All Forum Posts by: Rick Albert

I got an even lower cash flow number, around $6200 assuming these rents are correct and my spreadsheet can be pretty liberal sometimes (meaning I'm overshooting it and likely less cash flow). The problem with property management right now is they charge for everything (upcharge for maintenance, finding tenants, etc.). So that 7% of gross rents might actually be closer to 15%. BP wrote an article addressing this (don't recall where). Plus there is opportunity costs like downtime to build the ADUs. This also doesn't factor in that you may have to reduce the rents of the existing tenants since they are paying based on certain circumstances (IE access to the garage or yard space). Based on the aerial shots of the property building 2 ADUs may not be easy because of set back requirements and to be honest I know that you don't need off street parking if close to transportation and it is a garage conversion on a single family home. I don't know about a four unit because then you are really limiting off street parking. That could hurt your rents in the long run if tenants have to park on the street. 

Based on what your goals are, there are a few options. One is invest in Ventura County. Great So Cal appreciation, more politically conservative, and you are still dealing with higher numbers. Keep in mind a 3% appreciation on $3K/month is higher cashflow than 3% appreciation out of state on a $1K/month rental. 

You could also do a hybrid. Assuming you don't own a home here, but buy a property, leverage it and recycle the money to invest out of state. I bought my first house hack, leveraged it to buy my second house hack, and then sold the first one, leveraged my current one and started investing out of state. Although this will soon change, but I haven't done a down payment of my own money since 2015 and I'm up to 9 doors (including primary) and gearing up to buy more through leverage. 

Where do you live? Are you open to house hacking? 

If you are planning on buying and holding, lenders tend to like you putting 20%-30% down. With $50K, that would be a purchase price of about $250,000 not including closing costs and repairs. That could be a good starting point as to where to buy. 

So you are going to get bombarded with agents saying their markets are best, so take everything with a grain of salt.

Generally speaking, you can make any market work. I would first focus on your budget and work from there. For example, if you are pre-approved for a $200K purchase, then you know that you can't buy in Nashville. Conversely, you are pre approved for $3M, then the world is your oyster for properties.

If you are thinking of moving, think about the lifestyle you want. I was doing research on "Los Angeles alternative cities" and Miami came up a lot. That makes sense because I have friends and clients that have moved to Miami/nearby. 

Flipping homes in Los Angeles is tricky, but people are doing it. In all honesty, I'm seeing crappy work and my clients are noticing. There was a flip on the market where my clients offered $200K below list price because the flipper didn't even touch the systems. They said we low balled them, I told them they didn't and guess what, they received another offer near ours and at the end, the property didn't sell.

Construction costs are high. The best bet are homes where you can rework the floor plan to add bedrooms/bathrooms. They are tough to find, but doable. I sold a fixer recently in Calabasas where it could be done. 

If you are just starting out, I would also consider partnering with someone with experience. This is especially true when you are dealing with the city and getting permits. Not all flippers do it, but I would recommend it. When you get to a certain price point, it is expected.

There is a demand for turnkey rentals. Not sure exactly how the numbers would work initially, but if you can buy homes, convert the garage into an ADU, and then resale there is a market for it. This opens to generational living, house hacking, guest house situation, or full investor. I would also consider doing it in Ventura County. Demand there is growing much more than in LA County due to affordability.

Hey Mary,

I started with house hacking a condo. I would focus on at least 2 bathrooms if possible. Better for resale and if one bathroom has issues that need to be resolved, your tenants can use the other one while it is getting fixed. This means you don't have to pay a premium for a plumber to come out last minute. 

You are looking at conventional financing for the most part. It will depend on the property. The point of house hacking is low down payment.

If you have the financial means, buying a fixer condo will go far. I've noticed in my market that the discount to buy fixer condos is greater than the actual amount it takes to remodel. Not enough to flip but enough to have some equity.

It is never too late, you just have to think about strategy.

The younger you are, the more you can bank on higher loan to value due to appreciation. As you get older, it is the opposite. 

If anything, you could argue you are in a better position because you have more leverage options (retirements and as you get older, reverse mortgage and house hack). 

8 years actually could be enough time. I will say you need to really hone in on your budget to better understand what retirement means from a financial perspective. This also includes future medical because that is becoming one of the biggest expenses. 

I wonder as a strategy you could buy properties and each property is a designated expense. For example because medical can be expensive, you have one property with low LTV, like a single family home bought for under $100K but then you have another property that is more about appreciation and that one goes towards travel, etc. Or you find properties where the math works that you can get it paid off in 8 years. Long shot but interesting things to consider.

Hey Daniel,

Welcome to the BP community! You are definitely in the right place.

I'm a 2x house hacker (case study in the BP book The House Hacking Strategy) and an OOS investor of MFU.

Good luck!

It is a negotiation, nothing more than that.

I'm not an attorney, but I feel like in this situation I would have each tenant sign a confidentiality agreement. You don't what the tenants talking to each other about how much each got.

I also wonder if you need to give them a rebate at all. You aren't changing their units. You are taking away yard space and limit parking, but I would call the City to get a better idea.

My mentor house hacked in the 70s. It has always been a thing. The buzz word of "House Hacking" hasn't been around for as long.

Not everyone wants to be a landlord. I think there is a trend of people who want to achieve financial freedom early now that we have seen older generations struggle since they were closer to retirement age during the Great Recession and some still have to work to this day to catch up.

A couple of things:

1. Technically (although rare from what I hear), when you transfer your property into an LLC, that is technically a different owner, and the lender may call the loan (meaning you have to pay it back).

2. What mountain town? Look into the STR laws there. My understanding for areas like Big Bear whoever manages the property has to be within a certain distance. There are also permits, etc. to consider.

3. Talk to your insurance broker about an Umbrella policy. I have one and it costs around $500/year. Like most insurance companies, they will avoid paying if possible but if it does apply, then you have the extra liability coverage.