Behind every home purchase is a buyer that's saved up for years. There's all the times they skipped the nightclub, leased a Camry instead of a BMW, and waited for coupons in the mail to buy groceries.
Or, in this case, they might just be dwarves.
The smallest home sold in Northridge in 2018 was 858 sq ft.
By comparison, the average size of sold condominiums in Northridge was 1,326 sq ft. The average classroom in Los Angeles is 1,024 sq ft. In fact, two 2-car garages are bigger. Why would someone buy this house?
I had to find out.
"When you're renting, you don't care how big the house is. You just need bedrooms," says Javier Mendoza, the agent that sold the house. "Although I can't reveal much about my client, I can say he's an investor."
He's right. Although square footage can drastically affect a house's sale price, it does little for rentals. Renters looking for a 2-bedroom single-family residence are less focused on size and moreso on just getting a roof over their heads. Most leases are one year, so the repercussions hardly matter.
It's not so easy with home purchases. You're locked into a house when you buy. The closing costs associated with buying (2%) and then selling (7%) can destroy your wallet.
So, as an investor, it's a win-win. You get a house for cheap, but that still retains its rental income.
"CSUN is another huge draw for renters," Mr. Mendoza remarked.
Right again! When I was in college, I could have lived in a shack and been content. As long as I had Mountain Dew and Top Ramen, life was good. Students are known for living in squalid conditions. It's part of the college experience.
Most folks look at houses as primary residences, but rental income is big business. There's a whole set of different rules when attracting tenants than buyers. The transient nature of the student economy is ripe for capitalization.
There are so many smart people out there. Plus, the yard's nice too. Imagine playing beer pong over there? Who needs a large house when you can be out in the sun all day?
There's a fire pit, a shaded area, light bulbs strewn across, and a nice-sized yard. It's ready-made to be a party house. I can imagine it already - a couple of guys who party so much, that they hardly use the inside of the house. Oh, it's also walking distance to CSUN. Too many beers? Why drive to lecture when you can just walk?
The more I thought about it, the more I realized it was a genius move. At the purchase price of $530,000, it's the twenty-sixth cheapest home sold in Northridge - out of 608 listings! That's company with the foreclosures, condemned houses, and main street houses.
But... it's actually a really nice house.
We can't reveal the identity of the buyer or the address. But that's beside the point. Let the students live their lives. This is a lesson in business - this is how you find a deal.
A good rental property is its value relative to the tenant community. This property in Chatsworth would make a lot less sense. But next to CSUN, it's a brilliant move.
If you'd like to know more about what makes a rental property great, call us at 818-390-3265.
Listing courtesy of Javier Mendoza (DRE: 01404144), Keller Williams (DRE: 01841735)