About 10 years ago, retired Marine Corps Master Gunnery Sgt. Larry Sanchez and his family moved to Murrieta, where they rented a 2,100-square-foot home for $1,000 a month.
At the time, Sanchez could have bought a house but said he wasn't sure he was going to stay in the area after a 30-year stint in the Marines. But he and his family grew to like the area.
"The rule of thumb was if you know you are going to stay then definitely buy a home," Sanchez said. But, "we liked the neighborhood. We liked Murrieta and we liked our neighbors. And I had a stepson in high school at the time," said Sanchez, a Vietnam veteran, who wanted the youngster to finish up school before moving again.
Fast forward to 2004 and Sanchez is still renting a home. That house is 2,100 square feet, costs $1,495 per month and is located in the unincorporated community of Menifee.
While Sanchez has qualified for home loans throughout the years, he said it was never enough to buy a house in Southwest County that fit his family's needs.
"Just recently, we got prequalified for $320,000. You know what you can buy for $320,000 -- an outhouse," Sanchez said. "I need a four-bedroom home, and (listings) were showing 1,300 square feet was all I was going to get."
So Sanchez keeps paying rent -- paying someone else's mortgage -- waiting for the day he might be able to afford a house.
Lots of company
Sanchez and his family are certainly not alone. The percentage of households that rent in the state is about 40 percent, the California Budget Project in Sacramento reported earlier this year. That has been a boon to local investors such as Tom Skinner and David Rothacher, who have turned their own indecision about which home they wanted to live into a gold mine.
Roughly the same time Sanchez moved to Murrieta, Skinner bought a piece of property in La Cresta with the idea of building a home on land that sits high atop the northwest side of Murrieta.
Skinner also bought a single-family home in a cozy little housing development, Vineyard Knolls, which is located in the foothills of Murrieta leading up La Cresta, planning to live there while he built his home in La Cresta.
But Skinner, who is in the woodworking business, found he couldn't find a job in the area that paid him the same sort of wages he made in Los Angeles and didn't want to make that daily commute. So he ended up keeping his job and selling the land in La Cresta.
But he hung onto the house in Vineyard Knolls to rent out, because he figured at that the Southwest County housing market was poised for growth.
The decision turned out to be a good one, and he has since added to his landlord portfolio by buying two houses on the east side of Murrieta with his brother. The home in Vineyard Knolls rents for about $1,500 monthly, while the other two command about $1,400 each, essentially paying for themselves while he and his brother rack up the equity.
While complete data on the average or median rent paid for single-family homes in Southwest Country wasn't available, rental listings from local property management firms show houses typically rent from about $1,400 to $2,250, depending on location, size and amenities.
Typically, a household in Southwest County must have a gross income that is three times its monthly rent, strong credit ratings and good references, said John Sorah, founder of S & L Property Management in Murrieta. That means it takes a household income of more than $50,000 a year to afford to even rent a $1,400 house, although property managers say the demand is still strong.
The median household income in Murrieta was nearly $68,000 in 2002 and slightly above $66,000 in Temecula in the same period, financial data showed.
S & L manages about 300 single-family-home properties in the area, including those owned by Skinner, who turned to the management firm after having trouble renting the Vineyard Knolls home years ago.
"We tried to rent it ourselves from (Los Angeles), and that was a total disaster," said Skinner.
A road traveled
Rothacher, who has owned single-family-home rental properties in Corona and Norco for several years, said he decided to the same thing in Murrieta about two years ago. At that time, the median price of a home in the city was about $270,000.
Rothacher and his wife, Mary, snapped up a home near SCGA Golf Course with the intention of moving into it a few years down the road. Meanwhile, they are renting the home and living in Laguna Niguel. In the meantime, the median has since ballooned to $419,000 as of July, giving them a return on their investment of 55 percent.
"We saw that prices are going up. It was kind of like, you buy today or you can't get in," David Rothacher said on their decision buy in 2002.
Rothacher's road into Murrieta seems to be a well-traveled one, said Sheri Bailey, office manager of Murrieta-Temecula Property Managers in Murrieta. She said owners of rental properties in the area are attracted to it for several reasons, including rising property values and the hordes of folks moving here. She said most of their clients are absentee owners.
Down the line
While Bailey and Sorah say business is strong and should stay that way given demand, Danny Savant of SDL Real Estate & Property Management in Temecula was less certain.
Savant, an 18-year industry veteran who said his company has about 120 single-family homes under management, said it's hard to gauge how the single-family-home rental market will do.
"There is lots of inventory. There is lots of development coming into the market. But it is moving (renting)," said Savant.
He added that some homes rent quicker than others, a reflection of the value owners place on their houses.
"Sometimes rental properties are almost an impulse," Savant said, who rented a 1,700-square-foot home near Pechanga Indian Reservation for about $1,550 per month. "When the owner hired me, I told him in a walk-through, 'If you want to get this rented, I would paint it and change the carpet.' It worked. A gal walked in, said it was 'beautiful' and rented it."
Meanwhile, Sanchez is content to sit back and let the market unfold. He still believes the day is coming when he will be able to buy a home in the area, largely betting that prices will either stabilize or fall.
There's also the possibility he could acquire a house through foreclosure.
"We'll see," Sanchez said.
Contact staff writer Wyatt Haupt at (951) 676-4315, Ext. 2615, or whaupt@californian.com.
