L.A. is crazy expensive, particularly if you’re not a Wolf of Wall Street or playing one on screen. So, how do the rest of us save enough to stop worrying about money and enjoy life?
Here’s a bit of wisdom passed down in immigrant families like mine for generations:
Buy a small apartment building, live in one of the units, and collect rent from the others.
It’s not rocket-science:
1. You put down as little as $25k in cash (though the more you have, or can get from family, the easier it is) and borrow the rest at a fixed rate for 30 years;
2. You buy the right building at the right price (this is critical) in an area like the Eastside, where rents are increasing;
3. You move into one unit;
4. The other units’ rents cover the mortgage and some of the other expenses;
5. The amount you pay each month to live in your unit is less than the rent would be, plus you pay with (mostly) pre-tax money*;
6. Because the rents from the other units increase faster than the main expenses (property tax and mortgage), the amount you pay decreases over time;
7. Because you pay less and less to live, you save more and more;
8. When you’re ready, buy something else (bonus points if it’s another apartment building!), rent out the unit you previously occupied, and own an asset that pays you more and more each year;
9. Don’t sell (ever heard a broker say that?). Don’t refinance to pull money out. Then, 30 years from now, your cashflow increases dramatically, and you own, free and clear, an asset worth $500k-$1MM (in today’s dollars; it will be a much bigger number by then!);
The plan seems simple, but there are plenty of ways to mess it up. Over the next few weeks, I’ll write about the nuts and bolts and about how Adaptive Realty helps families like yours start down the path to financial security.
Meanwhile, if you’re interested in learning more right now, check out kagansblog.com.
To read the next post in the series, please click here.
President, Adaptive Realty, Inc.
1670 Beverly Blvd., Ste. 1, LA, CA 90026
*Don’t ever take tax advice from a real estate broker, me included. Consult an accountant.
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