All Forum Posts by: Michael Simpson

Just listened to an interesting episode of the Bigger Pockets podcast with @josepha and it got me thinking about investing in a section 8 rental properties in more expensive markets, particularly my hometown Los Angeles. The stigma of bad/crazy/poor/drug-using tenants has always deterred me from considering renting to those who have vouchers. But considering the way he does it sounds like a great way to reduce risk. Essentially he rehabs his properties to make them undeniably high quality (not just "good enough" for section 8) in order to generate a huge demand and thus be able to be extremely selective in his tenant screening process. 

I love the idea of being able to provide a nice home that lower-income renters can be truly proud of, and as a result (hopefully) will take care of the place. And then of course, I'll be able to enjoy the benefits of the voucher payment from the Housing Authority. 

I'm curious if anyone in the Los Angeles area has employed this strategy? With the Voucher Payment Standards in LA, I figure I'd need to find a 3 bedroom property with an ARV of around 280,000.

Would love to connect with anyone who has experience with this!!

Excited to share that I just closed on a newly remodeled Triplex as my first home purchase and 2 blocks from the beach! Passing the Self-sufficiency test on 3-4 unit properties with FHA financing is truly a nightmare.

Property: Triplex, new entire remodel from the studs just completed and vacant

- Unit 1: 3 bed 2 bath

- Unit 2: 1 bed 1 bath

- Unit 3: 1 bed 1 bath

Location: Long Beach, CA

Purchase Price: $1,250,000

Financing: FHA 1.75% fixed 30 year

- Down: 7%

For anyone that knows or has tried to finance a 3 – 4 unit property with FHA, the biggest roadblock is the Self-Sufficiency Test. I didn't even know this existed until the worst-case scenario occurred and the entire deal fell apart. Luckily, because this property is a new remodel and a beautiful location next to the beach, the appraised rental comp's were about 35% below market ($6200/month)! We went back to the appraiser for re-evaluation and they even exceeded the appraised rent rates we needed ($8500/month). Long story short, the PITI passed the self-sufficiency test by $20 (literally 20 dollars) and it took a 1.75% fixed interest rate to get us there!

I aged about 10 years through this process, but grateful we got it done. The amount I learned the hard-way through this volatile escrow process I feel as thought I could write a book!

If anyone is considering doing a FHA loan on a 3-4 unit property, especially in a high cost area, feel free to reach out to me for feedback/discussion as I just went through the real school of hard knocks, but came out with a great cash flowing property!

Hi all! 
I’m interested in buying a triplex to house hacking in Los Angeles. I have a question about tenant situation.

The triplex is consisted of 3/3, 4/2, 2/1. Currently 4/2 and 2/1 are tenant occupied. I plan to move in after purchase and live there as my primary residence.

My question is, is it a valid reason for me to ask the tenant in 2/1 to move out on the ground of owner needs to occupy the property? I live by myself, so it doesn’t make sense for me to live in the vacant unit in front that’s 3/3.

This tenant is currently on month to month, i believe she’s living there for more than one year. That’s all I could gather before my offer is accepted. 
Any guidance & advise is appreciated :) 

My wife and I actually pulled this off here in Los Angeles County.  We purchased a 4 unit property that was extremely outdated and moved into one of the units.  We did a ton of work ourselves to make it livable and rent ready while living in it. We're actually looking as we speak for our next multi-fam to do this again. 

It's challenging and will test your patience but it's worth it.  Some of the best parts about this strategy is that we pay less living here then living in a single family home (rents increase every year) and when do decide to move out the place will cash flow and we've been here for 2 years.  

When you do find a place you're interested in make sure to really understand who the current tenants are and what the rent control laws are for the city/county. Know how much you can anticipate raising the rents to each year as you're probably going to find listings that have rents that are way under market.   You don't want to get into a situation where you move in and one unit has a nightmare tenant in it.  Highly recommend Los Angeles County over City of Los Angeles. 

Hope this helps!

Hi Danielle, 

Just completed my first workshop and came here to checkout other folks' experiences. How have the last 5 months been working with NACA? Did you decide to go through with the program?