For many people living on the LA Westside, the dream of home ownership has been both elusive and hard to come by. When you consider the fact the median price of a home in LA as of December 2018 was $581,500, which is 2.6 times the national median price of $223,900, that’s enough for a lot of renters to pack it up and head to cities in the US where jobs are plentiful and homes are affordable. And yet, with a large portion of the country experiencing Antarctica-like temps, making it harder for those who couldn’t imagine leaving the So Cal lifestyle of the beach, warm weather and year-round outdoor living…there may be hope.
For as long as I have been interested in real estate, I have always wanted to be a real estate investor. The idea of owning something where someone else paid the mortgage while also generating monthly cash flow, has always been attractive. This along with many added benefits of owning investment real estate, are exactly why you should consider buying an investment property as your first purchase, and not a single family home.
When you purchase a 2-4 unit building, the lender still sees it as a residential purchase, meaning you don’t need to get a commercial loan which is required for buildings having 5 or more units. This means depending on your makeup as a borrower i.e., your credit score, income and debt to income ratios, you would have the same down payment flexibility as in a single family home purchase. What’s also great about buying 2-4 unit buildings, is that as an owner occupant (meaning you will live in one of the units), the bank will take 75% of the monthly income generated from the remaining units, and add it to what you make, when it comes to qualifying for the loan. This can be a HUGE and sometimes un-thought of advantage for most people, which can allow you to live in an area where owning a single family home was out of reach.
Let’s say you’re a fist time buyer and instead of looking to buy a home, you consider purchasing a duplex having both a 2bd/1ba and 1bd/1ba unit. Depending upon your housing needs, you could decide to occupy the 1bd unit, and use the income from the 2bd unit to not only help you qualify for the purchase, but to also help pay the mortgage with the monthly rent you’ll be collecting. As your income grows and or housing needs change in the future, you can always move into the 2bd unit and now rent the 1bd out. Over time through improvements and equity buildup, you could pull money from the duplex, use it to purchase a single family home, and now have the rent from both units to help pay the mortgage. In addition to having these options, there are the added benefits of writing off repairs, capital improvements, and a percentage of your annual property taxes, which is based on the portion of the building that you rent out. As everyone’s situation and scenario is unique, please consult your tax advisor.
Should you ever have any questions regarding an investment property purchase and if you’d be a good candidate, or about the LA Westside real estate market in general, please don’t hesitate to call or text us at 310-403-7381. If you prefer, you can email us at firstname.lastname@example.org.