San Diego Real Estate Blog

“Landlord”.   Merriam-Webster definition:  (noun) “The owner of property that is rented or leased to another.”

The lure of becoming the next Donald Trump has many San Diego residents asking me lately about buying rental/income property.  After all, Will Rogers said it best, “Buy land, they ain’t making it anymore!”   Late night infomercials help fuel the fire that fortunes in real estate are there for the taking, all you have to do is send in $49.95 everything else comes naturally, right?  Well, not exactly…

With housing prices at historic lows in San Diego, would-be entrepreneurs inquire to our office often about how to get in the game.  “How can I invest a minimum down payment and rent out a house or condo for positive cash flow?”  Effectively, “How can I, the average person, get someone else to pay for a real estate purchase that I make?”

Or, “How can I move out of the house or condo I currently own, rent it out, and buy a second house/condo to live in myself?”  Great questions!  Consider this…

Yes, it is true; more millions have been made in real estate than any other business in the history of our country.  We all have stories of friends, relatives and famous people in history or in the media today who have leveraged OPM (other people’s money) to help them build a significant real estate investment portfolio.

After all, of  the popular investments one can make (stocks, bonds, gold, a small business, the list goes on), real estate is the one you can normally leverage most using a mortgage, and the only investment you or your tenants can actually live in while waiting for the investment to gain value!  

There are two basic components that get in the way of the typical person following through on this dream, and I don’t mean picking up the phone at 2:00 am and ordering those DVD programs from the television pitchmen!  Instead, start by asking yourself these basic questions:

1)  “Do I own the place where I currently live, or am I paying rent?”   Unlike most investments, one of the beauties of a real estate portfolio is you can usually start off by firing your current landlord and buying your own place first!    This is a great way to get to know what all is involved in being a real property owner AND getting yourself off the rental treadmill, month after month, after year after year.  Often, the tax advantages make the decision to buy a no-brainer (see your tax professional). Then, being in control of your own space is the icing on the cake!

But you have to be ready to get your “hands dirty”, by getting your financial house in order (as you should probably do before investing in anything) and changing your lifestyle from that of a renter (see previous column) to a property owner.

3)  “Do I have a savings account?”  Sounds basic, but with no savings, it is a stretch to pursue most investments, all of which come with some degree of risk (see your financial professional).  It is not how much you have in savings that is key, as much as developing the habit of saving.

3)  Are you cut out to be a landlord?   Real estate investors who buy property with the intention of renting it out have weighed the pros and cons carefully.  They normally have some cash reserves for the months that a property may become vacant, often at a moment’s notice!  They have budgeted for repairs of damaged walls and carpet, or replacement of appliances for example.  And what about the famous late night phone calls to fix a leaky toilet?  You will never get a call like that from your stock broker!    Maybe the idea of getting a part time job to provide additional income is not that bad…

But if you have answered these basic questions “yes”, you may be landlord material.  If question #1 is an obstacle, now is a great time to taking the first step and buy your first home, and stop paying your landlord’s mortgage!   Don’t worry; you don’t have to change to a Donald Trump hair style.  Whew!

Q:  We are thinking of selling our house on our own, in order to save the real estate commissions which we cannot afford to pay anyway.  Any tips?  - B. Kaminska, El Cajon

A: Great question, but be careful.  According to the National Association of Realtors, the average sales price of a FSBO (for sale by owner) property is over 20% LESS than a similar property sold by a real estate professional, who normally charge around 6% to do the job for you.  My tip is, carefully consider your options before you make any major decisions about what is probably the biggest investment you will ever make. 

We are all about saving now, right?  Save a buck, save a tree, save on utilities!

San Diego is home to some of the warmer weather in southern California, and with that comes some great opportunities to save money in “these challenging economic times”.  Did I just say that?

Seriously, with the increased costs in energy we are all facing, household use of water and electricity is key to keeping dollars in our wallets.  To many San Diego county residents, you get the bill, you pay it.  Or, if you rent in many cases, you never see the bill (especially water), so you assume there is not a water problem or costs associated with using water.  Not so, my friends; your landlord sees the bills…every month.  Your rent could be impacted in the near future if you and other renters are not sensitive to the rising costs and increasing shortage of our precious utilities.

I look forward to getting some great emails this week; I’ll start with the following basic tips which can make or break a tightening monthly budget!  Habits are funny things, but many habits are money-making habits or money-saving habits.  These are for renters and owners, and for spreading the word.  Friends don’t let friends lose money to the utility companies!

Habit #1) Turn off the lights!  When you leave a room, or especially a lighted closet, turn off the light!  Now you know why your parents told you that…it costs money. 

Except for necessary security reasons, outdoor porch lights, driveway lights, pool lights, even low voltage yard lights can uselessly drain your piggy bank by the minute.  Enjoy them when they are being used to welcome guests and enjoy our great weather.  Just get in the habit of turning them off when not in use…like a blender. It will save you money and save on the power grid.

Outdoor floodlights used for after-dark horseshoe tournaments and for showing off your great landscaping are utility bill death.  Turn them off before you retire to the Wii indoors…it uses electricity too! 

Habit #2)  Get new lights!  Replace your old, hot (get it?) energy sucking incandescent bulbs with the new (cooler) florescent, soft-cone looking bulbs.  Not only is the savings huge, but the newer style lasts longer between replacements.  That could save you some gas!  Breaking the habit of buying the old style bulbs is like going from whole milk to 2% milk.  Just do it, it’s better for you.

Habit #3) Open the windows!  Let the cooler evening air take the temperature down in your house, condo or apartment rather than “paying” your air conditioner or fans to do it. 

Habit #4) I hope you have not been leaving the air conditioner on while you have been away at work all day, have you?  If so, catch up to the rest of the class and get into this habit ASAP.  It only takes a few minutes to cool off the home when you arrive.  An empty home needs no cooling for anything.  See your pet store professional if you own fish, then decide if you really want to keep them.

Habit #5) Turn off the water!  Guys, don’t let the bathroom faucet run the entire time you are shaving!  Can you imagine allocating thousands of gallons of water get piped down here from parts unknown just so you can let it run down the drain unused?   That’s’ what’s happening!  We import over 90% of our water in San Diego County.  Don’t let it go out to the ocean while you are trimming your beard.  I am talking to literally thousands of guys in San Diego!  That’s swimming pools full of water per year, wasted while shaving in San Diego alone!

Habit #6) Take 5 minute showers.  Really.  You are in the shower to get clean, not pretend you are away at Warner Springs or Niagara Falls.  Use a timer if you need to (some San Diego apartment managers are passing out 5 minute egg timers).  Showers are where we waste the most water ever, not to mention the heat used to make it a warm shower.  5 minutes, everyone else can do it, so can you!

Q:  Someone told me that the federal government is taking away the tax deduction for interest in a home loan.   Is that true?  K. Garcia, El Cajon

A:  So far, it is not true.  There has been talk about it from the current administration, however.  Keep in touch with your tax professional for the best answers to tax questions.  I have a couple professionals I can refer if you need tax advice.

                  Who Should Hire a Housekeeper?   Who should not?

Do you clean your own residence?  Most people do.  After all, it’s a basic responsibility of life, right?  “Pick up after yourself!”  We have all heard it.  But many East County residents are learning the value of having a housekeeper or cleaning service scrub the toilets, mop the kitchen and vacuum the carpets for them.  Ahhh…a maid service may be for you!

“Isn’t that just for the upper crust in La Jolla?” you ask.  Not necessarily.  Let’s get down and dirty (sorry!) with the subject and see what makes sense. 

Do you work?  Busy, busy, busy, aren’t we all?  When the weekend comes, do you look forward to housework?  Some people do!  Many folks find solace in making sure their home is clean their way, gleefully and peacefully washing their windows and mirrors on Saturday morning, or knocking down cobwebs on Sunday afternoon.   Some enjoy the time alone (or with someone) staying home, turning on some tunes and dusting bookshelves to the sounds of the the oldies-but-goodies they bought from a late night infomercial.  When it’s over, a cold beverage and something on the grill is a well deserved reward!   

Further, many people feel that no one can clean as well as they do and believe that hiring a maid service is decadent or a sign of laziness.  If you are one of those people, hiring a housekeeper would probably be more a source of worry or perception of waste for you; don’t do it.

Can you afford a housekeeper?  Maybe it is simply not in the budget.  No one will be impressed if you have a clean house but cannot afford to go to the movies.  Instead of going to the movies, clean your house!  Look for the fun and satisfaction in ensuring that your living environment is clean and clutter free.  Know that you are using the products that are pleasing to your senses and methods that work the way you want.  For some good input, pick up the book “How to Clean Almost Anything” and make the chore of house cleaning an enjoyable release of creative energy.  It can happen!

But if getting real with the dust of East County in your home is not your idea of quality leisure time, and you can afford it, by all means consider a housekeeper!  In fact, depending on what you do for a living, you may be able to justify the expense very easily by the time saved…

For about $40-$80 per visit (depending, depending), you can easily find a housekeeping service (or maid service, same thing) to do the dirty work for you.   Some show up with their own supplies and equipment (deduct that expense, and save that trip to the store when you run out of Pledge in the middle of a polishing frenzy) and spend anywhere from 2 to 4 hours cheerfully scrubbing your kitchen, bathrooms, floors, counters, etc., while you are at work, doing what you do for a living!   Or, maybe you are retired and figure you just deserve the luxury…

It is a wonderful feeling to come home to a sparkling clean house (every week, 2 weeks or once a month are the normal choices), smelling fresh, dishes washed washed (yup, most services clean up whatever is left in the sink, within reason) and those telltale vacuum tracks in your carpet or rugs.  Clean, clean, clean! 

Then, if you “pick up after yourself” keeping the clutter to a minimum, you have your leisure time free to live your life in the enjoyable ways you choose!  After all, life is all about choices, right? 

Speaking of choices, like in any service-for-hire business, rates and qualities of workmanship vary.  You might like knowing that your cleaning service is bonded, in which case you can expect to pay more.  Oh, and please don’t be shocked if you experience the accidental breakage of an occasional wine glass, or picture frame; it happens when you clean, too!

This week’s reader questions:

Q:  Do have any tips about home security?  We are retired, live in East County and are looking for inexpensive ways to make our place safer. –L. Robinson, Santee

A:  Here’s one!  Keep your car keys by you at all times, even on your nightstand at night.  Since most people have car alarms on their key fobs now, you can activate your car horn (HONK!  HONK!  HONK!)  and flash your lights by pressing the car locator button…no increase in household expense, but a great deterrent if you think someone is snooping around! 

Maybe YOU Should Keep Renting Forever!

I’ll bet you never thought you would hear a Realtor say that.

But it is true; many people who rent their East County homes should continue to rent, perhaps for life.    

Case in point:  Jennifer and Bill rent an apartment in Santee.  Jennifer works in the restaurant business, have benefits and a decent wage, while Bill owns his own plumbing company. 

They also love their home, a rented apartment which requires no property taxes be paid, has no HOA fees, zero maintenance outdoors and very little fixing indoors.  Jennifer and Bill take frequent trips to Las Vegas in their spare time and collect movies.  They are also in a bowling league and keep fit by hiking various trails around the county.  Jennifer and Bill have no children and do not plan on having any.  “We love being free from the work and worries that go with owning a house or condo”, says Jennifer.

“When I get home from work” says Bill, “I have plenty to do.  Whether or not my own toilet works is never a problem!  If there is a problem with anything here in the apartment, including the plumbing, I call the manager and it gets fixed.  As far as investments to, I have a stock broker who worries about that for me.”

Jennifer adds, “My sister is being told she has to move out of her house right now, and is trying to find a place to rent”, says Jennifer, whose sister’s application for loan modification was recently denied on the home she and her husband bought in 2005 at the peak of the market, using 100% financing.

Fact is, Jennifer and her sister did not grow up with parents who were homeowners and have never been interested in the benefits of owning their home.  Is there really something wrong with that?  Bill enjoys the tax deductions through his business; Jennifer has always enjoyed the flexibility of moving without concerns about the buying-selling process, as did her parents.

Sure, any good accountant can make a case for homeownership, and we real estate professionals do it every day.  But there are other considerations that go into choosing a home and the lifestyle that goes with it.  Owning is not for everyone, and each individual or family should asses their own priorities to determine what makes sense for them. 

Now, now my fellow agents, I have not deserted the ranks of believing in the American dream!  But let’s be frank.  No $8000 tax credit, or interest deductions and or the great feeling some of us experience knows as “pride-of-ownership” will ever sway a certain segment of the population and, in some cases, shouldn’t!

Take Frank and Roberta in El Cajon.  They just sold their home of 40 years.  The kids are grown and gone; Frank and Roberta will soon be hitting the road in their new motor home.  “Been there, done that!” says Frank about homeownership.  “I can’t wait to call our landlord and tell him something needs replacing.  I think I’ll call him from Yosemite National Park!”

Let’s face it, the thousands of families who rent their East County homes cannot all be wrong or completely missing out on some big secret of life, to which only we mighty homeowners are privy.  Different strokes for different folks!

Q:  Someone told me that prices have fallen so low on homes in East County that I could actually end up paying less to own something, than I am paying in rent.  Is that possible? – Sean B., Lakeside

A:  Yes, it is very possible.   I don’t know how much your rent is or what you would want to buy.  But we are seeing the monthly numbers line up very closely right now, and sometimes ownership is actually less money.  The $8000 from the government helps, too!   You should check it out.  This is a good time be asking that question!  My website has a mortgage calculator feature:  www.KeithSellsSanDiego.com.  You can do the math!