It’s no secret that living in tinsel town comes with a hefty price tag, but that doesn’t mean it’s fiscally impossible to take up residence in the City of Dreams. The quality of life at home has never been more significant, as the pandemic has forced the famous Californian indoor/outdoor living progressively indoors. Private outside space is increasingly coveted, as well as more room in general. Downsizing during an economic downturn is a notion of the past, as space becomes sought after more and more. A metropolis with a unique sense of sunshiny peace and quiet, Los Angeles has also become a desirable destination for investment properties. As long as international travel is prohibited, Los Angeles will only continue to grow as a holiday hotspot. In spite of the climbing costs, you can make the most of this progressively growing market with the right outlook and information.
Mastering the Market
“How much does it really cost?” It’s the eternally-popular question that comes up when prospective buyers are looking into purchasing a home. While it varies drastically within Los Angeles’ famous fiscally diverse neighborhoods, there are a few factors to consider. First, be prepared to offer above the asking price. In Los Angeles, a home’s listing price is merely a minimum benchmark, so look for homes slightly below your desired budget. On the bright side, the jump isn’t astronomical, as homes usually sell for between 1.4-1.8% over their originally listing price in Los Angeles County.
Weighing Pros and Con(dos)
The second consideration is whether purchasing a single-family home or a condominium is more fiscally rewarding and responsible. Homeowners Association fees (applicable to condominiums) in Los Angeles vary between as low as the $200s per month, and upwards of $700 (and in the luxury category in the $2,000 to $3,000+ range). This means HOA fees can run you between $90,000 and $252,000 (at the lower range) over a 30-year period, a hefty cost to consider when you’re weighing the pros and cons between single-family homes and condominiums. Always inquire how much the Home Owner’s Association has in reserves, for capital and emergency expenses, as an HOA with low reserves can result in high assessment bills to unit owners for major repairs. A well-run Home Owner’s Association is going to cover most problems that may arise in the building whereas in a single family home you are responsible for everything that goes wrong and the consequential expense.
“Lending” a Hand
Los Angeles recently hit a median listing price of $995,100, which is up 16.9% since last year. That requires a decent chunk of change for a standard 20% down payment. However, Los Angeles offers a substantial amount of alternative loans for those who can only afford to put 10% down or less. These include the First Home Mortgage Program, as well as Federal Housing Authority Loans. Note that these loan programs often have lower borrowing limits, and special qualification guidelines. A current benefit to putting less money down, is that interest rates are historically low at under 3% on average for a 30-year fixed loan. Los Angeles is simultaneously experiencing a balanced buyers’-sellers’ market due to the climbing market prices and falling interest rates. Be aware that cash buyers are not uncommon in Los Angeles county, and putting less down can affect your desirability as a buyer.
A Price Range of Possibilities
Market data for “Los Angeles” can be misleading as you can never be sure whether it referring to the entire county or the City and its surrounding metro area. The median sales price in each are differs greatly. According to the Beracha, Hardin & Johnson Buy vs. Rent Index, Los Angeles is one of several cities across the US where there is no clear answer to whether renting or buying is more financially responsible, partially due to the wide range of home prices. Amount of appreciation is typically dependent on the length of ownership, so consider how long you plan to stay in your new home when weighing the pros and cons between renting and purchasing. NeighborhoodScout shows a 94% appreciation in Los Angeles homes over the past ten years, so hold onto your new purchase as long as possible for maximum profit.
Revamp and Revive
Fancy a flip? One way to garner a chunk of change through Los Angeles real estate is by flipping a fixer-upper. The average gross profit after flipping a home in Los Angeles is about $145,000, with the highest profiting zip code collecting approximately $369,000. Flipping gives you the opportunity to invest and then reinvest in your dream home. You can also opt to hold onto your fresh remodel, reaping even more potential profit down the line. Looking for an affordable way to store your belongings while you work on your renovation? Neighbor offers cost-efficient storage options all around the City of Angels. Subtract the stress of moving (and moving again,) as transitional periods have never been more manageable.
Living the LA Life
When it comes to the cost of living in the land of eternal summer, there are more components to contemplate than a mere listing price. Point 2 suggests that monthly utilities can run you anywhere from $120 and up, depending on the size of your home, whereas a night out to eat will range from about $20.00-$40.00 depending on your restaurant of choice. Of course this is on the inexpensive side. Regarding healthcare, Payscale reports that Angelenos should expect to pay 10% more the national average. On the positive side, the public transportation system is growing exponentially each day. The metro is expanding rapidly in an effort to rid LA’s reputation for being an automobile-exclusive city. While your housing will most likely cost more than the suggested 1/3 of your monthly income, you might find it is worth it to make concessions in order to live in the international capital of entertainment. Plus, leasing a portion of your home to tenants (or finding rental roommates) is a great way to offset your expenses. Remember, there’s a reason people strive to afford a Los Angeles lifestyle. After all, where else can you ski in the morning and spend the afternoon at the the beach?
Check out the information on Point 2 for some more in-depth Los Angeles cost of living analysis.