Buying (or not) in Los Angeles. Help!

6 Replies

Hi everyone.

I'm brand new to this forum and very new to the real estate world.  

As a self-employed musician, I finally have 2 years of high tax income being shown, and I have some cash to buy now in Los Ange.  Also, Pre Approved.  I managed to get 2 years on a W2.

I'm looking in the range of $300,000 - $450,000 range, condo, townhome etc. House would be preferred but not for my price range.  Preferably looking in east LA, anywhere from Koreatown all the way to Azusa.

I wanted to ask if you think it's a good time to buy in LA.   Everyone is telling me, "if you can do it, do it" but I'd like some real opinions here.   

I'm looking at this strictly as a business and am looking to make as much profit as possible, obviously.

Any insight on great upcoming areas, or any advice on when or how to do this PROPERLY, would be so appreciative.

Thank you!

@Neal Daniels congrats and welcome. Not sure how far south you’re looking, but South LA is seeing growth. Also a lot of San Gabriel valley still has homes that are affordable. Most may need updates, but there are opportunities out there.

@Neal Daniels

Hey Neal, first off welcome to BP.

A few questions just to get a better idea of where you're at mindset wise. 

A. Are you buying to move in yourself, or are you buying for the purpose of investing and cash flow?

A2. If you are buying for yourself, how much is your current rent, does it go up every year and is it becoming unrealistic? If you are buying for an investment and are not planning to live in it are you will to go further than Azusa for cash flow?

B. How long do you plan on staying or holding onto the unit? 

C. How long has the money been sitting in the bank and will investing it into property be the best option for the kind of investor you want to be?

C2. Investor you want to be meaning Passive or not, self-managing or hiring a management company, A, B C neighborhood etc 

The fact that everyone is telling you to do it if you can is easy when it isn't their money.  So you have to make sure that the purchase you make is appropriate for you and within your means. Set up a budget you find realistic and still have oh **** money set aside on top of it. No one has the ability to tell you what will happen tomorrow or next month in real estate, but depending on how you answer the questions above may affect the advice I would give a client. I know you said you want to make as much profit as possible, so depending on your investment strategy there are numerous ways to go about what you choose to do.  

Thank you guys!

@Nabil Suleiman  

A - I am buying to move in myself yes, hopefully staying for a few years and selling.  Looking to climb that LA real estate ladder, if that even exits still.

A2- My current rent is $2250 and my girlfriend and I split it.  She will be living with me in the purchased home and be contributing around $1000 a month towards the mortgage. Buying the property by myself fyi.

B - Not sure, I would like to keep an eye on the property and move out when/hopefully it appreciates to a substantial degree.

C - It hasn't been sitting for that long, I've really acquired all of this in the last 16 months.

C2 - I will be living in the property and self-managing..  not completely clear on the question.

Hope this helps, I appreciate your time! 

@Neal Daniels

Got it, Outside of your Gf do you want to house hack beyond that, meaning do you plan on looking at 2 bedrooms and renting out the second bedroom to someone else? I did something very similar and my fiance lives with me, the motivation was that the PITI was about the same as I would be paying in rent, so it seemed like an obvious choice. Rent seems to continue to go up, and my mortgage as the years will go down, equity will be paid down, and the hopes of appreciation is always there but not expected.

(Side note, the fact that interest rates are so low and the ability to get them at a fixed rate for 30 years at this rate is amazing. Rates have gone up and they will continue to, so if home prices do not go down, the effect of the total cost of the house will continue to go up. One of the podcasts mentioned that every market has its opportunity, and one of the current opportunities is personal residence interest rates.) 

In my opinion, if you can buy the condo or townhome that needs some love, you can force appreciation into it, that would be the route I would go if you are looking to buy in our current environment. This way, you can have a small equity security blanket if the market shifts, and/or sell the property for a nice gain if the market continues to appreciate. 

C2 was more or so if you were purchasing something and not living in it. So that question doesn't apply to this situation. 

(side note 2, just as a precaution. Always have exit strategies in place. A) if you and your lady separate, do you have a second room you can rent out to make up her rent difference? B) can you rent the place out and cover you total PITI if you needed to move out for thing like job opportunities etc. C) purchasing under market as discussed so if needed you can sell and make money doing it.

Hey Neal! So my biggest caution would be-- if you only plan to hold it for a few years, you should think about calculating the interest on the mortgage that you'll be paying in that time. For the first quite a few years, your "mortgage payments" will be mostly interest payments. So the question becomes--will the property appreciate enough over those years to make up for what you pay in interest the whole time? If not, you might want to think about where your profit may be coming from. Because if there's no profit, what will be the point?

As a super-depressing slightly unrelated reference point.... I just bought a property in Venice and I was running those numbers. It's not until year 18 of the mortgage that the principal payment becomes more than the interest payment for the month.

My question would be- what would be your ultimate goal with buying a property?

It took me awhile to find something that worked. I ended up buying a condo in Gardena (just 7 miles from Manhattan Beach but worlds apart). The place has appreciated but the main reason I pulled the trigger when I did were the numbers seemed safe. I didn’t want to buy anything I couldn’t at least break even from rent. I ended up never moving in but my rent is going up from $2050 to $2200 in May and i’ll finally be above the 1% mark. (Purchased for $210,000).

I think places like Gardena, maybe Hawthorne, Carson to a degree still, Inglewood a little bit all still have room to appreciate. Obviously i’m more focused on south bay.

Also parts of east torrance have slightly decent deals and being in Torrance always gives you a better exit strategy then Gardena. There are also some really cool neighborhoods in south LA that i found literally a few months too late. Prices are now way up there (two years later) and unfortunately I didn’t have enough to get one. But look around, check rents, and explore. If you could easily cover your costs with rent then it allows you a safety net if you move out and the appreciation isn’t there.

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