All Forum Posts by: Jon Schwartz

 Kim, this is definitely legal. (Never take advice from Floridians.)

For rental comps, maybe check other short-term rental sites for rates? Check out www.furnishedfinder.com and google "corporate housing los angeles" and see what the competition is charging?

As for the eviction moratorium, it is across the board. There are no exceptions. I have a friend with a 100% valid Ellis Act eviction that's on hold until evictions are heard again. There are 0 evictions of any kind happening. So you will be at risk until the moratorium ends.

Best,

Jon

 Welcome, Tony!

Where's the duplex located?

How's the offer going?

Best,

Jon

 Chris,

I'm not a lawyer, but I am a landlord.

In Los Angeles, there's no such thing as a no-fault eviction.

A great resource for posting a question and getting some free legal advice is www.avvo.com.

Good luck!

Best,

Jon

Anthony,

Message me so I can share with you my house hack spreadsheet. It includes all the rough estimates.

For PMI, you can estimate 0.5% annually for every 5% under a 20% down payment. It looks like this:

20% down payment = 0% annually for PMI

15% down payment = 0.5% annually for PMI

10% down payment = 1% annually for PMI

5% down payment = 1.5% annually for PMI

That's are rough estimate; you'd need to talk to a lender to get more precise numbers.

Best,

Jon

Kurtis,

Thanks for the kind words!

I use Excel to organize the data and a software called Tableau to put the data on a map.

Each region is a census tract, which is the smallest geographical unit that the Census keeps track off. It's waaaay more granular that zip codes!

You're right that past results are not an indicator of future performance. I think it's a combination of growth and surroundings. Areas don't improve spontaneously; they improve when wealth comes in from a neighboring community. So you need growth plus a wealthy neighbor. If any area borders a greener area, has seen a lot of growth in the last five years, and is still several shades redder than its neighbor, I think that's an indicator of continued growth looking forward.

Best,

Jon

 Prop 13 limits property tax increases to 2% per year. That means the assessment is limited in growth to 2% per year.

Ignore the tax assessment. It has no relationship to the actual value of the property.

I bought a duplex in LA for $1.85M. The neighboring duplex, which was purchased in the 1940's, has a tax assessment of $150K.

Good luck!

Jon

Kurtis,

I'm a house hacker up near Hollywood and an investor throughout LA. In fact, my most recent investment was in a new-construction development catty-corner to Poly High in LB.

You're definitely on the right track! House hacks in the LA area don't cashflow while you live in them. I only know of one house hacker who's cashflow positive, and that's because he added an ADU to a triplex.

But with renting and owning traditionally so expensive in our market, just reducing your living expenses by hundreds or a thousand dollars a month is fantastic. I live in a large duplex (our unit is a 3/3, the rented unit is a 3/2) in an expensive area; my tenants pay $4975 to rent the smaller unit, and I pay less than that for my share of the monthly costs (mortgage, taxes, insurance, expenses). Plus, I have $2100 coming back to me every month in the form of principal paydown. So I'm not cashflowing, but I'm living in a neighborhood I love for a fraction of what all my neighbors pay (and the difference is going toward buying more real estate!).

Also, Long Beach is a great market. Tons of development downtown, and LB is one of the more landlord-friendly cities in our area. The rent control laws are much more lax in LB than they are just across the harbor in San Pedro, which is part of LA City.

And you're right about finding the right mix of price and quality -- though I'd say it's more about the right mix of price and personal comfort. Some of the rougher areas of Long Beach are actually the most quickly appreciating. Here's a map I created from Census data showing median incomes and median income growth over the last five years:

The colors represent current median income, and the size of the arrows represents growth over the preceding five years.

As you can see, some of the lower-income areas just north and south of the 1 also have the largest arrows. These are poor areas, but they're getting less poor faster than the wealthy areas are getting wealthier. These are good spots to buy -- and good spots to house hack if you feel comfortable doing so.

Here's one more map that supports the map above:

This map shows household formation over the last five years. A "household" is a group of people living together; it could be a family or two roommates or a single person. As landlords, we rent to households. So we want to buy where more households are forming.

As you can see, as many people are moving into the area just north of the 1 as are moving into downtown and coastal LB.

Last thing: the underwriting for a house hack can be tough with BP's calculators because there's no checkbox for "I'm going to live here for a few years." I made a spreadsheet when I house hacked last year to figure out the numbers, and I'm happy to share it.

All the best,

Jon

Souheil,

You're looking at this problem the right way, which is to set a monthly cost as the target.

I house hacked a large duplex just south of Hollywood last year with my wife and daughter. We bought a $1.85M property in a beautiful neighborhood and ended up with a monthly cost is $4000, which is actually (mortgage + taxes + insurance + expenses) - rent. Of that $4K, about $2100 comes back to us in the form of principal paydown.

We achieved our (relatively) low monthly cost by making a full down payment (so no PMI) and doing a renovation. While I was shopping for this property, I made a spreadsheet that factors in down payment, PMI, renovation costs, expenses, income, etc., and calculates the monthly cost. The spreadsheet also takes rent and expense assumptions and models out how the property will cashflow when you move out. I'm happy to share the spreadsheet with you.

Speaking broadly, the lower the down payment, the more difficult it will be to keep your monthly expense under $3000. For that reason, I don't know if an SFR plus ADU is the best option; you won't collect enough rent from the ADU to properly offset your mortgage (unless you occupy the ADU and rent the main house). A duplex with large units (like 3/2 or larger) on each side would generate more rent and keep your monthly cost down.

Having a 5-7-year occupancy timeline is great because, even with 5-10% down, you can find a property that will cashflow when you move out.

To answer some of your specific questions:

Zoning throughout much of LA is rather mixed between single-family (R1) and multifamily (R2 and up). For example, I live on a half-block of duplexes; the bottom half of the block is single-family homes, and the surrounding blocks are single-family homes. For house hacking, it's great to target R2 or R3 zones that are surrounded by R1 zones.

Zoning has zero impact on loans. Since you'll be an owner-occupant, you'll be shopping for the same loan product for anything from a single-family house to a fourplex. The only difference will be the rate; multifamily properties tend to carry a slightly higher rate. If you're targeting a conventional loan, multifamily properties also have higher borrowing limits (from $980K for a duplex to $1.4M for a fourplex).

In terms of tenant pool, I always say this: if you want to live there, people like you will want to live there. If you're really drawn to quiet, family areas (zoned R1) and find a great home behind which to build an ADU, then you'll find a tenant who's also drawn to quiet, family areas. If you want to live closer to the commercial strip and find a perfect duplex there, you'll have success with the tenant pool that also wants to live nearer to the commercial strip.

In terms of SFR vs MF pro's and con's, a single-family home will have a larger resale market when you want to sell; more people are shopping for houses than duplexes. However, I chose a multifamily for my house hack because I don't intend to sell. My duplex will cashflow when I move out, and I'll be keeping it in my portfolio. Plus, the economics of multifamilies work better for buy-and-hold in LA.

ADU financing: here's the one program I'm aware of:

https://www.thenorrisgroup.com...

Your questions are great and difficult to answer in a single post. If you'd like to discuss more, let's talk!

Best,

Jon

 Congrats, Hassan!

Hannah,

I'm a feature editor in my day job!

LA production is still seriously impacted. Smaller productions -- like commercials and returning TV shows -- are shooting, but nothing bigger than that. That's going to change before the end of the year, and we're all hoping for a swift and steady uptick in 2021.

Best,

Jon