Are you looking to implement successful house hacking strategies to get into real estate in the city of Los Angeles?
Los Angeles is a huge city and it isn’t inaccurate to argue it’s many smaller (and many not so small) markets pushed together, but for someone who wants to be in the greater L.A. area the question remains: what’s the best way to apply house hacking strategies to this region?
This post is our data-driven deep dive into house hacking Los Angeles and breaking down the pros, cons, concerns, and benefits of house hacking in one of America’s largest cities. I’ll also share my strategies for increasing the chances of making your house hacking efforts successful.
Let’s dive in!
Los Angeles: Tenant Friendly, or Landlord Friendly?
California is one of the most tenant friendly states in the U.S. and is much more tenant friendly than it is landlord friendly. That is a very important consideration to take into account when deciding whether to get into real estate in an area or not.
California was one of the earliest states to introduce rent controls and they have stronger than average eviction protections for tenants. Even beyond that, Los Angeles has a reputation for being one of the most tenant friendly cities in the country with an estimated over 70% of rental properties under rent control.
This doesn’t necessary disqualify Los Angeles for me, but I’d proceed with caution. Your own risk tolerance and experience may dictate whether or not an L.A. house hack is right for you.
Los Angeles Demographic Data Analysis
The six data points we use for evaluating house hacking markets are: population growth, income growth, property value growth, crime level, crime change, and job growth.
So how does the home of Hollywood compare? Let’s have a look below.
When it comes to these six metrics, this is how Los Angeles stacks up:
|Data Point||Benchmark (since 2000)||Los Angeles|
|Property Value Growth||40%||223%|
|Crime Level||< 500||337|
|Crime Change||0% or declining||– 5%|
|Job Growth||> 1%||4.6%|
Overall, a Los Angeles house hack looks quite good based purely on the data points. While they fall woefully short on the population side of things, every other metric looks solid to great.
If the extreme tenant-friendly setting of Los Angeles, California, didn’t scare you off, then the numbers support the idea of being able to successfully house hack in this market.
Mean Property Prices in Los Angeles
- All housing units: $979,275
- Detached houses: Over $1 million
- Townhouses $662,157
- Duplexes & other 2-Unit structures: Over $1 million
- Triplexes & 4-Unit structures $787,331
- 5+ Unit Structures: $746,157
The gross rent for Los Angeles even with the heavy influence of rent control throughout the city is $1,554 a month.
5 Strategies for House Hacking Los Angeles
Each city has its own unique potential benefits and challenges, and the City of Angels is no different. Here are five excellent strategies to consider to find the right deal.
Consider Multi-Unit Housing Options for House Hacking Los Angeles
Multi-Unit housing makes house hacking a lot simpler. When there are multiple units you know what space is yours and what space is going to be rented out. While many locals have figured out the benefits of house hacking a duplex, and thus drove the prices up to the same range as many single family homes, there are still deals around on the MLS as well as other spots.
Triplexes and multi-family homes still offer plenty of opportunities for a good house hacking deal that can help with the mortgage and in some cases even create cash flow.
Consider Airbnb House Hacking Rentals
There are too many tourist attractions to list in Los Angeles, and that opens up the Airbnb options. When a city is constantly in demand by visitors, that means the average per night cost is higher and that means more profit for the landlord.
According to numbers collected by Alltherooms.com, an average night in Los Angeles via Airbnb is $194. This can obviously change based on time of year and demand, but that also means it only takes eight nights rented per month on Airbnb to make more income than the average long-term monthly rent.
Definitely worth thinking about if your neighborhood is decent and you’re willing to do the housekeeping, upkeep work to keep those Airbnb ratings high.
Look at a Lot of Los Angeles Properties
The sheer variety of houses and housing units throughout Los Angeles is pretty remarkable. Don’t just look at conventional single family houses. Look at those, look at bungalows, look at multi-family units and mixed building neighborhoods.
There’s no lack of creativity in Los Angeles and doing the work to look at many properties through many different neighborhoods can reveal opportunities for house hacking a great deal that you might otherwise have missed.
Pay Attention to Up and Coming Neighborhoods
While some of those high prices could scare some people off, the large number of very high priced mansions can pull the mean average up. The average Los Angeles house or multi-unit property is still going to be considered expensive compared to most American cities, but there are good deals that can be found for lower than the mean average prices.
Looking for safe working class neighborhoods that are up and coming is a great way to get a property that will strongly appreciate and make sure demand from renters remains high.
Make sure your information is up to date. Many neighborhoods that were considered bad 20 years ago are considered promising or up and coming now. Don’t trust outdated info, verify everything!
Get Creative with Los Angeles House Hacking
Aside from the obvious house hacking options, always be aware of other options. Can a large outdoor office or tiny home be placed in the backyard of a single family to be used as an Airbnb rental? Do you have a huge garage and friends who need things stored?
Are you close to nearby high schools or colleges and have a room to offer to an exchange student? There are programs that reimburse for that!
Look at what you have to offer, and get creative with how you do things to get the most out of any house hack. Considering how likely it is that you’ll have rent control limits it’s crucial to make sure you’re getting the most out of what you have to offer.
4 Strategies for Financing a Los Angeles House Hack
Getting the money for a house hack in an expensive city like Los Angeles can be challenging, but there are multiple options available.
Only having to put 3.5% as a down payment as opposed to 10% or 20% can mean huge savings and make the buying of a property much more viable. The Federal Housing Authority (FHA) offers many loan types and programs but the popular FHA Loan is one of the most well known, and can be an extremely effective tool for getting your foot in the door with a good house hacking opportunity that you couldn’t afford to pay 20% of the full price upfront.
Anyone who has served in the military should see if they qualify for a VA loan. These loans are designed to give veterans of the Armed Forces borrower-friendly loans for purchasing properties. The program is also clear: as long as the loan holder is living at the location, VA loans for house hacking is a perfectly acceptable use – including with multi-unit properties.
A conventional bank loan is always an option for funding a house hack. This will work better for individuals with some decent savings and a good credit score. Keep in mind that if you find a property with 2 or more units, then 70% of the expected annual rent income can be added to your income for figuring out what level of loan you qualify for.
This tends to work best when buying a property from someone who owns multiple properties and is divesting themselves for retirement or to get out of real estate, but it’s worth trying, especially with multi-unit properties.
If you can get the seller to agree to finance the sale you often can get better terms like no payment for the first 6 or 12 months, in addition to cutting out escrow costs. You then take over the property and pay the seller based on the agreed upon contract.
They get interest payments meaning they make more money in the long-term, and rid of a property they don’t want to deal with. You get good terms for a property you can then improve and house hack. Ideally that’s a win-win for all involved.
House Hacking Airbnb Los Angeles
There’s no denying that Los Angeles brings in many millions of tourists every single year and that means there are plenty of opportunities for making an Airbnb or short-term rental work, especially in a popular neighborhood or areas close to major tourist attractions.
If you’re going to house hack Los Angeles, going the Airbnb route can often lead to higher earnings than a long-term renter, however it’s important to make sure everything is properly setup to make sure you’re operating legally.
The Airbnb Los Angeles rules are:
- You must register with the city planning department and pay an $89 fee for up to 120 rental days a year
- The fees jump to $850 for more than 120 rental days in a year
- The property must be the primary residence of the landlord
- Only one property at a time can be a STR in Los Angeles proper
When you have one property, one primary residence you’re house hacking, you want to make sure you’re getting the most out of it and going the Airbnb/short-term rental route in a very popular tourist destination like Los Angeles is a great way to do just that.
Los Angeles Neighborhoods to Know
Because of how large Los Angeles is this isn’t going to be fully comprehensive, but when talking about neighborhoods to look at investing in we’re going to skip places like Beverly Hills, Bel Air, or Brentwood because these aren’t neighborhoods you break into with a house hack, they’re the multi-million dollar mansions everywhere.
We’re focusing on neighborhoods where there are realistic options for house hacking for the average to above average earner in the area.
Up and Coming L.A. Neighborhoods to House Hack
- Glassell Park
- Echo Park
- Highland Park
- Faircrest Heights
- North Hollywood
Keep in mind some of these neighborhoods have been considered sketchy until very recently and are going through some growing pains, but investment and new young professionals moving in are changing some of these neighborhoods into places that have a very promising future.
Dangerous Los Angeles Neighborhoods to Avoid Completely
- Skid Row
- West Adams
Until those neighborhoods see major changes, the kind that often take decades if they ever take place, I’d look to the other many more promising (and safer) neighborhoods and suburbs in the greater Los Angeles area.
Depending on your location in the greater L.A. area, the Airbnb strategy could very well prove to be the most profitable strategy for house hacking in Los Angeles.
Should You House Hack Los Angeles?
Overall, Los Angeles is a great city with a ton of potential. If you live in the area or are going to need to move there, house hacking can be a great way to break into an expensive housing market that has minted its fair share of millionaires over the past several decades.
While it won’t be for everyone, if you have the risk tolerance for dealing with rent control and tenant friendly states, and the funds to break into the market, then house hacking Los Angeles could be a great option.