Realtor Sunny Jones discusses purchasing owner occupied income property that can lead you to your dream home.
By Realtor Sunny Jones
3717 S. La Brea Ave, Ste. 102
Housing affordability is a hot topic in our part of the world. The cost of an average one bedroom in Los Angeles now reaches over $2,500, which is a five percent increase over last year according to Rent Café. Leimert Park has an average of over $1,500 for a one-bedroom apartment.
Let’s say you’re a local South Los Angeles or Inglewood resident and you’re paying $1,600 a month for rent. Do that for 30 years and you would have spent nearly $600,000. The purpose of this article is to highlight owner occupied ownership as a way to have a vested interest in your future.
Affordability and gentrification often go hand in hand and native buyers and tenants alike are feeling priced out of the market. So, what can one do to “hack the rent” and become an owner without having to move to the other side of the country? One smart way to invest in yourself, your community and your financial future and buy income property, especially those looking to “hack the rent” and make living in Los Angeles more affordable.
Buying owner occupied income property (meaning you will live in one unit) prior to purchasing that dream single family home can be a great way to secure your financial future since purchasing up to four units is considered residential property. This allows you to use residential financing to purchase the property, a huge benefit as it can open your options to programs that provide down payment assistance and more competitive interest rates than if you were buying non-owner occupied. If you were to purchase a multifamily property after your primary residence, for most programs you would need a 20 percent down payment, which for many is cost prohibitive.
Most loan products will count 75 percent of the income generated as your income, to help you qualify for the loan. For example, you buy a fourplex and plan to live in one unit. Each of the remaining units are collecting $1,000 per unit, you get to count $2250 (3 units x $750) as income for qualifying purposes. Now let’s say five years down the road, you’re ready for the dream home, you now likely have an asset (the rents) to help you qualify for the next purchase. In reality, you have tenants helping you pay $3,000 towards your mortgage every month, lowering your own overhead.
I would be remiss if I didn’t mention ownership and being a landlord is not for everyone. Along with the advantages of owning comes the responsibility of maintaining the property and any tenant issues, and being an ethical property owner. Purchasing owner occupied income property however is one way to be able to afford to invest, live and thrive in your community. It can all seem overwhelming, so work with the right professionals that you trust to help guide you.