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    Beach City Income Property for First-Time Home Buyers

    March 5, 2022

    By: Richard Haynes
    Beach City Income Property for First-Time Home Buyers

    In a real estate market heavily tilted in favor of sellers, buyers need to get creative to find affordable deals in real estate.

    Almost always, first-time home buyers are the ones who have it the toughest.

    First-time home buyers typically have less to put down, require higher leverage and have little experience on how to pursue or underwrite real estate.

    However, the advantage that these buyers often possess is the willingness to be flexible.

    So, how can one be flexible to give themselves an advantage?

    The answer is plain and simple: Beach City Income Property.

    Due to the expensive nature of South Bay real estate, rarely do income properties by the beach pencil from a cash flow perspective. There are very few investors willing to hold property at a negative yield.

    Additionally, banks require larger down payment for non-owner-occupied real estate, interest rates are higher, and interest-only options are oftentimes not offered. With many beach city income property units on the smaller side, big investors would not dare to occupy a small beach unit.

    But, if you are a first-time home buyer with flexibility and the willingness to sacrifice to acquire your first property, then beach income property is where it’s at.

    You have the advantage of fewer investors, fewer home buyer competition, and the benefit of a higher leverage loan, lower interest rates, and yes, even interest-only loans to service debt more easily.

    The cherry on top, you get rental income from your tenant(s) and oftentimes a better location than a single unit with the same overhead.

    This week, I am going to give you a few examples to consider that not only offer value but are likely more affordable considering the rental income.

    Like I stated before, if you are willing to be flexible and sacrifice upfront, you can land a great beach location and spend less money owning it.

    North Redondo Triplex

    The first example is a triplex that closed this year in North Redondo. If you search in this area, by far, you will get the best price relative to rent revenue in the Beach Cities.

    • 2517 Curtis Avenue, Redondo Beach
      • 3 beds, 3 baths, 2,015 sq. ft., 7,485 sq. ft. lot, Triplex
      • Sold Price: $1,570,000

    This property allows for a buyer to pick up three units – a studio, a 1-bed, and a 2-bed.

    Pick whichever one you want to live in and enjoy rent collected from the other two units.

    Let’s assume a 20% down loan at 4.25% interest only where the buyer occupies the unit with one bed. Additional assumptions would be that the buyer keeps the studio at under-market rent of $1,115/mo. and puts in a little love into the 2-bed unit to achieve its pro forma $3,200/mo.

    For simplicity purposes of the blog, we will state mortgage payment, taxes, and rent to find what costs the first-time owner would bear.

    See below for the breakdown:

    • Rent Collected: $4,315/mo.
      • Less:
        • Interest Payments: $4,450/mo.
        • Taxes: $1,500/mo.
          • Cost to the owner residing in the one bed unit: $1,635/mo.

    Of course, there are other expenses to running a property, like any homeowner would have, but the point is that this triplex did not go for over asking. Investors simply could not make it pencil and the seller had to take a discount in order to get a deal done.

    A flexible first-time home buyer with about a $350,000 down payment could own a fabulous investment and live in a 1-bedroom for a similar cost to renting it.

    This was an amazing opportunity for an owner-occupier.

    Hermosa Sand Duplex

    If one needs to be closer to the beach, then Hermosa will likely be your best option (or a close second is El Porto aka North Manhattan Beach).

    Let’s take you to a duplex that recently went pending:

    • 818 Cypress Avenue, Hermosa Beach
      • 4 beds, 2 baths, 1,752 sq. ft., 3,160 sq. ft. lot, Duplex
      • Asking Price: $1,950,000

    This Sand Section location offers two units with 2-bedrooms each and pro forma rent of $3,500/mo., per the agent. Now, the overhead won’t be as good as North Redondo, but it will be better than buying a single unit to support all by yourself.

    Now, onto the numbers with the same assumptions as the North Redondo triplex…

    • Rent Collected: $3,500/mo.
      • Less:
        • Interest Payments: $6,900/mo.
        • Taxes: $1,900/mo.
          • Cost to the owner residing in half of the property: $5,300/mo.

    This is obviously more money, but perhaps pick up a roommate for $1,000/mo. and your costs drop to $4,300/mo. – close to what it would be for renting.

    In full disclosure, this price would not qualify for a conventional loan, but big box banks will do the interest-only option for 30% to owner-occupants in many cases.

    That extra down payment + roommate would get you to about $3,500/mo.

    While not perfect, a little flexibility and sacrifice really makes this income property intriguing. And once again, it took this listing almost three months to open escrow, so the price is likely lower.

    Two Active Listings to Consider

    The two above examples are either sold or currently in escrow. What about the current opportunities?!

    I won’t leave you hanging.

    Below are two real, actionable listings that are available today.

    • 331 Bayview Drive, Hermosa Beach
      • 2 beds, 2 baths, 820 sq. ft., 1,437 sq. ft. lot, Duplex
      • Asking Price: $1,525,000

    This listing has two, 1-bedroom units; one with a paying tenant and another unit vacant – perfect for an owner-occupied buyer.

    If one needs more space, check out this duplex option with two, 2-bedroom units.

    • 2404 Prospect Avenue, Hermosa Beach
      • 4 beds, 4 baths, 2,064 sq. ft., 3,337 sq. ft. lot, Duplex
      • Asking Price: $1,995,000

    Once again, one unit is vacant and another with a paying tenant.

    What about the numbers?!

    It is simple. Calculate the numbers yourself and see what price might work for you.

    I think you’ll find it is much more affordable than buying a single-unit and it will be a much better cash flow property to hold onto long term if you were to ever move out.


    If you are willing to be flexible and want an edge as a buyer in a scorching hot market, then consider an income property.

    It will afford you buying power and some negotiating leverage.

    Looking back a decade or two, I bet you’ll wish you bought more.

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