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Pardon Our Dust
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Home Buying Strategy
Writing Their Own Script
By Kathy Price-Robinson
Flush with funds following a TV writing job, Daniel Vaillancourt made
a startling suggestion:
"Why don't we buy a house?"
Vaillancourt's partner, David A. Lee, was incredulous, "What are
you talking about? We're freelance writers. Who would give us a loan?"
But weary of paying $2,000 a month for rent on their Hollywood Hills apartment,
they started tossing around ideas--in a style typical of collaborators--until
they came up with a plan: Buy a duplex, live in one half, and rent out
the other. The income would help pay the mortgage and provide a source
of regular income to appease the loan company.
An hour later, they were driving around looking for signs.
Such was the energy and assertiveness that allowed Vaillancourt and Lee
to start their duplex search in late July, find the ideal place in West
Hollywood a month later, and then close escrow 30 days after that.
As freelance televisions writers, Vaillancourt explained, "We're
used to creating our own opportunities professionally rather than relying
on our managers and agent. So this was nothing new. We pounded the pavement."
But that's not to say the two didn't have help. Before the first day's
search was over, the partners decided they needed a real estate agent
as they faced a complex, interwoven catalog of issues: location, price,
down payment, how much rent the second could bring, how much renovation
was necessary to draw that rent, and finally, the financing.
One agent came immediately to mind. Vaillancourt and Lee had met Michelle
Hess of DBL Realtors last year during an entertaining afternoon of looky-looing
at multi-million-dollar open houses. On that day, Hess was holding an
open house, along with mortgage broker Leo Donato, whom Hess refers to
as "my lender of choice."
As it turns out, qualifying for a loan was not difficult. "Almost
anyone can get a loan," Donato said. In just the six years he's been
brokering loans, the number and type of loans available has grown explosively.
To Donato, matching the loan to the borrower and the property is somewhat
of an art form. People who are self-employed, Donato said, should look
for a "no income verification loan." In the case of freelance
writers, who tend to have enormous expenses and tax write-offs that don't
reflect a high income on tax returns,
Donato suggests a "stated income loan," which he brokered for
this couple.
"It's a very common loan in Hollywood," he said.
Finding the right duplex, Lee and Vaillancourt discovered, was more difficult.
The second day of looking, they received an email from Hess listing 32
properties. After looking at duplexes in areas they didn't like, they
narrowed their search down to West Hollywood, Hollywood, Silverlake, Los
Feliz, or Miracle Mile.
Using skills honed in researching characters for TV shows, Vaillancourt
sought out and studied the legal ramifications of buying rental units,
especially those with tenants already in residence, rather than units
that are vacant. West Hollywood has some of the most strict rules, one
of which states that "landlords may not issue 30-day notices to terminate
tenancy without cause."
However, according to the City of West Hollywood's Rent Stabilization
Ordinance, tenants may be asked to move under certain conditions: if the
landlord or a close relative wants to move in (and then generally only
the newest tenant may be asked to move), if all rental units in a building
are withdrawn from the rental market, if a landlord already living on
the premises needs to switch units with a tenant for medical reasons (i.e.
to get a ground-floor unit), or if the landlord needs to make repairs
ordered by a government agency that cannot be done with a tenant in the
unit.
However, a landlord in a West Hollywood rent-controlled unit can offer
money to encourage a tenant to relocate, but not under any type of threat.
And no amount of money can force a tenant to move who doesn't want to.
"You can't buy your way out," said Allyne Winderman, the city's
director of rent stabilization and housing. Frustrations come for buyers
of rental properties, Winderman said, when they don't know that laws in
West Hollywood differ greatly from laws in Los Angeles.
Vaillancourt's and Lee's one-month search, which they treated like a full-time
job, began with them looking for fixer-uppers from about $300,000. Seeing
the location and condition of duplexes in that price range, they became
willing to pay up to $600,000 for a moderate fixer, and they asked their
contractor friends, Tim Wenzel and Tommy Shortess, to evaluate the cost
of bringing each potential duplex up a certain level of luxury.
"We wanted a nice fixer," Lee said.
"So we could get a nice rent," Vaillancourt said. According
to Hess, each $750 in rental income qualifies a buyer for an additional
$100,000 of loan.
After looking at dozens of places, getting a financial analyses from Donato
for eight or nine of them, and asking Hess to make formal offers on four
(for which they were outbid by other buyers), Vaillancourt and Lee found
the ideal duplex on the Thursday before Labor Day, the second day it was
listed.
The 2,176-square-foot Spanish style duplex, built in 1923, sits on a leafy
street filled mostly with duplexes. Like others on the street, it looks
more like a single-family home than a duplex. The two front doors are
sheltered by a single arched, covered porch, and each half has a different
parapet roof detail and a distinct picture window.
Inside, the units are similarly charming with built in cabinets, tiled
fireplaces and 9 1/2-foot ceilings. One has one bedroom, and the other
two bedrooms. Around back, the garage has been converted to a home office
and guest room. According to the seller's agent, the duplex received $100,000
in upgrades in the past two years, inlcuding tiled floors, can lights,
all new windows (except for the front picture windows) and central air
and heat. As a bonus, it would be sold without tenants.
Within minutes, Vaillancourt and Lee told Hess "We want it."
Hoping to buy the duplex before the Labor Day weekend would bring a slew
of other buyers and agents, Hess suggested to her clients that they offer
full price, nearly $600,000, and that they give the
buyer 24 hours to accept the offer. Three hours later, the offer was accepted.
Even though the duplex was nice, Vaillancourt and Lee wanted it to be
nicer. They pulled up the tile in the unit they chose for themselves (the
one most convenient to the back office) and added hardwood floors, put
granite kitchen counters in the rental unit, and added marble floors to
bathrooms both units. Nine thousand dollars in new appliances included
a front loading washer and new dryer for each unit. A new wood fence gives
the rental unit its own small, private yard.
By making the rental unit luxurious, the couple hope to attract tenants
who will treat the place with respect and will be willing to pay the targeted
rental price of $2,200.
Lee and Vaillancourt, who got the MTV writing job just months after moving
here from New York in 2001, see this as their starter home for the next
five years, but wild success could alter their plans.
"You come off an MTV job," Vaillancourt said, "and two
years later you create your own show and it’s a hit and you buy a
multi-million dollar mansion in the Hills.
"That's what happens to people in L.A."
Home Buying Strategy: Buy a duplex and use rental income to qualify for
a loan
Home Bought: Duplex in West Hollywood
Purchase Price: $599,000
Down payment: 20 percent
Type of loan: Stated Income Loan
Renovation costs: $50,000.
Anticipated rent on other unit: $2,200 a month.
Real estate agent: Michele Hess, DBL Realtors, Los Angeles, (213) 700-1372,
mhess@dbl.com.
Mortgage broker: Leo Donato, Sterling Financial, Studio City, (818) 980-9917,
leodonato@mindspring.com.
Contractors: Tim Wenzel, Tommy Shortess, Pacific Pride Builders, Los Angeles,
(323) 525-4024.