Is buying a condo in LA a good idea?

Question

I would be buying as a primary residence for a few years as I don't really see myself leaving LA anytime soon. My goal is to buy a property near my job (West Hollywood) that is around 425k because PITI+PMI+HOA(estimated around 350/month)+insurance comes out to about half my monthly income from my W-2 and I only have enough down payment cash for a home around that price.

Currently I have a SFH rental in Indiana with a partner that is cashflowing about $300 after refinance and are planning to buy another. This SFH costed me about 35k (and my partner 35k) which is about $8000 more than the down payment I would be shelling out for a condo here. Would it be a better idea to buy a condo here and build equity or throw my money at rent (probably around 1700) and buy another rental out in Indiana?

I have heard condos do not appreciate too well though I am not sure of how it is in LA. Thank you for reading and your insight!

Jon Schwartz · Answer

Kwon,

It's incorrect the condos in LA appreciate worse that houses.

Here's the Case-Schiller Home Price Index for LA:

https://fred.stlouisfed.org/se...

And here's the Case-Schiller Condo Price Index for LA:

https://fred.stlouisfed.org/se...

Both graphs are indexed to 100 in 2000. As of today, the home index is at 299 and the condo index is at 314. Condos have actually outperformed the overall home market since 2000!

As far as the condo vs. rental debate, you'll have to do the math and determine if the cashflow from a new Indiana home is more valuable than the principal paydown and appreciation prospects here in LA. My vote is for LA; you'll pay down more than $300 of principal each month with a WeHo condo, and there's appreciation on top of that.

Another point for the condo purchase is that the market appears to be flooded with condos now. If you're planning to live in it for a number of years, now seems like a good time to buy one.

I'm interested in hearing what route you pursue!

Best,

Jon

Jon Schwartz · Answer

My pleasure! With LA's rent control and insane market, proper research really gives an investor the edge.

And right now seems like a smart time to buy a condo as they're out of fashion in this COVID moment.

Best,

Jon

Kwon Do Lee · Answer

Oh wow thanks for those graphs, I've never seen that before.I'm leaning heavily towards buying and haven't heard anyone against the idea!