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To: Dog Gone; Rabid Dog; Ernest_at_the_Beach; RonDog; diotima; Bob J; daviddennis
Your thoughts?
D
To: daviddennis
Do you absolutely need to live and die in L.A.? If you can find gainful employment in your area of expertise with reasonable advancement prospects elsewhere, I would seriously (and seriesly :o) consider moving almost anywhere else.
3 posted on
11/18/2003 2:50:36 PM PST by
Poohbah
("Would you mind not shooting at the thermonuclear weapons?" -- Major Vic Deakins, USAF)
To: daviddennis
Can you stand to live farther out say Claremont? or Victorville? Housing is MUCH CHEAPER out there. And there are lots of areas that are springing up that are brand new affordable homes. Victorville is unbelievably cheap, much cheaper than the town I live in in Lake Jackson Texas. Nice growing town, but pretty dry and sandy. We lived in San Marino 1988-1990 and our house was $10K a month. It was worth $975K then - it is worth $1950K now. Unreal. I know a gal who bought a house in San Marino for $200 and it was worth $800K about ten years later.
4 posted on
11/18/2003 2:55:14 PM PST by
buffyt
(Can you say President Hillary? Me Neither!!!!)
To: daviddennis
We were in Claremont for a temp. relocation and didn't sell our home here, so we got an apartment out there. Still in LA county. Our rent for a very nice apartment was $1000. Our daughter's rend in Austin Texas was $2000 a month. Her rent this year for a VERY OLD small duplex is $583 a month times three renters. The landlord makes $3600 a month off a really old house. I guess in a college town they can charge whatever they wish, I heard that houses sell for a huge amount there too. There are areas in Houston where homes go for many many millions. There is a home in Dallas for sale for $12,500,000 right now.
6 posted on
11/18/2003 2:57:45 PM PST by
buffyt
(Can you say President Hillary? Me Neither!!!!)
To: daviddennis
It's a risky time to get a variable rate mortgage. Rates will probably stay low well into 2004, but sooner or later they will start rising again, either because the economy improves, or more ominously because the dollar keeps weakening, foreign banks become less willing to hold our debt, and the Fed has to raise rates even though it will damage our domestic economy.
The other issue is whether we are toward the end of a housing bubble and values may start to decline or even drop significantly. Nobody can predict this for sure. Even if there's a bubble, who knows when it will pop?
But I would avoid any kind of variable rate mortgage without a definite cap on it if at all possible. We may be seeing rising inflation and rates down the line.
The rest is really up to you.
7 posted on
11/18/2003 2:58:07 PM PST by
Cicero
(Marcus Tullius)
To: daviddennis
Dear Dave. Hard to help because LA is a big place. Is the property near Compton or the Simi Valley? Is it located in an enclave or within three miles of a Mexican barrio?
Here's a good rule of thumb. Land prices will continue to rise in California until the population is controlled (immigration control) or the liberals legislate redisritibution of land wealth ( rent control, low rent housing, etc.).
The questions you really need to ask yourself involve quality of life. The rest is just money.
To: daviddennis
I sold a home in Northern California in 1999 that I thought was at its peak. Since then, it' gone up in value an average of over 25% per year.
That said, there are two basic schools of thought, a) there surely will be a housing correction in LA at some point, and b) home prices in LA are following the law of Supply and Demand.
It goes against my basic instincts, but I subscribe to the latter. I simply believe that as long as the LA area is attractive to both domestic and foreign buyers, home prices will remain at least stable if not robust. Barring a catastrophe, buying a home in LA is a safe bet.
9 posted on
11/18/2003 3:02:16 PM PST by
Oldeconomybuyer
(The democRATS are near the tipping point.)
To: daviddennis
The three rules for investing in real estate:
- Location
- Location
- Location
10 posted on
11/18/2003 3:04:28 PM PST by
snopercod
(And if it is a despot you would dethrone, see first that his throne erected within you is destroyed.)
To: daviddennis
Real estate in CA is a great investment, even in this market. If you can get in, over the long-term, you can't hardly go wrong. However, you should be represented by a Broker or agent, even if you are buying the house you are renting. You need to have somebody representing your interests, and the seller will pay the commissions.
It sounds like you are also working the tax savings angle, but if you need any specifics, I'm a CPA & a Broker, so maybe I can help.
To: daviddennis
Don't forget that as a homeowner, if the water-heater blows, or the furnace stops working, or the carpet needs replacing, you can't ask the landlord to fix it...
So, make sure you include in your calculations the additional costs of home maintenance.
To: daviddennis
If interest rates increase substantially during the two years I'd own the loan, and my income did not increase, I could be in big trouble because I wouldn't be able to refinance and still keep my payment down to a reasonable level. I would then have to sell the house into what I'm sure would be a declining market.
It's likely a good investment. What I fear is the 2 year arm (adjustable rate mortgage). A lot of lenders will give you a 2 year arm with a 3 or 5 year prepayment penalty. The prepayment penalty is sometimes 1% of the balance, or worse, 6 months worth of interest, which in your case could be like $18,000!. I'm going to freepmail you the contact information for a friend of mine who would be happy to help you get a decent fixed rate loan. It will still be 100% financing and take the form of 2 loans (80/20%) but both will be fixed. Also, what you when you finally buy, make sure you write the purchase agreement to cover your costs AND prepays (taxes and insurance). For example, house costs $500,000. Write the offer for $510,000, with the seller paying $10,000 in closing costs and prepays. Good luck David!
To: daviddennis
Assuming you don't get caught up in short term problems with your mortgage, the value of housing in any desirable part of LA is going to keep going up in the long run. While there are always the short-term (3-5 years) corrections, the value of housing in LA has done nothing but go up for at least the last 60 years. Cities like LA and NY will always have apocalyptic critics who see them on the verge of ruin, and yet property values just rise and rise and rise. There will always be an adequate supply of rich, flakey people who want to live in Topanga and to whom money means nothing. Again, assuming you can handle a variable rate mortgage, you can't go wrong. As a former Claremont resident (and still nostalgic about it) it is true as another poster said that you get more house for your money there and it is indeed a wonderful area. But I loved those hikes through Topanga!!
16 posted on
11/18/2003 3:11:26 PM PST by
speedy
To: daviddennis
The CA real estate market kinda reminds me of when stock in Yahoo was ~$250/share. It will probably go down faster than it went up.
18 posted on
11/18/2003 3:13:20 PM PST by
Orangedog
(Soccer-Moms are the biggest threat to your freedoms and the republic !)
To: daviddennis
Forget LA, Check out Orange County. In Irvine you can get a nice selection for $500k. One more thing, it's a very safe bet that you will make money in a few years.
19 posted on
11/18/2003 3:13:26 PM PST by
cmsgop
(Why don't you settle down and go buy a Juice Newton Album....)
To: daviddennis
Los Angeles Real Estate: Prudent Investment or Insanity? I have heard this question over and over and over for decades. Let history be your guide. There is no reason for So Cal real estate to decline.
21 posted on
11/18/2003 3:15:04 PM PST by
BunnySlippers
(Help Bring Colly-fornia Back!)
To: daviddennis
prop 13. You pay 5k per year in prop tax.
22 posted on
11/18/2003 3:17:10 PM PST by
larryjohnson
( Man Bch to Maine in '95)
To: daviddennis
I've been a broker for 26 years and taught RE Law, Practice, Finance, and Economics at the college level for 10 years. This market still perplexes me. People are paying insane prices, but then someone pays an even more insane price. I thought it would have leveled off by now and expected a price correction.
Among the things driving the market are, of course, supply and demand. We have huge numbers of illegal aliens in this state. They are buying the lower end and pushing up the prices, thus the prices are pushed up as people move up.
Part of what you will have to guess is the position of interest rates. Prices will stay firm as long as people can afford mortgages. It appears that people don't care what they pay, as long as they can afford the 30-year mortgage. At 9%, payments would be considerably higher, and people simply would not qualify as they do now. Prices would come down. It interest rates hit 9%, our entire economy will have tremendous problems. So, I think that Greenspan and his cronies will do everything possible to keep them down.
Keep in the back of your mind the thought that L.A. is a Second Tier City. That means that, according to the ISO, which does insurance ratings, L.A. is ten times more likely to be hit by a terrorist event than a suburb. It joins Philadelphia, Seattle, Houston, and Boston. Tier One cities are D.C. New York, Chicago, and San Francisco. They are one hundred times more likely to suffer a terrorist attack.
L.A. has been steadily become a cesspool of the poorest and most dependent. It is a cesspool of crime. It is becoming a third world cesspool. Besides deciding if you can afford it, you have to decide if you want to live in and and raise your kids in that city.
As to moving further out, the freeways will be getting slower every year. Five million illegals are not going back home any time soon. You will get value if you fo further out, but the cost of the commute in terms of money as well as your sanity will take a toll.
23 posted on
11/18/2003 3:19:12 PM PST by
doug from upland
(Why aren't the Clintons living out their remaining years on Alcatraz?)
To: daviddennis
Real estate is a tricky game. I bought a house in Massachusetts straight out of college and it was a terrible investment. with great effort i was able to break even...
My take on real estate in general is to pay attention to the baby boom: the wave of WWII & later babies is what defines all economic movement in the US, and to a lesser degree the rest of the world.
These folks are starting to reach retirement age, and MOST of them have already bought a house -- they will probably only be interested in selling the one they have for a smaller one, and this process can only accellerate.
At some point, they (us -- *ME*) will all be gone so what happens to these houses they bought? who will buy them?
This isn't to say that there aren't good deals to be had, but i personally would never buy anything unless i could pay for it in cash -- cars, houses, etc included. the only benefit of paying interest for anything is in lowering taxes, and i find that a suckers bet if there ever was one...
to me, perfection is to live with ZERO debt... i ain't saying its easy...
27 posted on
11/18/2003 3:29:39 PM PST by
chilepepper
(The map is not the territory -- Alfred Korzybski)
To: daviddennis
A couple of things. My mother in law bought a cottage (maybe 1000SF) in West LA in the mid 30's for $3,000. Her heirs sold it for $650,000. in 90 (it was zoned for 4 units). I bought a 1500SF house in Mar Vista in 63 for $30,000 and sold it in 79 for $200,000 (divorce). In 1980 I bought a condo in the Marina for $133,000 and sold it in 95 for $235,000. That same condo I am told would be worth $400,000 today. I have since moved out of LA but miss it when I go back. If history is any guide you cannot lose.
To: daviddennis
You are not ready to buy this house or a similarly priced house, especially with the conditions you sketched out.
We own a number of properties and use the interest only loan option on investments only, and, only if the rent roll covers at least 150% of the payment. If you cannot significantly pay down the principal on that loan then you will end up paying interest on the same money twice.
As for your expected $800/mo. deduction you should understand that you still have to pay the same amount monthly and only realize the benefit of that deduction in the following year at tax time. You should also understand that an $800 deduction will not translate to $800 savings. Other factors, such as your bracket of taxation come into play.
If you are counting on a tenant to meet your payment expect to dig into your own pocket for every month that you do not have one. This will happen more often than you think unless you find the magic tenant and sign a long term lease.
With a tenant you insurance costs will go up as will your maintenance costs.
What will your PMI costs be?
How secure is your employment? Where are you in your career earning power wise?
I am a firm believer as RE as an avenue to wealth which is an avenue to freedom and I applaud your thinking...I just don't think you're really ready to pull the trigger...what kind of condo will $350k buy in SM? maybe there's a place to start.
31 posted on
11/18/2003 3:33:36 PM PST by
wtc911
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