Sometimes It Takes 2 to Buy 1st Home

A couple of years ago, Bill McCaleb and Gary Mitchell decided that their income taxes were too high.

As single renters, they realized that they were paying the government far more than they would if they owned property.

Neither of them could afford to buy a home alone, but they decided they could swing it as co-investors.

McCaleb, a Santa Monica veterinarian, and Mitchell, office manager of a Century City law firm, both had been renting in the Westside. They agreed they wanted to stay in the area, near their work and social activities.

They first looked at single-family homes, but almost immediately ruled them out because of price.

"There was nothing in Santa Monica for less than $169,000, and what they called a bedroom was about the size of a laundry room," said Mitchell, 33.

They turned their search to the condominium market. In mid-1982, the market was glutted, interest rates were high and prices were starting to come down.

Mitchell and McCaleb eventually found a spacious three-bedroom, three-bath unit in West Los Angeles that had been reduced from $170,000 to $135,000.

They liked the new, 1,600-square-foot trilevel dwelling with a roof patio. It was appealing, they said, not to have to worry about yard work and maintenance, since both have demanding jobs and a full schedule of after-work activities.

"We borrowed nearly 100%, getting a private loan for the down payment," McCaleb said. "We figured that we could rent the third bedroom and use that money to pay off the loan for the down payment in three years."

Their monthly payments for the first three years are nearly $2,000. After they repay the down payment, it will cost them $1,600 a month. The payments include homeowner fees and property taxes.

According to Westside real estate brokers, a growing number of condominium owners are people like Mitchell and McCaleb, who cannot afford to buy in the Westside unless they go in together as business partners.

In the 10-unit building where Mitchell and McCaleb live, owners include four professional couples and three single people.

One of the single owners is Sharon Mednick, a counselor and teacher at University High School who works two extra jobs, at night and in the summer, to help pay her mortgage.

Mednick said she decided to buy because "income taxes were eating up my wages," but she said condominium ownership has not proved to be inexpensive.

"It has reduced my income taxes somewhat, but there are other considerations," she said. "The monthly homeowner fee here is about half of what I paid in my old apartment, and the property taxes are high because it is a new building not protected by Proposition 13."

Mednick said that although she has always worked extra jobs, she had always done so as a matter of choice. Now she feels more dependent on the extra sources of income.

"Before, I never worried about money as much," she said. "I felt I had the choice or working or not, but now I feel more pressure. What if I didn't have a job?"

One of the selling points of condominium ownership is that it is supposed to be more carefree, but the building that Mednick, Mitchell and McCaleb bought into turned out to be more trouble than they had anticipated.

The developer went bankrupt and the bank foreclosed on the project. The condominium owners were left with unexpected expenses, such as having to chip in to complete work the developer had not finished properly.

Worse yet, they had to hire an attorney at $100 an hour when they found that a lien had been placed on the property because the developer had not paid the property taxes on two unsold units. Until the lien was lifted, the owners could not sell their property, had they wanted to, without paying the back taxes on the unsold units.

"We experienced a real tough first year," said Mitchell, who was the first president of the homeowner association. They all were first-time homeowners, he said.

"We all got a short course, or maybe it was a long course, in condominium law," said another resident. Mitchell said that next time, he would look more carefully at protections for the buyer and at the track record of the developer.

"But even with all the problems, it was worth it," he said.

"The difference between what I paid in rent and what I pay here is scary, but it is all made up by the tax advantage," he said.

In a few years when the market improves, Mitchell said, he and McCaleb expect to be able to sell their condo for substantially more than they paid. The profit could be used to step up to single-family homes, he said.

Mitchell and McCaleb drew up a formal contract when they bought the dwelling, outlining their financial responsibilities and giving each the right of first refusal should the other decide to sell his interest.

In addition to all the financial advantages, Mitchell said, the condo has been "a nice place to live," with a fireplace in the living room, new kitchen appliances, rooms with high ceilings and ample space, and a central Westside location.

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