Buying Rentals Is a Hot Topic in Many Firehouses
Silver Lake firefighter Dane Jackson got a piece of sage advice from a captain in his first year on the job. It had nothing to do with putting out blazes. The advice was about real estate.
“Buy property,” the older man said. “Forget the boats and motorcycles other guys your age are buying.”
Jackson took that advice and went on to purchase several houses during the last 17 years. Half of his friends in the Los Angeles Fire Department also bought rental property, he estimates. Experts say these hose-toting men and women make up one of the largest groups of residential landlords in the business, purchasing more rental property than people in other professions with similar or even higher incomes.
“They do own a lot of [rental] properties,” says James Joseph, a broker with Century 21 Grisham-Joseph in La Mirada. “Most experienced agents know that.”
Firefighters tend to go unnoticed as a force in the market, Joseph says, because they purchase small, unremarkable properties, everything from duplexes to six-unit apartment buildings--and they almost always fix them up themselves.
They have time to do the work because of their unusual job schedules. Most work 56 hours round-the-clock, leaving whole days off to tinker with properties, perform maintenance and collect rents. Many firefighters also have valuable plumbing, carpentry and electrical skills and share their knowledge with one another.
Just as important, firefighters say, is the trusted network of investors they have created. If someone spots a real estate bargain but is unable to come up with enough cash for the down payment, he or she can often find others in the station willing to chip in a few thousand dollars.
“We’re a very close-knit working group,” said Dallas Jones, a Downey-based firefighter and head of the Los Angeles Firefighters Union. “When you live with other people and eat together for much of the week, you tend to argue and debate.” While sitting around the dinner table like a family, he says, “a lot of the discussions are about income and investing.”
Although few firefighters would be considered wealthy, most make a decent wage, enough to do a little investing, brokers say. According to city personnel records, base salaries range from $36,500 for an entry-level firefighter to $89,000 for a battalion chief, not including bonuses for paramedic or helicopter skills and overtime pay.
Still, most claim it’s not enough to retire on, with firefighter pensions paying from 2% to 70% of salary, depending on tenure. So most look for good investments.
Although the real estate crash of the early 1990s and a new deferred compensation program prompted some of them to shift their money into stocks, many of these conservative workers still think buying something tangible such as real estate is the best way to build a nest egg.
“I figure that by the time my 5- and 6-year-old children are out of high school and ready to go to college, these houses will be paid off and we can sell or keep renting them for tuition money,” says Jackson, who rents out homes in Moorpark and Northridge.
Although no data are available to track the number of firefighters who own rental properties, brokers, apartment association officials and firefighters believe the percentage of landlords among them far exceeds the percentage of those in other professions.
“I’ve been aware of it for some time,” says Nancy Ahlswede, executive director of the Apartment Assn., California Southern Cities, which has more than 3,000 members.
“I think it’s a situation where they are particularly good at working with their hands, and they have the time to devote to it.”
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In fact, Ahlswede says, most Southland apartment owners aren’t the pinstriped executives many imagine them to be but small-time investors such as firefighters, teachers or beauticians who got into the real estate business almost by accident, winding up with an extra house in a divorce or inheriting a duplex.
“It’s the moms and pops who are the owners here,” Ahlswede said. “Our average member owns seven units. I don’t have even 100 members in my association who own 50 units or more.”
Still, there are more than a few cases of firefighters amassing large real estate portfolios. Ed Arnold, a 58-year-old former Los Angeles task force commander, accumulated most of his 25 rental properties before he retired from the department in 1982.
Aided by a rising market in the mid-1970s when he began buying, he was able to put a little money down, fix houses up, then refinance or use sale proceeds to plow into down payments on the next building. Six of his properties were purchased in partnership with other firefighters, including his son Mark, who is now a captain of the Hollywood fire station.
Although real estate investment is just a sideline for Mark, managing the 150 apartment units has become a second career for his father. Conducting business from an office in the back of his Belmont Shore house, Ed Arnold has taken on three employees to help with the paperwork. He spends most of his days showing properties, arranging for repairs or collecting rent checks.
“I like to keep busy,” he says. “Firemen are active people. They’re not the type that want to go home and watch the tube. You’ll usually find them out in the yard or working in the garage.”
Working hard didn’t prevent major losses for Arnold during the recent real estate slump, but he didn’t lose his shirt either, he says. The buildings provided valuable tax write-offs, and now, with rents and property values rising, Arnold expects them to pay bigger dividends. Reaping the rewards of real estate often entails a little extra financial education for firefighters and other first-time landlords. Many have to take courses in accounting and tax planning to better manage the books and learn the legalities of evicting deadbeat tenants.
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Union leader Jones says he paid far too much income tax in the first few years that he owned his eight-unit complex in Downey, and he has had to cope with months of lost rent trying to evict tenants who work the legal system.
But, the one-story wood and stucco building he purchased from a fellow fireman in 1975 is now worth triple the $140,000 he paid for it. And in a few years, he says, it will be paid off, providing him with monthly rent checks to round out his retirement budget.
“In my opinion,” Jones says. “real estate has been the best investment in California over the last 50 years.”
