All Forum Posts by: Jon Schwartz
Jon Schwartz has started 37 posts and replied 926 times.
Post: LA House for sale next door - worth it to expand our lot??
- Realtor
- Los Angeles, CA
- Posts 952
- Votes 1,153
Originally posted by @Mel Jones:
We own a duplex in an expensive hillside neighborhood in Los Angeles. The house behind us, which has a very large lot and we share a long property line with, is for sale. If we purchased we would own almost a half acre of land. All of the parcels of land including ours are zoned R1. The house for sale rents for about the same as the PITI (was leased on MLS so I can see the amount) if we can come up with 20% down, which we can do. We would need to make some magic (hard money??) to get the 100K reserves to qualify for the loan. We bought at a good time and have about 600K of equity in our property now.
I don't know WHAT we would do with a half acre with all parcels zoned R1, but it seems like a once in a lifetime opportunity to have this much land that I assume could be developed... somehow, someday? I am a realtor and there are zero comps for property or land with a lot of this size anywhere near here! Would love to hear anyone's creative ideas (or warnings!)
Can you share what neighborhood this is in?
Post: How to identify good areas to invest
- Realtor
- Los Angeles, CA
- Posts 952
- Votes 1,153
Originally posted by @Kurtis Foster:
@Jon Schwartz I like your maps. That seems like a great way to find possible up and coming areas.
Curious what area you are referring to as "26th Street Historic Core". The historic core looks in the middle of Downtown, north of the 10 around 6th and 7th. Do you mean 6th St Historic Core? Or is there an area south of the 10 near 26th that I just can't seem to find named "26th st historic core"?
Sorry, I meant 27th Street Historic District. I've never actually heard somebody use this neighborhood name in conversation, but google maps labels it as such.
Best,
Jon
Post: Rental Reduction Requests: CALIFORNIA
- Realtor
- Los Angeles, CA
- Posts 952
- Votes 1,153
Originally posted by @N M Clarke:
@Jon Schwartz
This was from an attorney specialized in the local market. Not 100 pct sure if accurate and hard to find true info out there.
Where is your rental located?
Post: Rental Reduction Requests: CALIFORNIA
- Realtor
- Los Angeles, CA
- Posts 952
- Votes 1,153
Originally posted by @N M Clarke:
@Jon Schwartz
Thanks again for the feedback. I think the deals are happening but that he does want to stay and get some savings. On my end I just don’t want to compromise my rights later, to your point? How do you suggest structuring the concession to preserve rights later? I’m told free months rent etc are factored in the average rent over the term of lease and that determines the current rate for any future rent increases.
I haven't heard that concessions factor into average rent and impact future increases. Where are you hearing that? I don't doubt you -- it's just news to me! Though I feel like I would know that if it were true. Where's your information coming from?
If concessions do impact future rents, than it's doesn't really matter which avenue you take. I'd offer him a 5% reduction. Moving sucks; nobody wants to move. I imagine your tenant will be happy with a little savings and not having to move.
Post: New to Multi-Family Investing in Los Angeles Area
- Realtor
- Los Angeles, CA
- Posts 952
- Votes 1,153
Originally posted by @Jay Styles:
@Christopher Mitchell Hey Chris, welcome to Los Angeles! I'm also new to the industry and soaking up as much knowledge as I can before I purchase a property to generate cash flow so unfortunately I'm not the one to give you any advice. But, good luck on on your journey man and thanks for your service! @Jon Schwartz Hey Jon, you gave Chris some great advice and wanted to ask you how do you pull that Census data, if I may ask?
Jay,
All of the data is free and comes from data.census.gov. The Census Bureau updated their online library to this platform last year. It's much easier than the last platform, but it still takes some work to figure out.
I made the map in an app called Tableau. Figuring out how to get the Census data from a CSV file into a graphical map took hours and hours and hours.
Good luck!
Best,
Jon
Post: New to Multi-Family Investing in Los Angeles Area
- Realtor
- Los Angeles, CA
- Posts 952
- Votes 1,153
Originally posted by @Christopher Mitchell:
@Jon Schwartz Thank you so much for the information! I think buying a property that doesn't need as much work would work best for me currently but something I am going to look into is incorporating renovation costs into my VA loan which may allow me to take on more of a project. That map is awesome and definitely allows me a greater understanding of income trends in the area which will help greatly. I agree, I think the middle income, high growth areas would fit well into my strategy. How have you liked house hacking? I think it is a great strategy, especially being a young man without any dependents. I want to establish a solid cash flow as early as possible and I think House hacking allows me to do this. Again, thank you very much and I will keep you posted on my progress. Feel free to reach out to me if there is anything you think I could help you out with!
Christopher,
I love house hacking! I live on a beautiful, historical block that I couldn't afford otherwise. I love knowing I'm paying thousands of dollars less per month than my neighbors (and tenants) to live in an amazing area.
Also, ironically, house hacking has been great during COVID. I really like my tenants, and we've gotten closer since the pandemic began. It's nice having a built-in pod!
One thing to keep in mind about house hacking, though: it's not a cashflow goldmine. Rather, it's a fantastic way to build equity and lower your cost of living. This in turn gives you more capital with which to grow your portfolio. I see house hacking as the base of the pyramid; cashflow fills up the top of the pyramid.
Good luck! I'm a resource for you if you need me.
Best,
Jon
Post: Rental Reduction Requests: CALIFORNIA
- Realtor
- Los Angeles, CA
- Posts 952
- Votes 1,153
Originally posted by @N M Clarke:
@Jon Schwartz
Thanks Jon. Tenant does not have financial issues. He just sees that there are deals out there and is asking for reduction accordingly.
Does the rent control apply across all CA? Or is this LA specific? I thought any COVID related deductions were allowed to go back to previous rate, if the market supports it.
Rent control applies across the whole state. The max annual increase right now is around 8.5%.
I haven't heard anything about COVID reductions and returning rent to a previous level. Where are you getting your information? Obviously, if your tenant has been allowed COVID-related rent relief, then when that ends, the previous rental level will stand. But I haven't heard anything about landlords reducing rent and then restoring an old rental rate later.
Again, if your tenants sees deals and wants a reduction, I'd offer a concession first. Are there actually good deals out there? It's possible your tenant is seeing rents drop generally, but doesn't actually want to move. Maybe he's just angling for savings!
Post: California - Real Estate Salesperson License - Online Classes
- Realtor
- Los Angeles, CA
- Posts 952
- Votes 1,153
Originally posted by @Kevin Mahoney:
I am currently overwhelmed with options for online classes for California. I was hoping to personally hear from anyone whom has taken online classes for CA before. I currently see options for Kapre, Aceable Agent, CE shop, & RE Express. I wanted to know if anyone had any online recommendations or could personally speak to what online class provider they used or heard good things about.
After I pass I would be looking to start practicing in the Napa, Sonoma, Fairfield, Davis area!
Kevin,
I like studying with physical books, so I went with the Kaplan courses that included books:
https://www.kapre.com/real-est...
Totally great. Each book is 15 chapters; each chapter has a quiz at the end in the book. Whenever you're ready, take the online exam for the book. Very simple; I loved it.
Good luck!
Jon
Post: New to Multi-Family Investing in Los Angeles Area
- Realtor
- Los Angeles, CA
- Posts 952
- Votes 1,153
Originally posted by @Christopher Mitchell:
All,
I recently moved to the Los Angeles area (Redondo Beach to be exact) and am looking to get involved in multi-family real estate investing. Being both new to the area and new to real estate, I am looking for any advice specific to the area and ways to get started. I am a military member and am planning on using a VA loan as well as looking to house hack once I find the right property. One of the first things I will be looking for will be a loan source, preferably an institution that has worked with VA loans before and will set me on the right path. Any contacts or advice in this regard would be greatly appreciated! I am hoping to keep my search closer to the beach towns (Torrance, Redondo, Hermosa, Manhattan, El Segundo) but am aware that prices may be a bit out of my range as a young military officer and am flexible on location.
Being in the military gives me many connections to other military members in the area and I am more than willing to help expand networks. I am new but excited to get started and will greatly appreciate any advice I can get!
Thanks everyone!
-Chris M
Chris,
Firstly, thank you for your service.
Secondly, welcome to LA!
You're totally right that step #1 is figuring out your loan situation. That'll give you an understanding of your budget and options. When it comes to house hacking, including with a VA loan, the most knowledgeable loan broker I know is @Jonathan Taylor. Definitely recommend reaching out to him.
Once you have a budget in place, it's time to think strategy and location. What's more appropriate for your life/work situation: buying a property that doesn't need much work, or taking on a project?
Regarding location, the beach cities are crazy expensive! A lot of tech firms have opened in Marina Del Rey and Santa Monica, and with them, a lot of tech workers have moved into the beach cities. That's driven prices through the roof.
One thing I do is generate maps from Census data to identify prime areas for investment and house hacking. For example, here's a map showing the current median income and five-year income growth in the beach cities:
The colors represent current median income, and the size of the arrows represents median income growth over the last five years.
You'll notice that the beach cities are very green (ie, wealthy) and have large arrows. But just inland, you'll see yellow and red areas (ie, lower price points!) that also have large arrows. I think you should target these middle-income, high-growth areas. You'll find more options at your price point, and you'll continue to ride the growth as the costal wealth has nowhere to go but inland.
One more tip: do you bank with USAA? If not, you should; their insurance rates are great! I'm currently house hacking a duplex near Hollywood, and I shopped around a lot for insurance. Nobody could beat USAA, though!
If you have more questions, I'm a resource for you!
Best,
Jon
Post: Advice: Short term house hacking or Out Of State purchase?
- Realtor
- Los Angeles, CA
- Posts 952
- Votes 1,153
Originally posted by @Shane McQuerter:
I’d love some advice on making my first property purchase and whether I should look to buy a duplex and house hack in my current HCOL city or instead focus on finding an investment property out of state.
Here’s some context: I currently rent in west Los Angeles with my partner who is doing a PhD at UCLA. We (unfortunately) need to continue living relatively close to campus, in very HCOL west LA, till she graduates in ~3-4 years. Once she graduates, we will likely move from LA, though we’re not sure where to. I’ve been toying with the idea of buying a duplex and house hacking in west LA mainly for the financial incentives that house hacking can yield, but also because I’d obviously feel much more comfortable living close to (or in) the first property I buy and being able to learn first-hand from being there. Yet, it seems to me like the sheer expense of properties in the area, as well as our short time horizon in LA makes buying here an imprudent option.
The other option would be finding a property OOS--turnkey or otherwise. This feels much more intimidating to me as a first time investor but, at the same time, also feels like less financially risky (at least in terms of the property cost / down payment outlay). Going this route would obviously rule out the advantages of house hacking.
Pros of buying in LA:
- Could leverage house hacking and live in half of the duplex--saving on rent while also potentially getting space for a work from home office (which I’d really like)
- I’d be able to manage the other unit myself and could save on property management
- Living in/near the property seems like an ideal introduction/education to REI
Cons of buying in LA:
- We would very likely be moving in 3-4 years and may need to sell the property when we move
- Very high prices in LA (I could get the money together for a downpayment but it would take all my savings and I'd rather start my REI education with a smaller purchase).
Pros of buying out of state:
- Lower prices (would be dipping a toe into a first property purchase rather than throwing all my savings into it).
- Potentially higher returns (though maybe not considering house hacking as an alternative)
Cons of buying out of state:
- All the difficulties of purchasing / managing an investment property at a distance--especially as a first time investor
- Having property management fees (and maybe turnkey costs) eat away at the return
My main question is: Should I even consider buying a duplex in LA with our (potentially) short time horizon? Would it make sense to buy a very expensive property if we’d need to sell it in 3-4 years when we move?
Should I HH in a duplex in LA? Look for an income property OOS? Simply keep my money in the stock market and reassess when we move in 3-4 years?
Shane,
I'm a househacker in a not-inexpensive part of Los Angeles, and I love it. The financial benefits over renting or owning a house are awesome, and you're right that living beside your rental unit is an excellent way to ease into landlording.
That said, I wouldn't recommend househacking in your situation because the time horizon is so short. A lot of your gains in LA come from appreciation. I made a long YouTube video discussing how to properly include appreciation in your underwriting, and the bottom line is this: over the short term, appreciation returns are too volatile to bank on.
Actually, let's get into the numbers, shall we?
These numbers are based on the FHFA's home price index for LA, which tracks prices quarterly going back to 1975. So we're looking at 45 years of data here.
Over that span, the median annual appreciation rate on a 4-year hold in LA is 6.9%. That's an annual, compounding appreciation rate. That's awesome, right?
However, the full range of outcomes is -10% to 21.4%. That's a really wide range. The 80% confidence interval -- that is, the range in which 80% of outcomes fell -- is -4.8% to 17.9%. That's still quite wide.
You'd need to hold a property in LA for 10 years for the 80% confidence internal to be entirely positive.
So if you bought a duplex or even a house with the intent to sell in 3-4 years, chances are you'd make some gains in appreciation, but there's also a chance the property wouldn't appreciate, and then you also have to overcome the costs associated with buying and then selling the property.
Given that we're in a really weird spot economically and at least some economists are predicting a recessionary environment next year, I'd recommend against househacking right now.
That said, let's explore a scenario in which it might make sense to househack...
If you were to househack in LA right now, you'd firstly want to find a property that lowers your cost of living. Your monthly out-of-pocket would need to be a few hundred dollars less than you pay on rent right now. For example, if you can save $400/month from what you pay in rent now, over 4 years, that's $20K. That's a cushion against the property not appreciating well.
Secondly, you'd want to buy in an area where the cards are stacked in your favor, an area that's rapidly developing right now. Given you're not Daddy Warbucks, probably the closest areas to UCLA that fit this bill are Inglewood/Lennox/Hawthorne or West Adams/Crewnshaw/Mid City. Some of these areas are still transitioning, so you'd need to be comfortable with that. If you do have more resources, then you could explore Westchester to the south or Mid-Wilshire to the east, both of which have plenty nice duplexes.
Thirdly, given the eviction situation right now, you'd have to find a duplex with a vacant unit.
If you explore the househacking route and decide it's not best, I'd start investing out-of-state. I don't think there's any downside in pulling your money from the stock market right now and getting started on your real estate portfolio. Investing out-of-state has its challenges, but there are plenty of good markets and, in a few, really great agents to help your journey. I'm happy to make a referral on that note!
Please be in touch if you have anymore questions!
Best,
Jon