All Forum Posts by: Jon Schwartz

I'm in LA, and here's my advice:

Offering a 15% rent reduction is going to haunt you for years because rent control won't allow you to restore the original rental rate when markets rebound. Especially here in LA, where annual increases are limited to 3% or 4%.

I'd strongly recommend offering a rent concession -- ie, forgive 1-2 months of rent. Forgiving 1 month of rent for the year is likely reducing each month's rent by 8.3%. After 2 months of rent forgiveness, and you're at 16.6%. That's a bigger savings for your tenant over the next year, and when the economy is stronger a year from now, you'll be back at your base rental amount.

My situation is similar but not as severe. I have a "luxury" duplex in LA; my tenants have made all rent payments through COVID. My next opportunity to increase rent is in January, but I feel like I should forestall my annual increase for a half-year. Even that bothers me because, in the long run, it's going to have a real fiscal impact.

Anyway, good luck! Be compassionate with your tenants, but protect that rental rate!

Best,

Jon

Paging @Remington Lyman...

Simon, I'm an LA investor and came to the same conclusion as you. I've decided to keep my capital in LA, but were I to go out-of-state, I'd go to Columbus and I'd work with Remington.

Best of luck!

Jon

Elena,

I second the above commenter's recommendation about connecting with a local, investment-minded agent!

I think the first step is to clarify your goals. LA's an expensive market, and even $100K limits your options for an investment property because you'll be required to put at least 20% down -- and most likely 25%.

So I think the biggest question is: what exactly are you aiming to achieve with this next investment? What role does your investment portfolio play in your financial life five years down the road?

Once you have that nailed down, then it's a question of doing the math on possible deals and finding the best submarket for appreciation and/or cashflow.

All the best,

Jon

Jordan,

Welcome to LA! Or maybe you're not new to LA, just new to investing... Either way, welcome!

I have some questions for you that'll help with your soliciting advice. What's your biggest goal with this property? Cashflow, equity growth, foot-in-the-door project to get you going? Are you trying to BRRRR it? Are you considering a househack, where you would live in the property and rent out rooms (or units in the case of a multifamily property)? How much capital do you have to work with? And where in the Valley are you interested in buying?

I'd be great to know these things to help you narrow down your search.

But without knowing those answers, here's some general advice:

Single-family homes are tougher to make work that multifamily properties, I've found, in terms of cashflow. And I'd suggest that a house isn't much easier than a duplex or a triplex.

If you have plenty of income and two years of job history and excellent credit and a green card, go with a big bank; their rates are stellar. If you don't have all of the above, you should go with an investor-friendly loan broker. I'm happy to make some recommendations.

Percent down really depends on the deal. If you're not househacking, the least you can put down is 20%, and you'll most likely be required to put down 25%. If you're househacking, you can put down as little as 3.5% on a house or 5% on a multifamily property. Determining the best amount to put down is really just a math problem: based on how much capital you have, what's the best allocation? Less down means a bigger mortgage payment, but you'll have money leftover for renovating. More down means a larger mortgage payment, but you might not have enough reno budget.

As for the GC, if you have no construction background and this is your first property, hiring a GC is a very, very good idea. If you're familiar with the general order of construction, and you have plenty of spare time, then yeah, take on the project yourself.

I'd love to give you more detailed advice if you answer those questions above!

Best,

Jon 

Pedro,

Some good suggestions here, but there're all broad and from out-of-staters. Not the most helpful. Especially those who said, "Why not do both?!" Uh, because money doesn't grow on trees, fellas.

I don't know many people who BRRRR in LA and I think it's because homes are so valuable that it's difficult to find a BRRRR that will cashflow after refinance.

To throw some numbers on the board: the median home price in LA right now is around $800K. If you executed a "perfect" BRRRR, you'd be in for $600K and refinance all of that out. At a 3.5% rate, the mortgage payment would be $2694. Property tax would amount to $847/month. So even before accounting for insurance and maintenance, the BRRRR'd house costs $3541/month. Of course, houses do rent for $3500 and more in LA, so I'm sure BRRRR opportunities do exist, but they're probably more difficult to make work in this market.

At any rate, if you're BRRRRing, you'll want to see what's on the wholesale market. I'll shoot you some wholesalers' info.

Househacking is great because it reduces your cost of living, but you're right that it ties up a lot of capital.

Here's an idea: BRRRR a househack... kinda. Maybe hone your search to duplexes (or larger, if the budget works) that are very distressed. At the very least, you'll be able to fully renovate your unit and the building's exterior. If the building's vacant, renovate the whole thing. Then, do a rate refinance (as opposed to a cash-out refinance, which usually has a higher rate) to get rid of any PMI. Then, open a HELOC on the remaining eligible equity. You won't get all (or even most, probably) of your money out, but you'll be enjoying the low cost of living and get at least some back out.

Does that make sense?

Best,

Jon

Thanks so much!

These forums prevent me from ranting about this stuff to my wife, which is very helpful for our marriage.

I'm also in the middle of a series of videos about househacking for my YouTube channel. It's just what I'm obsessively focused on right now.

Best,

Jon

Joel, I recommend Fathom Realty: www.fathomrealty.com

Best,

Jon 

@Marcos Urvina, curious to know where you're leaning on this now...

Best,

Jon

@Linzey Ledesma, curious to know what you're thinking...

Best,

Jon

@Ryan Cleary, 100% Columbus. Columbus is larger than its ever been, and the population growth is accelerating. Cleveland’s population peaked around 1950, and it hasn’t seen a year of population growth since.