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Los Angeles for 2-yr fellowship - Rent vs buy

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  • Los Angeles for 2-yr fellowship - Rent vs buy

    My wife and I are moving to LA for my two year surgical subspecialty fellowship starting this July. I am in the military and my housing allowance is 3500, annual income is 118K. This will increase to 180K in 2022 when I promote to Major and pass my boards. I have been listening to a few audiobooks and real estate investing, and want to build steady wealth this way (buy property (if it is wise) in each place we PCS) and rent it out when we leave, so eventually have a large portfolio of homes.

    Renting a 3bed/2bath in LA will likely be >3.5K, and buying a SF home will be about the same monthly expense it seems. LA home prices will only go up in the future, so it makes sense to buy. I am worried that when we PCS in 2 years I would have vacancies and would have to cover the rent...but I also don't want to just rent a place when I could be building equity...

    From what I have read, if we buy, it seems single-family in the suburbs is the way to go (more long term renters, easier to manage, more likely to appreciate). The issue is that no home in the LA area follows this 1% rule. This market uses gross rent multiplier to valuate homes.

    I have reached out to a few other sources and am waiting on help in making this decision.

    Anyone have any advice?

  • #2
    Absolutely rent, not even a question.

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    • #3
      Rent

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      • #4
        We got ourselves a real estate mogul on our hands....

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        • #5
          1. rent
          2. rent
          3. rent
          ...
          10. rent
          ...
          ...
          ...
          100. rent

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          • #6
            Welcome to the forum. Rent and enjoy LA with your wife as fellowship/service allows!

            I know Jim doesnt read the forum, but this is a good example of the messaging coming out of the WCI empire. On the one hand: don't buy til a few years into your attending job and no doc needs real estate to win. On the other: post after post about real estate investing and passive income and Coach Whomever's course.....

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            • #7
              Why would you need a 3bd sfh for just you and your wife? I'm certain you can find an apartment that is suitable to your needs with your allowance. Definitely live close to work in LA, traffic is no joke.

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              • #8
                Why do these SoCal home buying threads all sound the same?
                “Work” is a four letter word for good reason.

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                • #9
                  There is no credible, legitimate, non-absurd counterargument to the decision to rent.

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                  • #10
                    I made my decision from the thread title alone. No other information necessary.

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                    • #11
                      Originally posted by michaelavillion View Post

                      I have reached out to a few other sources and am waiting on help in making this decision.

                      Anyone have any advice?
                      Is this number recognizable? Welcome to the forum!
                      First suggestion is probably wish to stay a little anonymous and change your screen name.
                      Rent.
                      Why? You hit the answer yourself.
                      "I am worried that when we PCS in 2 years I would have vacancies and would have to cover the rent...but I also don't want to just rent a place when I could be building equity..."

                      Risk for a "want" is not a wise choice? What could go wrong? Roof, AC mortgage is the minimum.

                      You have a "hope" not a "workable plan". What other sources? Probably not WCI. Take the comments in the spirit intended. Constructive.
                      Last edited by Hank; 03-17-2021, 05:59 PM. Reason: I don’t know if this is the poster’s phone number, but no call to dox him or her.

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                      • #12
                        ....
                        100,000,000. Rent.

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                        • #13
                          To the original poster:
                          These aren’t random posters who are trying to crush your hopes and dreams without reason. Plenty of folks on this forum have served in uniform or know those who have.

                          We heard plenty about how Los Angeles housing valuations could go nowhere but up prior to the 2008 crash. (It didn’t end well.)

                          A property that doesn’t pass the 1% per month rule won’t be improved by 8-12% property management fees, vacancies, repairs, California income taxes, possible rent controls, etc.

                          Stay close to your training; live in a safe, reasonable part of town; and keep your commute under control. If you’re working at Harbor - UCLA, try to get housing at Ft MacArthur if at all possible.

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                          • #14
                            Originally posted by michaelavillion View Post

                            Anyone have any advice?
                            Rent.

                            I'll add 2 things -

                            congrats on the gig!!

                            Also, rent, b/c it takes a lot of work to own a place, and you could be enjoying walks on the beach, or hobbies, or sleeping, or working, etc. I'd use that time in the next 2 years to just fill up the coffers, enjoy your time, and then decide what you want. Transaction costs and selling are just a pita.

                            I vote to rent for your time, the benefit isn't worth the 500 hours it'd take to search, contract, wait, buy, repaint, deal with neighbor, buy another lawn mower, sell, move, pay 2 mortgages, etc.

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                            • #15
                              Regarding the buy and rent at each PCS plan, many have tried it with varying success. I took a slightly different approach. We found the place we planned to use as home base (the DC metro area) and bought a home and other rentals there. Anywhere else I was sent (typically every other tour) we rented. Advantages of this plan: simplified management (one manager for all properties); allowed me to get to know one market and buy cash flow positive properties; every few years I moved back to the area and could buy another or just fix up the ones I had.

                              Regardless, hot and expensive property markets are not really the place to look for long term rental investments. Too hard to buy right so that the investment makes positive cash flow. Be patient.

                              Last thought: the rentals are fine, but represent <10% of my investable wealth after a career in the Service and another in industry. Virtually all of the other 90%+ is in low cost, diversified mutual funds. Time is on your side so no need to jump at all the opportunities. Let this one go. Rent.

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