Writing their own script
Television writers Daniel Vaillancourt and David A. Lee never thought they could get the financing to buy a home.
“We’re freelance writers,” Lee said. “Who would give us a loan?”
But weary of paying $2,000 a month for rent on their Hollywood Hills apartment, they came up with a plan one day in late July: Buy a duplex, live in half of it and rent out the other half. The rental would provide a source of regular income to help them qualify for a mortgage and offset the monthly payment.
An hour later, they were driving around looking for signs. As freelancers, Vaillancourt said, “we’re used to creating our own opportunities.... So this was nothing new. We pounded the pavement.”
In fact, their determination helped them find a West Hollywood duplex a month later and close escrow 30 days after that.
But that’s not to say the two didn’t have help. Used to collaborating in their work lives, the partners decided they needed a real estate agent to help them determine location, price, down payment, how much rent a second unit could bring, what renovation was necessary to get that rent and, finally, the financing.
One agent immediately came to mind. Vaillancourt and Lee had met Michele Hess of DBL Realtors last year during an entertaining afternoon touring multimillion-dollar open houses. Hess was holding an open house along with mortgage broker Leo Donato, whose services the pair also would use.
Finding the right duplex, Lee and Vaillancourt discovered, was more difficult than selecting a real estate agent and mortgage broker. The second day of their search, they received an e-mail from Hess listing 32 potential properties. But after looking at several duplexes in areas they didn’t like, they narrowed their search to West Hollywood, Hollywood, Silver Lake, Los Feliz and Miracle Mile.
Using skills honed in researching characters for TV shows, Vaillancourt studied the legal ramifications of buying duplexes with tenants already in residence. West Hollywood has strict rules, one of which states that “landlords may not issue 30-day notices to terminate tenancy without cause.”
However, according to 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to move in (and then generally only the newest tenant may be asked to move), if all rental units in a building are withdrawn from the rental market, if a landlord already living on the premises needs to switch units with a tenant for medical reasons (to have a ground-floor unit, for example), or if the landlord needs to make repairs ordered by a government agency that cannot be done with a tenant in the unit.
A landlord in a West Hollywood rent-controlled unit can offer money to encourage a tenant to relocate but cannot force a move. “You can’t buy your way out,” said Allyne Winderman, the city’s director of rent stabilization and housing.
With a clear understanding of the laws in West Hollywood, Vaillancourt and Lee continued their search, looking for fixer-uppers from about $300,000.
After seeing the location and condition of duplexes in that price range, however, they expanded their range up to $600,000 and asked contractor friends Tim Wenzel and Tommy Shortess to evaluate the cost of improving each duplex they considered. According to Hess, each increment of $750 in rental income charged would qualify them to borrow an additional $100,000.
Even in the new price range, qualifying for the loan was not difficult. According to Donato, people who are self-employed should look for a “no-income-verification loan.” Also known as a “stated income loan,” it bases qualification on credit history and down payment, not on verifiable income. The downside is it comes with a higher interest rate. “It’s a very common loan in Hollywood,” he said.
After looking at dozens of places, getting financial analyses from Donato for eight or nine of them, and making 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 have 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, $100,000 in upgrades had been spent on the duplex in the last two years, including tiled floors, can lights, all new windows (except for the front picture windows) and central air and heat. Plus, the property had no tenants.
Hoping to buy the duplex before the Labor Day weekend could 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 consider the offer. Three hours later, the offer was accepted.
Even though the duplex had been improved, Vaillancourt and Lee wanted to make it nicer. They pulled up the tile in the unit they chose for themselves and added hardwood floors, put granite kitchen counters in the rental unit and added marble floors to both units’ bathrooms.
New appliances included a front-loading washer and new dryer for each unit. A new wood fence gives the rental unit its own small yard.
By upgrading the rental unit, the new owners hope to rent it out for $2,200 a month.
Lee and Vaillancourt, who landed an 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 multimillion-dollar mansion in the hills. That’s what happens to people in L.A.”
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Buying strategy at a glance
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%
Renovation costs: $50,000
Anticipated rental income on one unit: $2,200 a month
Real estate agent: Michele Hess, DBL Realtors, Los Angeles, (213) 700-1372, firstname.lastname@example.org
Mortgage broker: Leo Donato, Sterling Financial, Studio City, (818) 980-9917, email@example.com
Contractors: Tim Wenzel, Tommy Shortess, Pacific Pride Builders, Los Angeles, (323) 525-4024
Kathy Price-Robinson is a freelance real estate writer. She can be reached at www.kathyprice.com.