All Forum Posts by: Rick Albert

 Also keep in mind there isn't enough housing to go around anyways. So having a population decline, at least for now, isn't a major concern. But if you look at where people are coming from when moving down here, they are generally from other expensive markets. This could be an indicator that the people moving in have money, which just further increases values, rents, etc.

A couple of things:

1. Appraisers aren't giving dollar for dollar value for ADUs. I'm seeing somewhere between $50K-$75K when it cost double.

2. You are afraid of rent control, but if you add an ADU and it is detached, the main house (if built prior to 1978) may eventually become subject to LA Rent Control.

3. Flipping is very hard right now in LA. I'm getting weekly check ins from investors looking for fixers. The problem is so far almost every fixer I've sold has sold for literally hundreds of thousands of dollars more than if I were to sell to a flipper. If I have a fixer listing, I have an obligation to put it in the MLS because of this.

4. Cost of construction is expensive and about to get worse. With the fires, labor and materials are going to be in short supply. If you are thinking of buying a fixer, I would consider buying now before plans and everything get approved for all of these homes. 

5. Most neighborhoods you will be fine in. There isn't enough inventory to go around so as long as no new developments kick in (which there isn't enough land), most homes will see some sort of appreciation.

6. We are likely going to see a slow down in appreciation. The 15-20 year run people had is gone, so be VERY careful with listening to some of these "real estate gurus." 

7. I would focus on homes with dysfunctional floor plans. That way you can add bedrooms, bathrooms, etc. and that adds real value. For example can you enclose a dining room to create a fourth bedroom? Might cost you $10K but appraisers might give you $20K. 

8. I wouldn't bank on selling within 2 years. Focus on a 5+ year plan.  

2x House Hacker here in Los Angeles and a case study in the BP book, The House Hacking Strategy.

1. Make sure to have clear rules in place. Things like quiet hours, parking restrictions, etc.

2. Some of the best deals are in dysfunctional floor plans. Average person can't visualize how to fix it, but you can (create an extra bedroom for example)

3. Understand your short term and long term goals. Often times they don't cash flow right away, so plan accordingly.

4. Look for desirable areas and live just outside of it. As people get priced out, they have to go somewhere. 

5. It's okay to screw up. Real Estate is a long term play. 

6. Don't buy beyond your means when it comes to construction. Now is not the time to say, "well, we will figure it out." Those days have gone. Make sure to do your due diligence and plan for it.

This is all interesting, thank you!

Hello All,

I'm considering buying a small home on a small lot in LA. Here are my thoughts:

1. Buy at a discount given the lack of building potential and can always pass that discount along when I sell.

2. There is still a high demand for SFRs.

3. Tenants may not care as much, therefore there may not be a big discount for the lack of space. 

I'm curious if anyone else has gone down this path and what their experience has been.

Thanks!

At least with FHA 203(k), you cannot do ground up construction. It has to be an addition.

I would double check because maybe the workaround is reinforcing the garage and building above it.

We lived in our studio ADU for two years before we moved into the main house.

Best thing to do is talk to an experienced lender.

That isn't 100% true. You can convert a garage into an ADU. That's what I did. You just can't do new construction. It will likely depend on where you are looking.

It really comes down to your goals and time commitments.

Airbnb margins have been getting tighter and it is extremely time consuming. Plus the 20%-30% more in gross revenue just goes towards utilities, furniture, etc. Not sure you really make more money.

BRRRR would be interesting if you can find it.

Flipping is competitive and brings in cash but not long term wealth.

They all are great options, it just depends. I would also look at your skill sets and go from there. If you don't have construction experience, I wouldn't start flipping. I would buy a fixer upper and rent it out. That way if it goes over budget, you can rent it out to make up the money. Then slowly grow into bigger things.

I'm a 2x house hacker here in LA and an out of state investor. Happy to chat.

Los Angeles is an appreciation play. I used the equity from my house hacks to expand my portfolio out of state. 

It's doable but it takes time. That is the biggest challenge I have with my clients. They want cash flow today putting 3.5% down. If the numbers work at 3.5% down, then obviously an investor putting 20% down is going to snatch it up. 

You do have to get creative. Create rooms within existing square footage, look into ADU properties, etc.

There are a few reasons:

1. Despite what people think about California, it tends to appreciate well and in general vacancies are low. My rental has rented for 18% more in three years from the previous tenant. 

2. Yes, taxes are high, but property taxes are capped at 2% per year. Other states there may not be a cap, which makes it harder to control expenses.

3. Low building levels keeps inventory low. It is too expensive to build and there isn't land. That was my issue with Texas. Every time I would analyze a 2-4 unit, I would see brand new apartment complexes nearby. I wouldn't be able to compete with those amenities other than price.

4. You mentioned the weather. It is a great marketing tool to recruit high paying jobs. It is a recruiting tool for companies. 

5. Bigger dollar amounts means you can arguably build wealth faster. 3% appreciation on a $1M asset is better than a 3% appreciation on a $100K asset. Same principal for rents, mortgage buy downs, etc.

6. California actually has a lot to offer. In So Cal, you can go surfing in the morning and snowboarding by the afternoon in the same day. 

7. Cost of construction has gone up everywhere. I had to do major tree trimming that cost almost $5K in Birmingham, Al. It is going to take me longer to recoup that money than if I had a property here.

The big thing with California is that you have to utilize what the state offers. Otherwise, you need to move. I'm not saying get the Disneyland Annual Pass, but go to Santa Monica and enjoy the beach scene, go to SF and experience Union Square. There's good food choices, culture, theme parks, etc. Plus major airports for those who like to travel. There have been times when it was cheaper or the same price to travel internationally than to travel just to another state. In LA you can go hiking, play tennis, go to museums, most are low cost or actually free.