All Forum Posts by: Jon Schwartz

Shalini, lemme take a stab at your second question first:

 I don't think anybody should be in a rush to buy multifamily property. The outlook for the economy and CA's eviction moratorium are too uncertain right now. I also think we're going to see prices soften in 6-12 months when federal aid subsides, but we're still suffering from a weak economy. Maybe overpaying now by $5-10K isn't a problem, but I'd bet you'll likely underpay by $20K in a few months.

As to your first question: I'm househacking a duplex with a toddler right now! My wife, our two-year-old, and I moved into our duplex last year. We picked an area south of Hollywood in LA that has decent schools and is really walkable. The area's not cheap, though! You might have trouble finding something affordable and near great schools.

A few ideas, though:

Go to greatschools.org and actually find some great schools you'd like your child to attend. Then find your local GIS service (google "Irvine GIS" or "Orange County GIS"), which will have zoning maps. Find the areas zoned for multifamily near the schools you've identified. Then see if anything in that area is for sale! It's a cumbersome process, but it's worth it -- it worked for us!

Good luck!

Jon

 Not significant, but I think prices will soften.

I don't disagree that the cards don't favor landlords in this crisis, but a lot of sectors, businesspeople, and entrepreneurs are getting dealt pretty awful hands.

@Oscar Montealegre, do you have the opportunity to request forbearance?

I know it feels like you shouldn't have to do that because you're not the guy in the wrong here, but this is how tragedies go...

With $350K and a desire for cashflow, I would buy as large a building as I could in South LA and have Action Management do the property management. I'd wait until we're closer to the eviction moratorium ending, though.

Erika,

For sure, ugly places attract ugly people. I'm in no rush to invest in the worser parts of Compton, etc.

That said, there are decent areas within lower-income neighborhoods worth exploring. And in LA, it's really a block-by-block proposition.

For example, I've been keeping an eye on this low-cost triplex south of downtown:

https://www.redfin.com/CA/Los-Angeles/2911-Maple-Ave-90011/home/6930384

It cashflows, and the immediate submarket looks pretty decent. Yes, it's a lower-income area, but there appears to be a lot of families and small businesses around and not too much graffiti. Things like this make a block or small area stand out.

Here's another promising listing at a higher price point:

https://www.redfin.com/CA/Los-Angeles/1213-E-59th-Pl-90001/home/7274322

It not as great a deal and doesn't produce as much cashflow, but this is a great block. A fourplex sold down the street a few months ago; when both were on the market, I cruised by to check them out. This one block of E 59th Pl. just happens to be one-way, and something about the block is much more pleasant than the blocks surrounding it. It's not far from major avenues, but definitely not too close, and the mall a few blocks away has a Starbucks, a Chase bank, a CVS, and a supermarket. I think this is a solid longterm investment.

The money is made in finding the overlooked gems or the properties just outside of the already-gentrified area.

Jonathan, love your plan! I'm also a Jonathan, and I househacked a duplex last year (still living in it now). I see it as my financial foundation moving forward.

In terms of the plan, you're thorough and right-on. The only other things to consider are down-the-road options. For example, when lenders catch up with how to appraise homes with ADUs, you may able to open a HELOC on the property in order to keep it for cashflow *and* buy another property. Also, assuming the 1031 exchange stays in place, it might be more advantageous down the line to exchange the property rather than sell it traditionally. But like I said, these are distant considerations -- champagne problems!

One thing that does concern me is your estimation of up-front costs. I think $75K is too little for the whole operation. If I'm not mistaken, buying a $550K on an FHA loan will cost $37K, broken down as:

• Down payment (3.5%):   $19,250
• Closing costs (1.5%):   $8,250
• Up-Front Mortgage Insurance Premium (1.75%:   $9,625

That leaves you with $38K for the cosmetic improvements and garage conversion, which is only possible if you're a contractor and doing the work yourself. Are you? If not, I think you should budget $80K just for the ADU conversion. Or better yet, have 1 or 2 reputable ADU contractors bid the job for you during your inspection period (and I make a recommendation if you need one). Conversions prices vary widely based on foundation and systems needs.

And if you're a contractor who *can* do this for $38K -- I want your number!!!!

Best,

Jon

Erika,

Where exactly do you live? If somebody asked me where to find the most affordable and promising multifamily investments near LA, I'd say about 10 minutes south of Downtown!

Best,

Jon

@Jesse Morrell, an important metric to look at is owners’ equity in their homes, which is significantly higher now than in ‘08.

When the forbearance programs end, there will be a flood of sales, not foreclosures. If you can’t pay you mortgage but aren’t underwater, you can sell!

An increase in supply will lower prices, but it won’t be a crash.

That’s my two cents. Follow the equity!

Akore Berliner at whodoesyourtaxes.com. She's great. At this point, between my wife and I, we have an S-corp we control, an LLC we control, a property we own, and four K-1's. Akore's fees are suuuuper reasonable; she charges less for less complicated returns. Check her out!

I don't have a horse in this race, but Little Rock is barely growing:

https://www.google.com/search?q=little+rock+arkansas+population&oq=little+rock+arkansas+population&aqs=chrome..69i57.4344j0j7&sourceid=chrome&ie=UTF-8

I think you should pay more attention to Northwest Arkansas (the cities of Fayetteville, Springdale, Rogers, and Bentonville) if you're looking for a solid, longterm investment:

https://www.nwacouncil.org/northwest-arkansas

Good luck!

Jon