Paying high rents in Los Angeles and Orange counties and trying to save enough to buy a home is like using a sieve to collect water. According to Rent Jungle.com, in March 2019, average one-bedroom apartments go for $ 2,500 a month while Orange County comes in at $ 2,194.
Money paid for rent means little is left over to put down on a home. Living a landlord lifestyle, though, can offer a pathway to home ownership.
Realtor Fatima Malik says it’s one strategy she uses with buyers. “The idea of having a property to pay for itself sounds promising if you have the means and the choice fits your lifestyle,” says Fatima. “Carefully break down the costs for owning the property and project what the rent could be.”
Living in a multi-unit building like a duplex to a four-plex is different than outright home ownership. Careful planning is the first step.
A Self-Landlord Profile
Living in one unit of a residence and renting out the other units takes an entrepreneurial mindset since you’re running a business. Get familiar with IRS tax laws for being a landlord plus local county and city requirements for applicable permits and taxes.
Los Angeles County has plenty of online information, including this page Your Home Before You Rent. Know the legal landscape before you start a landlord business, even if it’s renting out a room in your primary home.
Put the Numbers Together
A building costs money to upgrade, repair and maintain. Do all the basic legwork before making an offer like estimating costs of roof repair or replacement, plumbing costs, windows and more.
Fatima says ensure that your rental-residence plan makes financial sense. “Pull together all the costs including water and property taxes. You need the capital to withstand damages that tenants may cause and periods that a unit may be vacant.”
Being your own landlord is not just about collecting money from others to cover your costs.
“Your primary reason for owning should be clear,” says Fatima who has worked with investors locally and internationally like the U.K. and China. “Some people want an asset that will appreciate. So they buy and hold for long-term gains and others want a short-term profit.”
Personal circumstances are important as well. “Can you see yourself living in one of the units and, if so, for how long? Do you have the skills and time to fix problems like broken door handles, leaky faucets, and poorly mounted ceiling fans? If not, you’ll need to hire a handyman or contractor.”
Some people have the personality to have the rent paid on time and follow-up while others are better off turning over the collection to a property management company. Listing the conditions for owning creates a realistic picture.
Once a property aligns with financial and personal goals, then it’s time to get serious about making an offer. Fatima works with professionals who can work with an individual’s circumstances and offer loans that traditional banks normally won’t handle.
There’s another consideration to buying a property to live in and rent out. It’s the same question that Fatima asks people who are selling their homes with a slight twist. “Who’s going to rent?”
Neighborhoods attract people because of the culture that develops and amenities like nearby stores, bus lines, and freeway access. Knowing the type of renter who’s going to live in a place where you’ve put your money is another piece of the puzzle in deciding whether or not you should be your own landlord.
If all the signs point to green lights, then pursue the opportunity. You might find a way to live in Los Angeles affordably and meet some great people along the way.
ABOUT THE AUTHOR
Don Simkovich writes about Southern California, creates content for businesses and is writing the fourth novel in the Tom Stone Detective series.
Visit his website, www.donsimkovich.com, for his creative adventures.