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You Should Buy a South Bay Income Property (Not a Single-Family Home)

If you tuned-in to our live podcast with DIGS Magazine last week, you probably heard me strongly recommending a purchase of an income property before buying your own home. Why? The numbers alone prove income properties to be the better financial move. If you are motivated by money, then you should really consider buying units in the South Bay rather than a single-family home.

I am an owner of multiple income properties and choose to rent my primary residence because the numbers pencil that way. My sweet fiancée has even agreed to move into a duplex, triplex, etc. as our first home purchase…with some contingencies of course (like watching Real Housewives every night for the rest of time).

Don’t believe me? Well, as always, let me share some examples that will hopefully make you consider looking into the possibility.

*Below assumes: 70% loan at a 4.25% rate over 30 years

Redondo Beach

Income property located at 821 Avenue A (Duplex):

  • Sold for $1,390,000
  • 4-bedroom unit and a 2-bedroom unit over 2,600 sq. ft.
  • Live in the 2-bedroom unit and collect $5,150 per month from the other unit
  • $2,010 per month in overhead after collecting rent (mortgage, taxes, insurance)

Single-family home located at 632 Avenue A:

  • Sold for $1,700,000
  • 3-bed and 3-bath over 1,700 sq. ft.
  • Live in the home with no additional income
  • $7,825 per month in overhead

Not only does the income property cost less, the overhead is almost a whopping 75% discount to the home. You get more square footage, a great future land play, and you could move in to the bigger unit to be comparable to the single-family and still reap better benefits.

Hermosa Beach

Income property located at 639 1st Street (Triplex):

  • Sold for $1,999,000
  • 3-bedroom unit, 2-bedroom unit, and 1-bedroom unit over 2,680 sq. ft.
  • Live in the large 3-bed collect $3,150 per month from the other units
  • $6,015 per month in overhead after collecting rent (mortgage, taxes, insurance)

Single-family home located at 160 Ardmore Ave (corner of 1st):

  • Sold for $1,430,000
  • 4-bed/4-bath over 2,362 sq. ft.
  • Live in the home with no additional income
  • $6,615 per month in overhead

Although this income property is over $500,000 more expensive, the overhead is still lower even with the owner living in the large 3-bedroom unit. Move into the 1-bedroom unit if you can fit, and the overhead drops another $2,000 per month.

El Segundo

Income property located at 837 Penn Street (Duplex):

  • Sold for $1,455,000
  • 3-bedroom unit and another 3-bedroom unit over 3,775 sq. ft.
  • Live in one of the 3-beds and collect $3,000/mo from the other unit
  • $3,725 per month in overhead after collecting rent

Single-family home located at 849 Sheldon Street (on other side of the block):

  • Sold for $1,500,000
  • 3-bedrooms and 3-bathrooms  over 2,100 sq. ft.
  • Live in the home with no additional income
  • $6,925 per month in overhead

Another income property option at a lower price and significantly discounted overhead to service. The square footage of the building is almost double the size of the home which makes your 3-bedroom size quite comparable to the single family option.

If you find you are nervous about servicing the debt and costs of a home in the South Bay, then consider an income property if you are financially driven! It is not for everyone and many still choose to buy a home regardless of the financial implications. And that is OK! Buying a home is often more emotional, involving a lifestyle decision and bringing peace of mind.

But if you are purely motivated by the financials of real estate, then you should be hunting for income property to live in rather than a single-family home. In my opinion, continue to rent and find property that cash flows outside of the South Bay.

Happy hunting!

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