All Forum Posts by: Francis A.

@Kyle Atans

There can be only one way to find this out for sure and it is to actually do it which I'm in the middle of doing and so...

I'm going to bookmark this conversation. In 3 years, we'll revisit it. ;-)

@Kyle Atans

Your question is one heck of a hairy subject but at the same time it’s one I’ve grown to love.

Least affordable? That's what I'm told however, "affordable" has to be examined through the lens of variables too numerous to list in their entirety.

LA for the most part is a mature market and so to really “do LA” we have to be 360 degrees creative (numbers included) and see what others essentially may not be looking for. Easy to say, hard to do.

IE:

Affordable = can you see yourself living in that particular neighborhood for at least a year (till you move out and rent the whole dang place at “worthwhile rates”)?

Affordable = Will your mortgage be covered by incoming rents?

Affordable = If you wait to buy (ala your quote) will you really be able to buy a place after you’re really and truly “priced out”?

You get my drift. So the question is can you afford NOT to own, if owning is within grasp?

I was lucky in the sense that before I purchased a duplex in LA, I hadn't joined Bigger pockets otherwise I might have been discouraged by all the screams of “LA is WAY TOO EXPENSIVE”. Let’s not even get started on the 2% rule which drove me Totally Bonkers AFTER I had purchased. Fortuately, the duplex was a total rehab and so zero work save for a few tweaks here and there were needed. A heads up for you too btw. ;-)

Pre duplex, I went through intense despair as I hunted for an SFR. I was brought to my knees by the prices of SFRs in gentrifying neighborhoods like Highland Park and Leimert Park. And then through sheer necessity and a loving patient wife who was waiting in the wings probably thinking to herself "Duuuude…. We need to do something!!!, I stumbled on the idea of going the duplex route with the plan of back tracking to an SFR later (IF) we had to.

Without becoming a blowhard, fast forward a period of hard knocks (a very necessary process in any worthwhile endeavor), I’ll say this. During my stressing over where to buy I gradually discovered through sheer desperation, that Real Estate can be the ultimate creative space in terms of problem solving. Or at least it can be one of them. Now I've seen the proverbial light. Nothing will stop you when you see the light btw.

Once again variables kick into gear. Do you mind doing your own property management? Do we (you and I) have similar "what could be" visions when we look at the same property? And we have the stomach to go through with said plans. What do we want and how much sweat equity are we willing to input into the equation to make it happen? For instance in LA, an SFR in the right location can yield MFR numbers. I have heard and met people who are doing so, but I have yet to test this myself and so let's talk when I do.

All this is to say that essentially, you have to tune out all the “LA is too expensive” baying and gnashing of teeth. And this is especially so when folks who don’t live here are doing the shouting. Your tactical advantage is that you live here. You have to get to know your target neighborhoods - intimately. YES IT'S HARD WORK. I just went to see a property that I forgot I'd seen before. Yikes. And in some cases, gasp, YES you can cash flow in LA without causing your better half to leave you.

Creative techniques aside…. at the very least, armed with an FHA or a first time home owner 5% down and some seriously wise choices (location, choice of type of purchsse IE Duplex, SFR in the "right" place) you can do some serious damage! The glass is half full for the City of Los Angeles.

Don’t get side tracked by all the fancy number crunching. The equation is simple. Is your new purchase going to be relatively repair free for at least the 1st 5 years (hello inspection)? If you rent out all the spaces within this domicle, will you be able to cover your mortgage? If the answer is yes, you’re seriously on your way.

Find a potential neighborhood that matches your wallet and the "preferred ambience" you can tolerate while your investment percolates. [ Ambience is on a sliding scale btw :-) ]

And so in closing, like the rock song from the 80s that goes “What do you wanna do with the rest of your life”?

Your answer presumably is….

I WANNA ROOOCK! ;-)

For the curious and for what it's worth...

http://www.realtor.com/news/trends/top-10-hottest-...

Anytime you think of an idea, always assume at least 10 other people have had the same idea. 

Make sure that you aren't the only one who had access to this database and make sure that you are within your rights to sell this repeatedly. 

And lastly, remember that price is always negotiable. 

Interesting article:

http://www.bloomberg.com/news/articles/2015-08-13/renting-in-america-has-never-been-this-expensive

http://www.scpr.org/news/2015/08/06/53592/la-high-rents-evictions-tenants-union/

A fellow investor asked this question and I didn't have the answer. This is his scenario.

Home 1: Duplex purchased with an FHA loan.

2 years later...

Home 2: Currently moving out of the FHA financed duplex into a owner occupied SFR (5%) down.

Outside of the requisite 20% - 25% down payment for an investor owned building, he's now thinking of how to finance HOME 3 (multi unit or SFR) and possibly HOME 4 (multi unit or SFR) and how using an FHA loan again might possibly factor in again. FHA can be used again (after 36 months is what I've heard) depending on when, where, what etc. We discussed 1081 one of the buildings into a larger building but he'd rather keep both and add a third.

Thanks!

@Kevin Kim

I meant to say "live AND WORK" from these zip codes. If you work too far from here, it might be something to consider, however if the financials bear out to be favorable (rent price etc) you should definitely sign up on Redfin (if you haven't already) to receive alerts anytime something within your parameters is listed. 

As a case study, check out this 4 plex located one mile from USC.

https://www.redfin.com/CA/Los-Angeles/3923-Brighto...

If you already had the experience owning and managing a multi, it would begin to maybe make sense as this building is fully occupied meaning at the very least, you have a chunk of your mortgage covered. You would then look to negotiate with the seller to see if they are open to vacate one of the units for you and your wife to live in (in order to still qualify for your FHA status). The banks would factor in the pre existing income from the remaining 3 tenants into the size of the loan you would have to carry in order to take ownership of this 4 plex.

When we first started looking at multi units (with zero managing experience), all of a sudden we qualified for a couple of $600+k 4-plexes because the income from the units were factored into the banks qualifying equation. What did I do? I ran for the hills. When I looked back, I was the only one running while the realtor stood at the gates of the building with dollar signs in his eyes. If I had known what I know now, I would have tackled it - no problem.

When we eventually bought our first duplex, we were 15 minutes from USC. I wasn't prepared for the avalanche of applicants who came raining down on me to rent a 1 bedroom. 

I can't say this enough. DO YOUR DUE DILIGENCE. Get a Google phone number to handle your incoming prospective renter calls (the voice calls will also be trancoded to text and forwarded to an email address of your choice - sometimes messages get lost in translation so its good that you also have the actual message to listen to at your convenience). There will be a lot of crappy prospective applicants. You will soon learn how to separate the chaff from the potentially good applicants. Trust me, using Google voice (or something like that) is far better than fielding calls in real time once you get the unit(s) you want to rent out listed. You will feel apprehension and sometimes wonder if you're doing the right thing. STAY THE COURSE. 

Be careful what you wish for, it can be a great thing! :-)

@Kevin Kim

Is there ever a wrong time to start investing in your future by having the right renter (you will check their back grounds thoroughly) help you pay off your mortgage while enjoying all the tax, HELOC and other benefits extended to multi unit dwelling owners? Obviously, this assumes that you don't over extend yourselves the first time out by buying something too expensive for your monthly expenses budget.

Take a moment to read this recent Bigger pockets post if you haven't already. It pretty much summarizes the main points you need to think of as you make your first foray intro multi unit owning. 

http://www.biggerpockets.com/renewsblog/2015/05/13...

All this is to say, we did exactly what you're contemplating and purchased a multi unit via FHA and feel very fortunate to have done so. Now the sky is the limit depending on how creative I can get. Yes, I have been charged with that task! :-)

Do your home work. The extent to which you're able to find what works for you regarding tenant opportunities and your idea living situation do depends on how motivated you are. Los Angeles will never run out of renters. Digest that with the pros and cons at your leisure. 

That being said, you probably are motivated and subsequently can't go wrong if you stick to your budget and remind yourself that this is your first property. You have a bright future ahead of you once you take that sensible first step.

Start with these zip codes (your approved loan amount will make a lot of sense here unless off course the both of you live far from these locations) but even then, I would take a hard look. 

90037

90003

90047

90062

90018

90062

I have been looking at these and more for a while but my criteria and goals are probably different from yours and so you'll see what your radar points you towards. That's the joy of real estate investing. We all see different possibilities! 

For what it's worth, subscribe to this newsletter about all things downtown Los Angeles. You might get ideas about where to plant your flag.

http://www.ladowntownnews.com/newsletters/headlines/

Good luck! on your journey!

More regarding the long term water outlook in California:

"The Water Replenishment District of Southern California, which manages groundwater for parts of the region, has set a goal to wean itself off imported water altogether by treating and recycling wastewater and collecting more stormwater."

http://www.yesmagazine.org/issues/cities-are-now/l...