Los Angeles: Where do I buy?
For those of you who are familiar with the LA area, I'm trying to buy my first place at 31 years young. I work in Santa Monica, currently live in Venice and rent for $1495/month.
I'm not even close to buying anything in that area - I'm totally priced out. Everyone says to buy the worse property in the best neighborhood, but I can't even find dumps or rehabs in Santa Monica / Venice for under $750k.
My budget to purchase is $500k - $650k and I'm looking for a 2 bed / 2 bath, so I can rent out one of the rooms to help me with my mortgage payment. I have $150k saved to use as a downpayment, closing costs and / or fix a place up.
Ideally, I'd like to purchase a house for $500k, use $100k down, have a monthly mortgage of around $2200 and put another $20k - $30k in repairs, fix up, live and get a roommate and then sell in a few years. However, it's looking like I'll have to be in less desirable neighborhoods to accomplish that. Otherwise, I could go condo route, but then I'm stuck paying a $300 - $500 HOA fee.
I'd like to keep my commute time to 30 minutes during rush hour and would like to buy in a "up and coming area." What do you think are the neighborhoods that will be the "next big thing" somewhat near the Westside? I've been looking at Playa Vista, Ingelwood and Mid-City. I'm almost priced out of Mar Vista and I'm really not interested in Palms.
I'm even open to Sherman Oaks, Topanga Canyon or some other further areas, but really not looking to sit on the 405 for an hour each way to work.
Does anyone have any ideas on where to look and buy?
Yup Im in the same exact boat @Julian L. All the areas you mention are the areas most will advise you to look. Inglewood just east of westchester might be a good spot to look or even westchester its self. With the new stadium plans I would think that could help future value but who knows. Curious to see what people think.
Went through this a couple months ago. We were living in Santa Monica and wanted to stay on the west side. Ended up moving east to Los Feliz. Commute is a pain but very happy with what we were able to find for the money. Good luck.
Woodland Hills!
If you are considering condos, try Culver city. If you are planning to live there yourself, I would check out the schools. That doesn't help you with your budget, but I know a ton of people that bought before kids and then had to move once they had them. Plus the values in good school districts remain high.
So that all said, if you are willing to buy a condo, you can find them in that price range in culver city where I live. Excellent schools and excellent potential.
My wife works in Santa Monica. 30 minute commute doesn't get you too far, unfortunately. If you want up and coming, maybe check out areas near the new light rail stations that aren't built yet.
Hopefully that helps a bit.
Jeff
If you are considering condos, try Culver city. If you are planning to live there yourself, I would check out the schools. That doesn't help you with your budget, but I know a ton of people that bought before kids and then had to move once they had them. Plus the values in good school districts remain high.
So that all said, if you are willing to buy a condo, you can find them in that price range in culver city where I live. Excellent schools and excellent potential.
My wife works in Santa Monica. 30 minute commute doesn't get you too far, unfortunately. If you want up and coming, maybe check out areas near the new light rail stations that aren't built yet.
If you are looking for a house. Woodland hills might work, it's nice, although it's hot as hell in the summer. You can get to Santa Monica on topanga and pch. I lived there and my wife liked that commute, but got in very early and prone to mudslides blocking the road.
Hopefully that helps a bit.
Jeff
Originally posted by @Jeff T.:My wife works in Santa Monica. 30 minute commute doesn't get you too far, unfortunately. If you want up and coming, maybe check out areas near the new light rail stations that aren't built yet.
This is what I was thinking... once the Santa Monica Expo line is up and running in 2016, could areas off Exposition boom? I[m specifically thinking the West Adams area, around La Cienga or Crenshaw and Exposition...
I bought another duplex in the Mid city 90019 area in July 2012 for 425k - turned it into tri-plex and it generates 4050.00 in gross rent and the value is now above 600k ( Zillow has it at 778k and Chase Home value which is in my opinion the best free appraisal site has it at 613k) keep in mind both of those values are calculating it at a 2 unit and not a 3. This area is great and the Midtown shopping center is now at capacity, it only had Lowes in it in 2012. Planet Fitness just opened up 3 months ago and the commute to Santa Monica or Downtown is quick. There are still many great deals in the area and a lot of 2-5 units that need rehab. Basically near the 10 freeway and La Brea (North of La Brea might be a little more and South of La Brea a little less based on your budget)
I found a couple SFR listings in your price range on the MLS within about 10 miles from Santa Monica that may work for you. Would you like me to send them your way?
Originally posted by @Christine Lovett:
I found a couple SFR listings in your price range on the MLS within about 10 miles from Santa Monica that may work for you. Would you like me to send them your way?
I'm sure I have already seen them on redfin, but feel free to shoot any deals you find my way. [email protected]
Originally posted by @George Margareti:
I bought another duplex in the Mid city 90019 area in July 2012 for 425k - turned it into tri-plex and it generates 4050.00 in gross rent and the value is now above 600k ( Zillow has it at 778k and Chase Home value which is in my opinion the best free appraisal site has it at 613k) keep in mind both of those values are calculating it at a 2 unit and not a 3. This area is great and the Midtown shopping center is now at capacity, it only had Lowes in it in 2012. Planet Fitness just opened up 3 months ago and the commute to Santa Monica or Downtown is quick. There are still many great deals in the area and a lot of 2-5 units that need rehab. Basically near the 10 freeway and La Brea (North of La Brea might be a little more and South of La Brea a little less based on your budget)
What are your thoughts on 90016? I'm thinking the 10 and La Ceinega, as that is a bit closer to Culver City and the Westside?
Yes just as good!
Hey George, that's encouraging to hear there are still deals in the mid city area. I live here and love the place but haven't been able to find any great deals just yet - still looking! Any chance you could share the details on your tri-plex in mid city? Like operating expenses and if you are able to generate positive cash flow? Thanks a lot!
So many variables, but short answer is mid-city, USC area, NELA (North East LA)
I feel your pain man, I do. I commuted from pasadena to Santa Monica for two years. There are days that 30 minutes doesn't even get you out of santa monica proper!! I ended up quitting because I didn't want to sell my house in pasadena and the drive was killing me.
Woodland Hills and Topanga Canyon, but those might even be out of your price range. Agoura isn't a terrible commute but I think that's also too pricey.
I am not a fan of mid city or culver city, but that is just me. So if I was stuck back working on the west side I'd probably spend time trying to find a distressed place at a discount, In either Agoura or Woodland Hills so of ventura. (easier said then done!) And now that I think about it, that's still a crappy commute I remember why I quit that job! Good luck!
NELA is great but its not ever going to be a 30 minute commute in rush hour traffic.
@Julian L. I am curious why you are not interested in Palms but you would be interested in 90016?
Originally posted by @Mel Jeffrey:
@Julian L. I am curious why you are not interested in Palms but you would be interested in 90016?
Because I am priced out of SFH in Palms and since it's probably the least desirable neighborhood on the Westside, I'd rather buy a house. I'd really only do a condo if I found something in Marina Del Rey, Santa Monica, West LA or Playa Vista. Maybe Culver City, but if I'm East of the 405 anyway, I almost feel like it's worth the risk in speculating with mid-city and avoiding the HOA fees.
Agora Hills and Woodland Hills would be an hour + commute during rush out, wouldn't it?
I've looked in and around 90016 north of the 10 and 90019. That's where I'd pick if I was working on the Westside. You can easily pick up some income property with your price target. Personally, I'd much rather have tenants pay down the mortgage than to have live-ins. And by having live-ins, it makes it harder to rehab. And with the better cash flows from income property, it becomes easier to finance another property.
The new light rail will make it that much better for high-income people who are being priced out from the westside thus giving you a demand bump.
You'll most likely have to head for the valley for that price range! :( I just keep renting in Venice so I can stay here. I'd much rather live where I want than be forced somewhere else if I want to buy something. I use all my mortgages for rental properties instead, which the income from can just cover my rent payment
But yeah, that price range on the west side is next to impossible unless maybe you find a condo? But then watch out for the condo fees...
I hear you about a condo. Only makes sense if you are going to stay at least 7-8 years but preferably longer. Keep in mind a $300-$400 HOA fee really isn't too crazy as that should cover your water, sewer, some insurance, gardening, and outside electricity among other things. You are going to have pay those things yourself on a house. The real bite is looking out for assessments on top of that for major deferred maintenance and capital items that may exist. A lot of condo HOAs are dysfunctional messes.
I am a bit lucky in that I have lived in the same 4 unit townhome complex for 16 years and we have a simple structure and I control 25% of the vote. The downside is that I have to run a lot of the HOA duties or they probably won't get done. The advice I have taken to heart on condos is either go small (4 or 5 units where you can control things) or go really big like over 100 units where they can afford professional management and a few bad apples don't muck things up and there is a big base to spread capital costs over.
On 90016, I own an income property north of the 10 Freeway (Mid-City). There are still quite a few properties that need rehab. Like most of LA, the real money is in value add, which I agree can be a little intimidating for a newbie, especially with the big numbers and RSO in LA. For the neighborhood, the good is that Mid-City to the North along Pico continues to improve. Culver City is just a mile or so to the West and this part of CC is about to really go to the next level. Just to the South, the Expo Line Phase II is opening next year and will provide a 20 minute stress free ride to Santa Monica, which is a game changer IMHO because there is no other affordable areas near SM that can come close to that commute. The bad is that there is really not much of a walking commercial street here so it is kind of a spillover neighborhood. Also, this area used to be a swamp (La Cienaga means swamp in Spanish) and does not do well in major earthquakes - liquefication...
Hi Julian it is great to see someone staring out and wanting to get it right. I might suggest however that the economics of what you are looking to do may not be the best use of your money. Have you considered the alternative of renting for longer and using your money to create more money for you, and then buying your own property at a later date without a mortgage? Many people find that once they buy a home with a mortgage that they end up sitting on their asset, i.e. their equity in their property, and waiting for the market to increase to create wealth.
A better alternative is to actively use your asset, your cash in this instance, to create wealth real time. It has been my personal experience that as a professional property investor I can make way more money using my money than I could ever make waiting for the market to improve. As an example consider these simple figures. Let's assume that property values increase by 5% per annum compound and we have a 4 year plan. Now this is kept simple for this exercise and I am not going to look at real cash flows or taxation effects.
So, you buy for $500,000.00 and get a mortgage for $400,000.00 and spend $30,000.00 on improvements. Let's assume after improvements your property is worth $550,000.00. So after improvements your equity is $150,000.00.
Now, at a compound rate of 5% per annum after 4 years your house is now worth approximately $668,500.00 so your equity, assuming an interest only mortgage to start with is $268,500.00. So looking good.
Now consider the following scenario. You remain renting and invest your $150,000.00 cash into a good quality project. On a cash on cash basis return you should expect at least 20% on your money. Although I would personally expect more. I would also suggest that you should be able to turn your cash over 2 times per year. So let's look at the next four years, 8 deals in total.
Deal number 1 you invest $150,000.00 and earn 20% cash on cash so you now have $180,000.00 which you put into deal number 2. Deal number two has the same return so on conclusion of that deal you would have $216,000.00. This rolls into deal number three and so on. here are the rolling amounts to deal number 8.
Deal 3 investment $216,000.00 take out $259,200.00
Deal 4 investment $259,200.00 take out $311,040.00
Deal 5 investment $311,040.00 take out $373,248.00
Deal 6 investment $373,248.00 take out $447,897.00
Deal 7 investment $447,897.00 take out $537,477.00
Deal 8 investment $537,477.00 take out $644,972.00
If the value of what you initially wanted to buy has risen to $668,500.00 over the same 4 year period and you then bought you would only need a mortgage of $23,528.00 instead of having a mortgage of $400,000.00!
There are no doubt many professionals on this site that can show you how to invest with them and make 20% cash on cash in your market, if not significantly more.
This is just a thought you might want to investigate before making the decision to buy your own home. Most people get a mortgage and commit themselves to years of losing the ability to invest because equity is not the same as cash when it comes to making money.
Happy shopping!
Hi Julian,
I'm a realtor and investor working in the area. View Park is another option for affordability. Sending you my info if you want to talk.
Originally posted by :@mattmason
On 90016, I own an income property north of the 10 Freeway (Mid-City). There are still quite a few properties that need rehab. Like most of LA, the real money is in value add, which I agree can be a little intimidating for a newbie, especially with the big numbers and RSO in LA. For the neighborhood, the good is that Mid-City to the North along Pico continues to improve. Culver City is just a mile or so to the West and this part of CC is about to really go to the next level. Just to the South, the Expo Line Phase II is opening next year and will provide a 20 minute stress free ride to Santa Monica, which is a game changer IMHO because there is no other affordable areas near SM that can come close to that commute. The bad is that there is really not much of a walking commercial street here so it is kind of a spillover neighborhood. Also, this area used to be a swamp (La Cienaga means swamp in Spanish) and does not do well in major earthquakes - liquefication...
@mattmason
I've seen north of the 10 freeway mentioned quite a few times in the Mid City area. What do you think of areas South of the 10 freeway for long term/value-ad/ buy and hold investing?
Originally posted by @Will F.:
Originally posted by :
@mattmason
On 90016, I own an income property north of the 10 Freeway (Mid-City). There are still quite a few properties that need rehab. Like most of LA, the real money is in value add, which I agree can be a little intimidating for a newbie, especially with the big numbers and RSO in LA. For the neighborhood, the good is that Mid-City to the North along Pico continues to improve. Culver City is just a mile or so to the West and this part of CC is about to really go to the next level. Just to the South, the Expo Line Phase II is opening next year and will provide a 20 minute stress free ride to Santa Monica, which is a game changer IMHO because there is no other affordable areas near SM that can come close to that commute. The bad is that there is really not much of a walking commercial street here so it is kind of a spillover neighborhood. Also, this area used to be a swamp (La Cienaga means swamp in Spanish) and does not do well in major earthquakes - liquefication...
@mattmason
I've seen north of the 10 freeway mentioned quite a few times in the Mid City area. What do you think of areas South of the 10 freeway for long term/value-ad/ buy and hold investing?
This... what about like Hauser and Adams or La Ceinega or Jefferson?
Originally posted by @Julian L.:
Originally posted by @Will F.:Originally posted by :@mattmason
On 90016, I own an income property north of the 10 Freeway (Mid-City). There are still quite a few properties that need rehab. Like most of LA, the real money is in value add, which I agree can be a little intimidating for a newbie, especially with the big numbers and RSO in LA. For the neighborhood, the good is that Mid-City to the North along Pico continues to improve. Culver City is just a mile or so to the West and this part of CC is about to really go to the next level. Just to the South, the Expo Line Phase II is opening next year and will provide a 20 minute stress free ride to Santa Monica, which is a game changer IMHO because there is no other affordable areas near SM that can come close to that commute. The bad is that there is really not much of a walking commercial street here so it is kind of a spillover neighborhood. Also, this area used to be a swamp (La Cienaga means swamp in Spanish) and does not do well in major earthquakes - liquefication...
@mattmason
I've seen north of the 10 freeway mentioned quite a few times in the Mid City area. What do you think of areas South of the 10 freeway for long term/value-ad/ buy and hold investing?
This... what about like Hauser and Adams or La Ceinega or Jefferson?
I am not as familiar with South of the Freeway. The Freeway represents a major dividing line, because everything south of it is considered South Los Angeles to some degree. It can be a little rougher around the edges down there. I did have a friend that lived in Village Green and that was quite nice, but you tell people you are going down there and some think you are going to the moon. However, this area is right along the Expo Line and is still very close to Culver City. It has some potential.