All Forum Posts by: Rick Albert

 I was thinking the same thing. Also before looking at multifamily, look at what the status is of the tenants. Trying to convert a garage that the tenants are using can be complicated. 

I agree with what some people are saying here and disagree on some.

Regarding condos, they can appreciate really well here in Los Angeles. I doubled my money is 7 years. Granted that appreciation train is slowing down but you have to be particular as to what you buy.

MOST of my condo investor clients in LA are selling. The HOAs are getting difficult because buildings are getting older and with people working from home, there is more usage on the pipes and water. That's why the average HOAs are creeping up to $500/month or more. 

The other issue is condos built prior to 1978 in Los Angeles are likely subject to LA Rent Control. You can raise rents whatever you want thanks to the Costa Hawkins Act (at least for now) but all of the other rights for tenants are in play.

It depends on how you define cash flow, but with $500K down you may have cash flowing properties because you will have a low LTV. Some of my clients do this, others don't because leverage is key in real estate. Otherwise investing in the stock market or better yet, a high interest savings account (mine is at 5.5%) can actually be a safer bet.

If you are set on condos, I would be looking in Ventura County. Good appreciation, rents are creeping up, and you avoid the LA County rent control BS.

Or, you house hack. You buy a very nice house with an ADU and you rent out one of the units. You live your best life and get some rental income. You could even buy a property and convert the garage with the difference (although you don't get dollar for dollar value from an appraisal perspective).

You do have options here in So Cal and there are some benefits to investing here. High appreciation, high dollar appreciation (3% increase in rent on a $3K/month is better than 3% appreciation on $1,000/month). I invest locally and out of state by way of reference. 

This is really a question for the housing authority, not here. You are in a politically liberal area so I would assume that the tenant stays. Otherwise many investors would buy, "kick out," and bring in higher paying tenants.

I think the better question is what's needed that is health and safety? You have guaranteed payments coming through and you can allocate your rehab dollars and buying another property on top of this one. As the units become vacant, then remodel and go for the higher rent. 

In the meantime, offer based on what the tenants are paying now. Alternatively, submit the offer with the SELLER removing the tenants, not you. Far less risk.

Hey Nestor,

Good luck! You came to the right place. I'm a 2x house hacker here in Los Angeles (and a case study in the BP House Hacking Strategy book). Happy to chat if you would like.

Best,

Rick

This is certainly complicated, especially with family.

I agree with @Dave Meyer that you need your down payment back. You could have easily put that in a high interest savings account with less risk. 

Because of how complicated this can get and you don't want to go back on your word, you could devise an exit strategy. Maybe at $X price, you sell and move on. The first red flag was the bankruptcy. I wouldn't have gone into business with someone who had a recent bankruptcy (really at any point but people can learn). 

You could also have him put money into this if he truly wants this to be 50/50. For example maybe pays any additional $500/month that goes directly into your pocket until you achieved $17,500 (half of the down payment and closing costs). That is a stellar deal for him because it is effectively a 0% interest loan and he is still banking on the appreciation. 

Something to consult a CPA about is the tax write offs. You are on title and on the loan, so how would that work? Maybe the compromise is you take full benefits of the tax write offs up until a certain point.  

This is an ongoing conversation with Buyers all over the country. Here's the problem: This is an ongoing conversation with Buyers all over the country.

You can wait, but so is everyone else. This means if/when rates drop, you are going to be competing against other buyers, driving the price up. I don't think it will be like 2021, but there will still be more competition.

Versus, buying now, rates drop, competition increases and prices go up, and you get to ride it out. Next year (or whenever), you can decide to refinance. But at least you will be in control.

The problem with Zestimates is it doesn't factor what it doesn't know. For example, my Zestimate was low because it didn't know about the addition, full remodel, and garage conversion into an ADU. Another great example is Zillow doesn't know about views, usable land or if a street is worse than another.

What Zillow is good for is you can search for sold comps, including what has sold off market. That is likely more useful.

People have already said what your options are. Something to consider is with $30K (which is no small amount of money), you will need to factor in closing costs and repairs (unless you can negotiate with the Sellers). 

You can house hack anywhere. The concept is to live there while tenants help pay the bills. 

I think the bigger question is what are the long term goals? 

Also keep in mind you make real estate in four different ways:

1. Cash flow

2. Appreciation

3. Loan Buy Down

4. Tax Write Offs

So even if you aren't getting the positive cash flow, you are potentially making it up in the other ways.

@Dave Poeppelmeier

1. The idea of the master lease was to do a 10 year lease and they deal with turnover. Vacancy is getting expensive on my other rentals so I figured they could manage their own turnovers. Plus I don't live nearby so I figured it would be easier to self manage. So now I'm saving on vacancy, turnover, and property management. That is thousands of dollars per year.

2. I used to be an Adviser of a Chapter here locally that had a house. The Alumni had a board that worked with the students on general upkeep, etc.

3. I appreciate the insight, it is definitely something to think about.

If I decide to move forward, I just hope I don't end up in a jam with this deal...raspberry jam.