Had no idea Californians were spiritual

Investor Psychology 131 Replies

It would be great to actually hear from people renting in the LA metro area regarding the affordability issues,  income keeping pace with investor projected rent growth rates and trend in housing prices. Renters feeling the pinch may not necessarily share similar investor enthusiasm it seems or do they? Obviously  would be great to keep the discussions civil and somewhat related to the subject matter.

http://tiny.cc/laspirit


I grew up in Los Angeles.  I went there recently and saw an enormous spike in homelessness.  The city allows small tents in certain places - so you see them everywhere.   There is an affordable housing crisis in Southern California now.   Income is not keeping up with rental increases.

Why is real estate so expensive there?   It is a wealthy state, but people don't make double of what you make in a place like  Dallas.  The answer is the inability to add supply.  And resistance to becoming a more vertical city.  

@Mike Fletcher Don't get the tag line. At any rate I have a friend as we speak living in a 1 bedroom apartment. She is a single Mom with 4 kids. She works full time and pays 1100 per month for the roach place. I have been researching the past 5 days trying to find her at least a 2 bedroom. Said friend only makes $13 per hour. There really is no hope in site. I am trying to convince her to pick up and move. Unless she moves to the desert she will continue this struggle. The drawback to moving is she will not have a job and people will not lease to her without income. Even with a decent raise she will have a tough go of it in a 2 bedroom. The prices are insane for bad areas. When I lived in Hollywood in the 90s there were plenty of places to move and afford. Crazy prices now and I feel for the people. I have lived in California and other states. You never make twice the money as people think unless industry specific. I made more in Michigan at times than California with not near the cost of living.

Most people live where they do and how they live by choice. Those on lower income scale rarely have a job of any great value and can choose to live anywhere in the country they choose. If they choose to work and live where they can not afford the cost the problem is self inflicted and they have no grounds to complain. Stupid is as stupid does.

Most people struggle by choice usually due to making very poor decisions in life..

I've been living in the area my whole life. The rent is highly dependent on the area you choose to live in.

Someone renting in Santa Monica could easily use the same amount of money to OWN in areas of the Valley (the greater Los Angeles area). Sylmar, Reseda, Woodland Hills, Santa Clarita, etc.

The biggest problem is traffic, depending on where do you work?

I work in Television so I travel to all sorts of places and various times. A trip from Sylmar to Sony studios at 5 am is about 25 minutes. leave at 7 am and the same trip is easily 2 hours.

Rents in the valley can range from 600-900 depending on the area. The closer you get to areas like Studio City you can see rents skyrocket to $2-3000.

It's like they say, location location location...

How is she making $13 in LA? I've hired grossly unqualified property managers that make $14+. And that's in Houston. And at that price it's hard to find someone that'll actually show up and work.

Originally posted by @Ruddy Anthony Salazar :

I've been living in the area my whole life. The rent is highly dependent on the area you choose to live in.

Someone renting in Santa Monica could easily use the same amount of money to OWN in areas of the Valley (the greater Los Angeles area). Sylmar, Reseda, Woodland Hills, Santa Clarita, etc.

The biggest problem is traffic, depending on where do you work?

I work in Television so I travel to all sorts of places and various times. A trip from Sylmar to Sony studios at 5 am is about 25 minutes. leave at 7 am and the same trip is easily 2 hours.

Rents in the valley can range from 600-900 depending on the area. The closer you get to areas like Studio City you can see rents skyrocket to $2-3000.

It's like they say, location location location...

 LA traffic is bad, it may be heading to China's. :)  Did you say 600-900 rent? I didnt see anything in that range on the map in the news report though...

Originally posted by @Brian Ploszay :

I grew up in Los Angeles.  I went there recently and saw an enormous spike in homelessness.  The city allows small tents in certain places - so you see them everywhere.   There is an affordable housing crisis in Southern California now.   Income is not keeping up with rental increases.

Why is real estate so expensive there?   It is a wealthy state, but people don't make double of what you make in a place like  Dallas.  The answer is the inability to add supply.  And resistance to becoming a more vertical city.  

Small tents? I did have a feeling there was a crisis of some sort but wasn't aware it was that pronounced. The LA Times is reporting a significant material disconnect in the rates of both income growth and housing prices in LA. About supply, the city is making it difficult to add supply?

I apologize, I should probably have clarified that the 600-900 dollars is for renting a room* not a SFR.

I only mentioned room rents because many of the buy and hold investors here buy 5-6+ room SFR's and rent out the rooms individually, therefore creating CF in a market where CF is harder to find.

Originally posted by @Dylan Vargas :

@Mike Fletcher Don't get the tag line. At any rate I have a friend as we speak living in a 1 bedroom apartment. She is a single Mom with 4 kids. She works full time and pays 1100 per month for the roach place. I have been researching the past 5 days trying to find her at least a 2 bedroom. Said friend only makes $13 per hour. There really is no hope in site. I am trying to convince her to pick up and move. Unless she moves to the desert she will continue this struggle. The drawback to moving is she will not have a job and people will not lease to her without income. Even with a decent raise she will have a tough go of it in a 2 bedroom. The prices are insane for bad areas. When I lived in Hollywood in the 90s there were plenty of places to move and afford. Crazy prices now and I feel for the people. I have lived in California and other states. You never make twice the money as people think unless industry specific. I made more in Michigan at times than California with not near the cost of living.

 lol @ Dylan.. you need to read the heading in the news article in the initial post to get it...  :)

sorry to hear about your friend... 4 kids in a 1 bedroom? I thought that was literally illegal to have that many people in a 1 bedroom.

Regarding the wages there... outside of the tech sector... silicon valley etc....it seems  wages in LA or CA generally, is for the most part not materially different from the rest of the country but housing prices obviously is. 

This will always cause an affordability issue. Seattle I think is also having a similar problem and recently had to increase minimum wage to $15; their prices too also appear to be on speed. Not sure if this will be more of a norm in most of the areas also experiencing inflated property values.

Businesses may not be too happy about it as this may also mean your property manager may be demanding a raise.

Originally posted by @Dylan Vargas :

@Mike Fletcher Don't get the tag line. At any rate I have a friend as we speak living in a 1 bedroom apartment. She is a single Mom with 4 kids. She works full time and pays 1100 per month for the roach place. I have been researching the past 5 days trying to find her at least a 2 bedroom. Said friend only makes $13 per hour. There really is no hope in site. I am trying to convince her to pick up and move. Unless she moves to the desert she will continue this struggle. The drawback to moving is she will not have a job and people will not lease to her without income. Even with a decent raise she will have a tough go of it in a 2 bedroom. The prices are insane for bad areas. When I lived in Hollywood in the 90s there were plenty of places to move and afford. Crazy prices now and I feel for the people. I have lived in California and other states. You never make twice the money as people think unless industry specific. I made more in Michigan at times than California with not near the cost of living.

The cost of living in Los Angeles is quite high.  The silver lining for your friend may be the government subsidies provided in California (specifically Los Angeles) are considerably more material than other areas.  I would make sure she takes full advantage of WIC, SNAPS and other State assistance programs.  There should be some housing assistance as well considering she's a single mother with 4 children.  Your friend sounds like the perfect candidate to take advantage of many of the state/city-wide programs.  Best of luck to her.

People take on roommates, live with extended family or roommates longer than they would in other parts of the US, live in neighborhoods they wouldn't have considered years ago.  They may keep their car longer or not have a car and rely on public transit and an occasional uber.

People in tech, entertainment, investment management/finance, aerospace & defense, and international trade tend to make high incomes and there are a ton of those jobs in LA.  People in fast food or retail don't really make any more than the rest of the US and there are a lot of those people too. 

Every year, LA and CA in general lose lower income folks to other US states, while higher income people move in either from other cities like New York or from other countries.  To people from some of these places like Sydney, London, NYC, & Tokyo; Los Angeles is still cheap. 

People complain about housing prices and about transplants who they often blame for pushing up prices just like they do just about everywhere else.

None of this should be news to someone from Brooklyn, where prices are just as high and have increased a ton in the last 20 years.  Are people there spiritual?

Originally posted by @Ruddy Anthony Salazar :

I apologize, I should probably have clarified that the 600-900 dollars is for renting a room* not a SFR.

I only mentioned room rents because many of the buy and hold investors here buy 5-6+ room SFR's and rent out the rooms individually, therefore creating CF in a market where CF is harder to find.

Interesting, sounds like you mean hacking a SFR and renting out each room? Is this a real common practice there? The 5-6 room SFR still would be valued using comps as a regular SFR and financed as a typical SFR property though.

Originally posted by @Mike Fletcher :
Originally posted by @Ruddy Anthony Salazar:

I've been living in the area my whole life. The rent is highly dependent on the area you choose to live in.

Someone renting in Santa Monica could easily use the same amount of money to OWN in areas of the Valley (the greater Los Angeles area). Sylmar, Reseda, Woodland Hills, Santa Clarita, etc.

The biggest problem is traffic, depending on where do you work?

I work in Television so I travel to all sorts of places and various times. A trip from Sylmar to Sony studios at 5 am is about 25 minutes. leave at 7 am and the same trip is easily 2 hours.

Rents in the valley can range from 600-900 depending on the area. The closer you get to areas like Studio City you can see rents skyrocket to $2-3000.

It's like they say, location location location...

 LA traffic is bad, it may be heading to China's. :)  Did you say 600-900 rent? I didnt see anything in that range on the map in the news report though...

The photo is amazing. Where do they place the Sani-Cans?

Originally posted by @Ken Min :
Originally posted by @Mike Fletcher:
Originally posted by @Ruddy Anthony Salazar:

I've been living in the area my whole life. The rent is highly dependent on the area you choose to live in.

Someone renting in Santa Monica could easily use the same amount of money to OWN in areas of the Valley (the greater Los Angeles area). Sylmar, Reseda, Woodland Hills, Santa Clarita, etc.

The biggest problem is traffic, depending on where do you work?

I work in Television so I travel to all sorts of places and various times. A trip from Sylmar to Sony studios at 5 am is about 25 minutes. leave at 7 am and the same trip is easily 2 hours.

Rents in the valley can range from 600-900 depending on the area. The closer you get to areas like Studio City you can see rents skyrocket to $2-3000.

It's like they say, location location location...

 LA traffic is bad, it may be heading to China's. :)  Did you say 600-900 rent? I didnt see anything in that range on the map in the news report though...

The photo is amazing. Where do they place the Sani-Cans?

 This was an unexpected traffic jam of sorts... it took several days to clear about 12 days to clear 

Originally posted by @Matt Mason :

People complain about housing prices and about transplants who they often blame for pushing up prices just like they do just about everywhere else.

 Did you happen to read the LA Weekly article in initial post by chance? Trying to ascertain if you are disagreeing with either the reporter or that there seems to be a consensus that housing prices in LA grows at a rate materially different than income and unsustainable in the long term. 

@Mike Fletcher

You seem to have a fascination with Los Angeles given your recent posts. Dunno my understanding of Brooklyn is it faces the same problems and opportunities.  

Originally posted by @Jeanette Adler :

@Mike Fletcher

You seem to have a fascination with Los Angeles given your recent posts. Dunno my understanding of Brooklyn is it faces the same problems and opportunities.  

 I am getting conflicting stories and perspectives and feel it would be great hearing from persons on the ground... we do keep a close eye on whats going on in certain nooks within the big four markets: NY, CA, TX, FL and some of the other markets. Dont feel picked on..:) Should you have anything to add about LA that would be great! 

Originally posted by @Thomas S. :

Most people live where they do and how they live by choice. ..

 Interesting... it sounds like the market there in most Canadian metros cooled or is cooling significantly and forecast is for prices to be down next year. The are serious concerns about a similar cooling here in some areas. The government here though didnt go as far as enacting new special taxes to levy on foreign investors as a way of reducing foreign investor buying activity, which apparently is what was blamed for (among other things) the inflated housing price trend in Toronto, Vancouver etc.. Toronto residents probably had or have similar concerns about income growth not tracking home price escalations in Vancouver and Toronto.

Originally posted by @Mike Fletcher :
Originally posted by @Ruddy Anthony Salazar:

I apologize, I should probably have clarified that the 600-900 dollars is for renting a room* not a SFR.

I only mentioned room rents because many of the buy and hold investors here buy 5-6+ room SFR's and rent out the rooms individually, therefore creating CF in a market where CF is harder to find.

Interesting, sounds like you mean hacking a SFR and renting out each room? Is this a real common practice there? The 5-6 room SFR still would be valued using comps as a regular SFR and financed as a typical SFR property though.

I'd say about 10-15% of buy and hold investors do this or a variation of it.

1 example would be one investor I know buys SFR's with 5-6+ rooms and splits the rooms for international students.

Another example is a investor/contractor that builds 10 room rehab homes. 

There is also post-rehab homes as well as assisted living homes.

Just to give you a range. 

@Cody L.  @Joe J.  She works hard, does well at her job. She is studying to take a test that will give her a promotion but still will be very tough. I am tracking down housing programs to see if she can qualify. Cody, I am interested in having a place in the San Diego region in the future. A little too hot up here in Chico. Will be visiting soon to check out areas. Want a flat, bike able area with cool temps.

Originally posted by @Mike Fletcher :
Originally posted by @Matt Mason:

People complain about housing prices and about transplants who they often blame for pushing up prices just like they do just about everywhere else.

 Did you happen to read the LA Weekly article in initial post by chance? Trying to ascertain if you are disagreeing with either the reporter or that there seems to be a consensus that housing prices in LA grows at a rate materially different than income and unsustainable in the long term. 

Mike...Dude... do you know that LA Weekly is an entertainment newspaper? 

 :-]

Back to the reason why being on the ground in the area you invest can be beneficial.

I am a spiritual Californian.

In California you're basically paying for the weather and the lifestyle. It's insane how many people move here from other places just because they want to live here. Half the people you meet in LA are from somewhere else. It's a city of transplants. Lots of people with lots of money move here from all around the world to be in the sunshine. Prices will always be crazy here.

For me living here is a lifestyle choice. My sister lives in Cincinnati and is always saying we're crazy. "You could afford a huge house If you moved!" I'm much happier in my little one bedroom 20 minutes from the beach. I could care less about having a McMansion with granite countertops and stainless appliances. It would be nice but no way I'm giving up location for nicer digs. Not everyone here with modest incomes are struggling. You can be comfortable in LA on a normal salary. You just have to have different priorities than most people. If you are the kind of person that needs a new car and a big house you will be miserable in this city unless you make a ton of money. But if you are the active type that would rather spend your free time at the beach, working out, scuba diving, road biking, hiking, surfing etc then this is paradise. The funnest things to do in Cali are free.

I've spent a considerable amount of time in Ohio and Kansas because of family. So it's not like I don't have a little perspective. To each there own, it's just not me. Some things are more important than money. I know people that live out in Riverside and work at LAX. They spend 4-5 hours a day in traffic!! That's insane to me. All that for a nicer house...no way.

Our plan is to rent a 3 bedroom townhouse in a better neighborhood 5 minutes from the beach when we have kids and they are starting school. By that time our rental properties will be able to cover the rent. For the same amount per month we could buy a MASSIVE house in a gated community in Ohio. But I would hate it there. You only live once, and we refuse to settle.

Do what I do invest in Ohio and live the dream in California off your cash flow.

I live in San Diego and have 85 front doors in NE Ohio, soon to be 109 front doors. I started investing in this area in 2014. I have traded in pricey San Diego single family for much higher cash flowing 8 single family and 6, soon to be 7 apartment complexes.  I now have $120,000 cash flow per year, soon to be $160,000 cash flow.  You can have your cake and eat it too.

Feel free to ask me any questions.

Swanny