First Time Homebuyers: Buy Your First Investment Property At The Same Time


Homeownership is the cornerstone of the American dream and an integral part of a long-term wealth building strategy. Owning a home, especially in a market like Southern California, provides substantial advantages to renting that include tax savings, steady appreciation, and gradual principal reduction. But for many, the idea of being a landlord and building passive income is equally alluring to owning a home. So what is the best purchase to make first? Why not do both!


By purchasing a duplex, triplex or quadruplex, you get the benefit of owning a home and purchasing your first investment property simultaneously. There are some serious advantages to this strategy that every first-time homebuyer should consider. One of the most important is the conforming, FHA and VA loan limits. In LA County, here are the current limits:

  • SFR:$636K 
  • Duplex:$814k 
  • Triplex:$984k 
  • Quadraplex:$1.2M 

If you qualify for an FHA loan, you can purchase a home with a 3.5% down payment. For an SFR, $23k is needed for a down payment if you purchase a $658k home and borrow the maximum loan amount. If you buy a duplex, your down payment is $29.5k for a $842k property that also maxes the loan amount. By saving an additional $6,500, you can qualify for a larger, more expensive property. And if you happen to be a Veteran, thank you for your service! You qualify for a VA loan that allows you to purchase a home with 0% down so no additional savings are needed!


Since you will be living in the duplex, it qualifies as an owner-occupied home with lower mortgage rates than a typical non-owner occupied investment property loan. While the mortgage rate will be lower, the payment will be higher since you are taking a larger loan.


A huge advantage of this strategy is that you’ll be able to use the rental income from the additional unit to help qualify for the loan. This is a substantial reduction in the net monthly cost versus owning a traditional single family home. Here are some very rough numbers (assuming an FHA loan) to illustrate the point:


 $658,000 SFR

  • Down Payment: $23,030
  • Mortgage (4%): $3,635.64 ($3,084.49 payment and $551 mortgage insurance)
  • Taxes and Insurance: $795.09
  • Total Monthly: $4,430.75

$842,000 Duplex

  • Down Payment: $29,470
  • Mortgage (4%): $4,652.30 ($3,947.03 payment and $705.27 mortgage insurance)
  • Taxes and Insurance: $989,34
  • Rent on 2bd/1bth Unit: $2,000
  • Total Monthly: $3,641.64.

 This rough analysis does not include any vacancy or additional maintenance expenses, but will hopefully demonstrate the power of having rental income to reduce your net homeownership costs. To get an idea of what an $842k duplex looks like in the LA area, click here.


There are some other advantages to owning a multi-family home instead of a single-family home. The first is the tax advantages of owning rental property versus a primary residence. You can pick up additional deductions that can include depreciation, maintenance and upkeep expenses and business deductions that you would not be able to deduct otherwise. Please consult a tax professional to get a greater understanding of the tax advantages.


You’ll also get to intimately learn about the demands of being a landlord since you are so close to your tenants. If nothing else, maintaining your rental property and being responsive to maintenance requests should be less taxing on your time.


There certainly are some disadvantages to purchasing a duplex as well. Perhaps the area that you can afford isn’t the greatest place to raise a family. Maybe the public schools are challenged. And there certainly can be some uncomfortable moments if your tenants end up not paying rent on time or having domestic issues. Duplex living may feel more like living in an apartment or condo instead of a traditional home. Tenants aren’t for everyone, and this will give you a chance to learn about property management far more than any course will ever teach you.


Keep in mind this isn’t your forever home, just your starter home. Plan on finding a place you will be comfortable living in for the next 4-6 years. Maybe find a place that needs a little work that you can add value to while you live there. Target areas that are up and coming or next to the area that you ideally want to live. For example, you may not be able to afford Redondo Beach now but could afford to buy a duplex in Lawndale or Hawthorne then migrate to Redondo in a few years.


When it’s time to upgrade, you’ll (hopefully) be making more income and will have the ability to save additional funds with the lower net cost of owning the duplex and the additional tax advantages. Perhaps you will start a family while living in your duplex but be ready to move to a better school district once your children get closer to kindergarten. At that time, you will have the ability to sell your duplex and use the equity earned to purchase a much nicer home than you could afford now. Especially if being a landlord is not your cup of tea.


Or even better, you could keep your duplex and convert the unit you were living into another rental unit. This could truly put you on a path to long-term wealth building and become a cornerstone of your real estate portfolio!


David Coe is a CA Realtor and diverse real estate investor in the South Bay of Southern California. He can be reached at

Jan. 8, 2018

Top 5 Tips for Home Buyers in Today’s Competitive Real Estate Market

1. Get Pre-Qualified First

Pre-qualification is truly the first step in the homeownership process.  Without getting pre-qualified with a reputable mortgage broker or bank, you really have no idea how much any home will cost YOU.  Regardless of the purchase (asking) price, each borrower has a different credit score, income profile, and down payment; therefore the price of the home is just the starting point.

Working with a qualified mortgage broker allows you to determine up front “how many homes” you can afford.  Then when you begin your search for a home, you understand what the actual cost of the home would be for YOU, based on the monthly payments, down payment you are planning on putting down, etc.

The second important component to getting pre-qualified is having your “letter of pre-qualification” ready when you find the right home and you are ready to make an offer.  Your offer on a property must include a letter of pre-qualification in order to be taken seriously. Pre-qualification can take a day or two, depending on what supporting documentation the lender requires.  If you are competing against other interested parties, and you do not have this pre-qualification ready, the time it takes to generate this documentation could be the difference between your offer being considered, and another offer being accepted.

 A letter of pre-qualification accompanying an offer shows the Sellers of the home, and their listing agent that you have done your homework, you are prepared to buy, and that you can afford the home.  This small, but important detail can be the difference between getting your offer accepted and losing out on the home of your dreams.

2. Determine Your Housing Needs – Now and in the Next Few Years

Are you a young couple looking to purchase their first home?  Are kids in the immediate future (you will need more bedrooms)?  Are you a single professional, who still lives with roommates?  Do you live by yourself, but are willing to have roommates?  What kind of home do you want to live in?  A condo building with amenities?  A single family home with a private backyard?

Those are just a few considerations to think about when looking into purchasing a property.  There may be only one or two of you now, but if in two years you need more space, do you really want to have to move again?

Do you rent a place by yourself now?  Do you realize that by owning a two or three bedroom (in the same area) it may cost you less, and you will build valuable equity moving forward?  You can take the master suite and rent out the rest of the rooms to your friends and co-workers.  If you find yourself in a committed relationship, your new partner can move in, and you can ask the roommates to move on out.  Already owning a property might be a big advantage in the future.

 3. Be Open Minded and Reasonable

Preview homes that you can comfortably buy and afford.  Be reasonable about what you are able to purchase with your budget.  The next property that you purchase will likely NOT be your last.  Stop trying to make this purchase the solution to everything you always wanted in a home.  Think of it as the first step towards achieving your ultimate home.  If you do a good job of purchasing the right home now, the equity (appreciation) that may take place in the future may enable you to buy the “perfect home” in the future.

Yes, that brand new building or remodeled condo is attractive.  Though the units are small and you will only get a two bedroom, where an older building or unit you can afford three bedrooms for the same price.  Buying something that may need a little updating might be a better option than overpaying for a property someone else fixed up to sell.  When you do the work yourself, you get the opportunity to pick the colors and finishes to your taste.  Real Estate investors who flip properties are on a budget and a deadline.  You will usually pay a premium for their work.  This has the advantage of allowing you to move right in; but if you have the time and a little patience, you may be able to save a lot of money if you buy a unit that needs a little updating and do the work yourself (or hire your own contractors).

4.Location, Location, Location  

Price is not usually the number one factor in purchasing a home.  The cost and what the home looks like often times weigh heavily on the decision; though where the property is located is still the most important factor in Real Estate.  The location usually dictates the value and the surrounding neighborhood.

Some of the most important factors that contribute to “good location” include:

  • Proximity to major business centers, beaches or desirable landmarks
  • School District Ranking and Reputation
  • Crime rates overall neighborhood safety, neighborhood reputation
  • Land Use and Ease of access to freeways, other areas, etc.
  • Views and other neighborhood features and amenities

None of the aforementioned criteria included “price.”  That is because the value of real estate can be specifically dictated by those factors.  In general, people are willing to pay more to live in safe communities that are located in desirable locations and offer good lifestyle features.

We hope you have found these tips useful.  While the suggestions may seem a little obvious, many people do not fully consider the impact of these questions up front in their search for a new home.  When you do know what you want from the beginning, and you have taken the important step of getting pre-qualified for a loan, you can save yourself time and energy, as well as find exactly what you are looking for.

5.Have the Right Representation and Be Ready to Act

Being Pre-Qualified, Knowing What You Want, Being Open Minded and Knowing Where You Want to Purchase Your Next Home are all important; but being Ready to Act and Having the Right Representation when you do may be the most critical component of all.  The COE Real Estate Team is ready to assist you with finding the right property for you.

Why work with just one agent, when you can work with two?

David Coe and Gloria Commiso have over 20 years professional Real Estate Experience as well as decades of professional marketing and advertising experience.  This diverse experience and team approach expands our resources and provides the most dynamic representation available, to assist you with finding the right property, and purchase it at the most favorable price and terms.

When you are ready to discuss your Real Estate needs, please contact Gloria Commiso or David Coe of The COE Real Estate Team of Keller Williams Beach Cities.




Posted in Market Updates
Jan. 8, 2018

FIBI South Bay MB Panel Impresses Capacity Crowd

In today’s hyper-social environment, where there are now way too many groups, organizations, and events to account for, it is refreshing when you attend events like last nights FIBI South Bay that deliver.  For instance, did you understand that the impact of the amount of water used to manufacture an almond can have a dramatic effect on portions of California and other regional Real Estate Markets?  The audience last night will never look at almonds the same.  (There will be a podcast of the event, which will shed some light on how almonds impact the Real Estate market and this complex topic; I will not be delving into further here).

FIBI (For Investors By Investors) is a Professionally hosted, no-sell/no pitch information-only environment that meets monthly.  Each event features a different topic related to the current real estate environment.  Last night’s event was hosted by FIBI organizers COE Real Estate Team partner David Coe and Investor Matthew Owens, and featured three panelists: Ryan Secrist Professional Real Estate Consultant and Managing Partner of Keller Williams Realty, Beach Cities and Torrance Branches, panelist Aaron Belliston who currently serves as President of BMR Enterprises a Real Estate Development Co, and panelist Sara Sutachan the Manager of Broker and Real Estate Finance Outreach for California Association of REALTORS (C.A.R.).  This cross-section of experts discussed the topic “What is Happening in the California Real Estate Market” and the audience was treated to a lively and unbelievably informative discussion from a local and statewide perspective.  The insight and information provided was truly mind-blowing.

FIBI is open to the public, and anyone interested is welcome to attend.  More info about FIBI South Bay can be found here.

A few enlightening quotes from the evening included:

“We are in a pause in sales”, said Sara Sutachan; when responding to a conversation about why this “pause” may be occurring, she replied, “cause its hard to get a loan.”

(A quote that I have paraphrased several times recently when discussing the same topics, but sounds so much stronger when said by the “Managing Broker of Real Estate Finance of C.A.R.”)

The resulting conversation about some of the proposed reasons why loans are difficult to get for borrowers (even though the media continues to promote the large sums of money being lent), and specifically who the loans are difficult for was interesting.

“The Industrial Sector is Expecting Growth” – “there is a significant number of new projects happening in Los Angeles” stated Aaron Belliston.  Our astute audience quickly pressed this speaker, who many did not know, on what this somewhat general statement meant.  After all, “expecting growth” didn’t even include an adjective to accompany a sense of “how much growth” he might be boldly predicting. Then he proved to the audience that he was no psychic, but just a shrewd, savvy investor who really knew his field when he very quickly rattled off the following statistics:

“There are 134k building permits issued in Los Angeles in 2013 for projects that have just begun.  That represents a 40% increase from last year and is only 5,000 permits less than the same period in 2005 (a notoriously busy year for construction in L.A.).  This all results in $1.7 Billion in Construction Expenditure in the area with 96 large projects slated for downtown Los Angeles alone.”

These stats then led us to an in-depth conversation about the impact that these new units will have on the rental market and availability of housing for the fast-growing population. The panel expert Sara then provided some perspective on Aaron’s figures by letting us know that “the state is currently adding 250k new households a year, while only adding 50k new units,” thus we are deficient in inventory.

That was just a sampling of some of the information that was shared and discussed last night.  The panel was providing so much knowledge and insight, you had to focus to absorb all of the perspectives and data.  It was an evening that I am confident all of those in attendance will not soon forget and will reference in their Real Estate conversations for a long time to come.

So if you have made it to this point in this blog post, I ask you… do you think that the COE Real Estate Team has an understanding of the current California Real Estate Market? That is for you to decide.  Feel free to contact me or David to see what else we may have learned last night, today, tomorrow or the next day, and how that may help you with the purchase or sale of your next home or investment property.

Posted in Market Updates
Jan. 8, 2018

How to Use a Cap Rate

When investing in the income-producing real estate business, there are many ratios and other measures used to evaluate a real estate investment. The most important measure is the CAP rate of an investment. There are two key decisions that CAP rate can drive, one at the start of an investment and one at the end.

First, let’s look at how a CAP rate is calculated, then how it can be useful to a real estate investor.

 The CAP rate is an approximation of cash flow as a percentage of market value of the real estate. The formula is operating income/market value. A property with operating income of $40,000 and a market value of $1,000,000 would have a CAP rate of 4%.

Let’s look at a real-world example. Property A has $72K in gross rents with $19.7K in expenses, NOT including mortgage payments. The difference is $52.2K in operating income or Net Operating Income (NOI). If the property was purchased for $1.5M, the CAP rate is $3.48%.

What does that CAP rate tell us? First, it can be useful in determining how much to put down on a property vs. how much to finance. The general rule is:

  If the CAP rate is less than the interest rate, borrow as little as possible.

If the CAP rate is more than the interest rate, cash-on-cash returns increase the more you borrow.

Current mortgage rates are low, but probably higher than the 3.48% of Property A. So if the property were worth investing in, you would want a higher down payment…perhaps as much as 50%…to make sure this investment had proper cash flow.

CAP rates are also useful when considering a 1031 exchange. We advocate exchanging into properties with a higher CAP rate than the property given up. So if you sell at a 3.48% CAP, you want to look for something with a HIGHER CAP rate. Usually, that means a property, or seller, that is more distressed than the one that was sold. Purchasing a higher CAP property will ultimately provide a better result for the investor.

Like all tools, the CAP rate is only one measurement and should not be relied upon exclusively. It is valuable, but it can lead you astray if you ignore other factors. But understanding CAP rate and using it properly can help to determine the long-term chances of success with any real estate investment.


Posted in Market Updates
July 31, 2017

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We can definitely fill you in on details that are not listed on the report and help you determine the best home for you. If you are wondering if now is the time to sell, please try out our INSTANT home value tool. You’ll get an estimate on the value of your property in today’s market. Either way, we hope to hear from you soon as you get to know our neighborhoods and local real estate market better.

Posted in Market Updates