Multifamily House Hacking in Los Angeles with Logan:
This week, we hear how Logan Allec from Money Done Right started house hacking in Los Angeles. Living in Los Angeles just got a whole lot cheaper!
Let’s find out more about this small multi-family house hacking in Los Angeles success story!
Meet Logan Allec
Logan Allec is a tax accountant that found a way to successfully house hack in Los Angeles. Although the area is well known for expensive housing, he was able to slash housing costs with a carefully procured four-unit property.
Allec’s interest in real estate was first piqued while working on tax returns for clients at a financial services firm. As a certified CPA, he spent a lot of time pouring over the details of tax returns. He quickly noticed that many of his clients were real estate investors and they were making large returns with relatively few tax obligations.
At that point, he decided that he wanted to try his hand and real estate investing at some point.
After some internet research, he stumbled upon a blog post that outlined how someone could but a quadruplex through an FHA loan with very little money down. Once you owned the property, you could rent out the units and have the tenants pay your mortgage. With that, the idea of house hacking was something that Logan was definitely interested in pursuing.
When he was first interested in house hacking, it was 2011. The real estate market was a tough place for a new investor with a new career. Since lenders were not willing to take a chance on Logan, he had to put his plans of house hacking on hold for a while.
When 2015 rolled around, Logan felt a renewed interest in house hacking. He also felt better prepared to take on a mortgage for a quadruplex. With a higher income and more assets, he was also a better mortgage applicant.
Searching for the right property
After recommitting to the idea of house hacking in fall 2014, it took him almost an entire year to find the right property for his situation. He closed on a four-unit property in fall 2015, which started his journey of house hacking in Los Angeles.
Finding the right real estate agent
The process to find this property took a long time. At first, he worked with two different big-name real estate agents. However, he found that they weren’t very responsive to his needs. With that, he decided to seek out a real estate agent that was more willing to work with him. That meant seeking out a younger agent that was more hungry for the business.
He found the right real estate agent by making a post in the BiggerPockets forum. He met with a younger agent that had fewer clients, and more time to commit to his search. Overall, it worked out really well.
Finding the right deal
After many months of searching in a particular geographic area, Logan decided to expand his search. The problem was that he wasn’t finding any affordable properties in his smaller search radius. In the end, he found a four-unit property in an unincorporated part of LA. The downside is that it was an hour and a half from his office. But on the plus side, he was able to completely eliminate his housing costs.
If you are looking to house hack in a larger city with an FHA loan, then you might to expand your geographic scope as well. The larger the radius, the more likely you’ll be able to find the right property.
Since Logan had the goal of keeping his housing costs as low as possible, this commute was worth it to him.
The house hack
Logan bought the property for $445,000 with an FHA loan. He put down $15,000 which was 3.5%. The total mortgage cost at $3,000 per month.
The property was somewhat unique. It had a duplex and two standalone units, most of the units were studio-sized. When Logan bought the property, he moved into the vacant unit. He also rented out the bedroom in his unit and slept in the living room.
The other tenants each had leases but all of the rents were well below market rate. In total, the other three units were bringing in around $2,600 per month. Plus, the room in his unit rented for $600. That meant that Logan was able to completely cover his mortgage from day one.
Of course, the older property needed some repairs along the way. With that, most of the extra cashflow went back into the property.
In order to manage the tenants, Logan had each of them sign a standard lease. He downloaded a standard lease and made some addendums that were specific to the property.
When he lived onsite, the tenants just dropped off their rent checks to his unit. But now he uses Cozy.co to manage his tenant payments.
Logan stayed in this property until he married his wife. At that point, he moved into her single-family home. Overall, he is happy with his decision to house hack this property. Although the numbers could have been better if he was living in another part of the country, they are great for Southern California. Now that he has moved out, the property brings in a few hundred dollars each month.
Looking back, Logan says that his biggest win was just getting started. Many of his peers don’t even have this amazing strategy to build wealth on their radar. If he could go back, he would have started sooner.
The Famous Six
What is your favorite personal finance blog, book, or podcast that you’ve read recently?
What’s your favorite real estate related blog or book you’ve read recently?
What is your favorite destination so far?
Where will you travel next?
Walt Disney World in Orlando this year. Hopefully Austria next year.
What is the biggest bucket list goal that you haven’t accomplished yet?
Sell a business for a big exit.
What is your favorite life hack?
Don’t put your cellphone by your bed.
You Can Listen On:
Be sure to check out our Ultimate Guide to House Hacking for a great overview of the different styles of house hacking and different types of tenant bases.
Check out the home page for “The House Hacking Podcast” here.