Why we’re moving to the hood

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My very patient wife Lucy and I are moving this week to a new home just north of Washington and just east of La Brea.

When I tell people where we’re moving, they get sour looks on their faces and say things like “Oh, I guess it’s improving” or “It’s not that bad”.

The truth is, it’s not that bad, but ain’t Shangri-La, either. So, why are we doing it?

Because it makes sense financially. Here’s how it works:

  • We bought a fourplex
  • We’ve joined the top two units for ourselves
  • Our downstairs tenants pay a total of $3600 / month
  • The total mortgage / taxes / insurance ends up around $4,000 / month

Obviously, there are additional costs (water, maintenance, etc.). But we’re going to end paying something like to $1,000 / month to live in roughly 2,000 sq ft of space upstairs. Once you consider the depreciation of roughly $1,200 / month, we’re creating losses of $26,000 / yr. At our marginal tax rate, that’s worth approximately $13,000 in tax savings. So, we’re living for free.

I’m not sure how long we’ll be able to tolerate living in an apartment (Lucy is incredibly patient, but there are limits!). When we’re ready to move, we’ll rent out the upstairs units for $1800 each and net something like $25,000-30,000 / year on our $250,000 investment ($200k down plus another $50k or so in renovations).

Deals like ours don’t just fall off trees. You need to know what you’re looking for. If you’re interested in trying, get in touch.

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