All Forum Posts by: Rick Albert

As someone who is on his 2nd house hack in Los Angeles, you have a few options but not much considering your budget.  You have a few options:

1. Go the condo route but make sure it is at least 3 bedrooms.  I believe as LA gets more and more pricey, 3+ bedrooms will become the alternative to houses.
2. You could go the FHA 203k route but I do believe it will be difficult to find a house under $500K. There are a few areas I would consider. Using the FHA 203k loan, you could build out the ADU assuming it appraises. I did this on my second house hack. You would only be using about $30k, then you can consider refinancing once the work is completed and use the remaining cash as more of a down payment to avoid MI if it makes sense.

I'm happy to chat about it if you would like.

The only way I see it on the surface is buying a run down, undersized home and do the reno to the main house and build out the ADU. Make sure to buy in an area where there are ADU comps. Don't be the first one. You are going to have to do major homework on every property ahead of time. Think like a flipper without the margins.

Hey Everyone,

Thanks @Steven Ortiz for the shout out.  @Jason Gettler, the plan overall makes sense. As Steven said, appraisers aren't giving dollar for dollar on the ADUs for now, but over time that can change. You can also look into the FHA 203(k) loans or Home Style Renovation loans. This might get you into the door and you can refi later. That's what we are doing on our ADU property.

Happy to chat more if you would like.

Best,

Rick

@Jorge Ramsés García

Hey Jorge,

I’m a real estate broker and 2x house hacker here in Los Angeles (I’m one of the case studies in the House Hacking Strategy).

I’m happy to chat about your goals and create a game plan.

Talk soon!

Rick

@Josh Gorokhovsky

Hey Josh,

Happy to chat with you. I’ve worked with a developer for over ten years and would love to help you out.

Best,

Rick

I agree with @Jonathan Taylor, in the big scheme of things it is a good return. Once there are more sales it will certainly help. I had to provide ADU comps to the appraiser because he didn't realize that agents advertise the homes with the combined square footage (both the house and the ADU) so he thought they were out of the "square footage allowances" to count.

I think Los Angeles is a better place to invest than what some people give credit for.  Here's why:

1. Yes, we are big in entertainment and hospitality, but we are also big in technology, food, universities, finance, and other industries.  Just outside of Los Angeles is one of the largest pharmaceutical companies in the country.  Those are a great pool of tenants making six figures. 

2. We are still cheaper than other big cities like New York, San Francisco, Tokyo, and London.

3. Rent control sucks, but that gives us opportunities. Landlords are leaving California, that will decrease inventory. Basic supply and demand. My clients and my rentals usually get rented out in about two weeks assuming it is priced right. When I rented out my main house (my wife and I are house hacking and living in our ADU), I overpriced the home and got applications and renting for full price plus a gardener fee.

4. Less units for similar cash flow. After my refinance and when I rent out my ADU, we will be cash flowing $1,000-$1,200 on our hard costs. You might need 10 units in the midwest to do that.

My hunch is after COVID is under control, we will see an increase in rents.  Even though people can work remotely, some may still want to be close to the beach and what Los Angeles has to offer.

For what it's worth I am in the process of my refinance and the appraiser gave my studio ADU $45,000 in value. I'm in the northern end of the San Fernando Valley. This is the highest I've seen from an appraiser for a studio ADU in the SFV.

@Erin O'Connor Smith

On the surface it makes sense. I would factor in parking for everyone and privacy.

Thanks all.  That's what I thought I was just curious if there was something unique.  

@Julio Garcia good to see someone from the Modesto area.  I'm an alum of Cal State Stanislaus and did my internship at a commercial real estate office up there!