC for 5 years while I went to college.

FYI...throw the 1% rule out the window when looking for properties in LA...

"Just about anything) on the Westside near the beach is gonna be a great long term investment, but there are other areas to look at as well.

@MattR. , @HankFields I am thinking of buying near the coast of Oceanside.  This is an area north of San Diego where there are hit and miss spots.  Some parts are nice and others are not. Lots of flips have happened in the past 2-3 years.  

They are builiding some new condos there that are about 1 1/2blocks from the beach.  They start at 472,900 for a 2 bedroom 2 bath and attached 2 car garage.  Most places that close to the beach have underground parking or street parking.    We want to live there for a few years and then when we have enough to buy another place, we would rent this out.  

We would put down about 200k. HOA is $258/month. Tax rate is 1.1% Would that reasonable?

Would love feedback.  

Thanks, Christy