A foot in the door
Becoming a landlord in Nevada while remaining a tenant in California felt backward to DeLanzer Huggy Ford.
Most people buy investment property after purchasing an owner-occupied residence.
But it was the only route the Sherman Oaks choreographer could find into the housing market. With a $200,000 limit on his purchasing power, Ford hit the price ceiling before he could find a desirable residence in Southern California. So he laid down $160,000 for a 2,400-square-foot, three-bedroom, three-bath house in Las Vegas.
Other Southland renters are taking similar approaches, staying put as tenants while purchasing their first properties out of state. Like Ford, they are anxious to grab hold of some real estate of their own, but with local home prices several rungs out of reach, they are buying outside California.
Eventually they plan to either sell their out-of-state investments or pull out equity to buy in Southern California. The success of this strategy will depend on housing appreciation, but so far those who have done it say it's worth the risk.
"Don't get me wrong," said Elena Schmidt, a single mother in Los Alamitos who this year purchased a condominium in Las Vegas. "It was not easy. I put my finances in jeopardy. But you have to look at the big picture. I knew I was doing the right thing, but at the same time, I was like, 'What did I get myself into?' "
Schmidt, who is in her 30s and works for a dental insurance company, followed the advice of a friend who has turned real estate investment into a second career.
Schmidt first considered Scottsdale, Ariz., but was concerned that it was too far away. Then she looked at Las Vegas and, after having her first choice snatched up by another buyer, found a $135,000, two-bedroom, two-bath condominium that met her requirements.
"It's a lot of work, going back and forth and arranging," she said. "You have to find the agent. You have to find somebody who will finance out of state."
When all was done, Schmidt's mortgage payment, property management fees and homeowners association dues totaled $1,000 -- about $300 a month more than the rent the market will bear.
But Schmidt thinks of the tax benefits she'll receive as a property owner and considers the out-of-pocket expense akin to a monthly contribution to a 401K plan.
"This is the way I look at it: You put in $300 and they [the tenants] put in $700 a month," Schmidt said. "Wouldn't you agree to that?"
