West Los Angeles Real Estate


Wednesday, July 5, 2017

Los Angeles World Class City – Ranked #1 for Investment - #1 for Tourism - #1 Period


Why Has Los Angeles Finally Emerged as the World's Most Important City

It isn’t clear why it has taken so long for Los Angeles to be seen as the crown jewel of the world’s cities. LA isn’t exactly shy. Most of the elites of the world come here to play, if not to live. Why have cities like London, Paris, NY, Hong Kong or Bejing grabbed all the attention. 

Could it be that Los Angeles is “newish,” on the world stage? Might it be that with the LA image dominated by the movie and leisure industries, it was hard to take the region seriously? Possibly the urban sprawl kept LA from having a skyline or a true downtown.

What might easier to figure out is why LA has emerged in the last decade to grab the crown. What has happened to this massive urban complex that reaches from Westlake and Simi to San Juan Capistrano and from Santa Monica to Riverside over the past 10 years is revolutionary. We aren’t alone. Dallas/Ft Worth, Houston, Nashville, Charlotte, Atlanta, and Miami are undergoing similar transformations, but LA had a huge head start and the story is just plain bigger in every dimension.

They Come to Play

Southern California has always had the rest of planet earth lapped when it comes to ways to play, and there can be no doubt that this magnate is still affecting the massive influx of business and people into the area. While the population may not be growing as fast as some cities or urban megaplexes, the issue is about space to build, cost of living, and regulations inhibiting residential construction.

What is happening is that the population influx consists of middle class and upper middle class workers in media and hi tech. The outmigration is in workers with lower paid skills fleeing to less expensive Texas and Phoenix.

It might seem obvious and boring to list them, but truly no other city has the combination of natural playgrounds like outstanding ocean beaches, mountains, forests, and deserts, combined with man-made lakes, parks, and trails for walking, running, biking, and offroading. When combined with 300 days of sunshine and temperatures averaging 70 pretty much year-round with low humidity, the play factor is unparalleled.

What has changed in the last decade about play? The facilities just keep getting better. The ocean is cleaner. Smog is basically a non-issue.

They Come to Visit

Statistics are a funny thing. Los Angeles doesn’t make the top of any lists on total tourists visiting the area. But something seems wrong with that. Anyone who has lived in SoCal for more than a few years will have noticed that the freeways are no longer empty in summer. Twenty years ago commuters looked forward to a steady thinning of the traffic starting around April and not picking back up until school started. Not anymore!

Now the freeways are packed in Summer, and not just during rush hours. It took a little digging to figure out how LA could have fewer tourists than London or Paris, but as it turns out, the race isn’t even close. Southern California sees far more tourists than any other area in the world.

The statistical issue was primarily due to Anaheim. If you look at nights stayed in Los Angeles (the city), LA is not #1 for tourists. But if you look at the region, the LA area wins, hands down. If you use other measures than nights stayed, even the city of LA will take the prize. Most who come to the region and stay in accommodations outside the city in Santa Monica, Long Beach, Anaheim, or Pasadena, visit many of the attractions in the City of Los Angeles.

They Come to Learn

A recent Schroders Global City Index 30 ranks LA as the best city in the world for investment. LA has ranked high in the past, but Schroders decided to make a minor change in the way they evaluated cities. They added educational facilities. It has become obvious that world class cities need world class universities to feed the hi tech work force in modern urban centers.

No city in the world can claim to providing a better University system than Los Angeles. With over 70 colleges and universities, and a similar number of smaller schools and local junior colleges, the availability for business to tap into these resources is immense.

They Come to Earn

A huge shift of the last decade has been the recognition by the tech companies of their need for entertainment content. The combination of this need and the need for college educated workers has turned the LA basin into a destination for major internet companies. In particular the Silicon Beach area between Santa Monica and Manhattan Beach, and 10 fwy and Wilshire Blvd corridors between Silicon Beach and Downtown LA (DTLA) have seen huge influxes of major headquarters and facilities including Google, Microsoft, YouTube, Facebook, Snapchat, and many others.

With these have come thousands of startups to service these larger companies and their employees. The entire region has enjoyed (or not) a gentrification of old neighborhoods like Santa Monica, DTLA, Venice, and Mar Vista, into resplendent hip neighborhoods. DTLA is unrecognizable. Twenty years ago it was shabby and unwalkable. Now most of the neighborhoods in the central city are revitalized and safe to walk, even at night.

They Come to Mature

While LA has been recognized for decades as the place where new culture starts, many would also say that it was the headquarters of the vast cultural wasteland. Unsurprisingly for a city of this size, LA has had excellent museums, theater venues, and other evidences of culture. But no one would have compared Los Angeles to NY or Paris on the culture scale.
What a difference a decade or so makes. Starting with the museums, just the massive Getty undertaking alone moved LA into the running for cultural capital of the world. More recently the arts district in DTLA has added one amazing museum after another, topped by the Broad and MOCA’s Geffen, the story gets way interesting. Now add in the massive upgrades and additions to LACMA and the complete renovation of the Huntington Library. Finally, there are 100’s of smaller museums including the Getty Villa, The Pasadena Museum of California Art, and the Fowler. Almost every small city has a museum dealing with the local culture.

Then there is music. There should be no surprise that the city would venerate music, but because the city is so huge, there has never been a concentration of music venues. Even today it can be hard to search the web and find the offerings of chamber music, symphony, opera, light opera, and classical jazz that are being played all over the city. Their marketing could use some help. But the reality is that there is music everywhere if you can find it. And nowhere else can you find the number of venues offering the up and coming singers and bands. If many new talents head to Nashville or New Orleans, many more are already here or come here.

Whatever your taste in music, it is playing in LA if you take the time to track it down.

They Come to Watch

LA has always been a great sports town with UCLA basketball, USC football, and Dodgers baseball all iconic symbols of their sports. But with a new football stadium and possibly a new hockey stadium coming to Inglewood, SoCal may be able to lay claim to being the sports capital of the world.

The stadiums alone will speak to that positioning. The Rose Bowl, The Coliseum, Dodger Stadium in Chaves Ravine, The Forum, The Staples Center, and the new Ram’s stadium, not to mention Stub Hub Stadium, the Honda Center, and Angels Stadium would clearly make the Southland the metro area with the most major stadiums in the world.

With two Major League teams in baseball, basketball, football, and hockey, LA ties NYC for the most franchises, but when you add USC and UCLA as there is no doubt that Los Angeles gets the overall crown. Soccer? LA will have two teams as of 2018.

They Come to Complain

So what would keep LA from the top slot of cities anywhere on earth? The traffic? Have you tried to drive in NYC or London? The prices? LA is still cheaper than any of the other world class cities. The Crime? It is a little known fact, but current crime levels in Los Angeles are similar to the 1950’s.

The biggest issue – there are just too many people. This reminds one of the Yogi Berra quip – “No one goes there nowadays, it’s too crowded.”

Investment Opportunities

As noted above, LA is ranked as the number one city in the world for investment. If you are considering buying a home, condo, duplex, small apartment building, or any other type of residential real estate in theLos Angeles area, you will need an experienced and knowledgeable realtor to help you find the perfect property, then help you with negotiations and all the paper work.

Belle Tsai is the perfect choice. She has been actively dealing with West Los Angeles real estate issues for her entire adult life. Call Belle today at 310.738,7118

Belle Tsai - Sotheby's International Realty
15308 Sunset Blvd.
Pacific Palisades CA. 90272
CalBRE# 01841341
SIR CalBRE# 899496

Monday, June 26, 2017

Los Angeles Real Estate Prices Are Nowhere Near Topped Out – Proof!

Los Angeles 1986 - 2016

 Home Prices in LA County Likely to Rise Another 40% Over Next Four Years

I apologize in advance. We are going to go into the tall weeds for this post. Evaluating the direction of any market is difficult, whether Tesla stock, Apple bonds, coffee beans, or Bitcoins. It is easy to get burned even if you’ve done your homework.

Housing is at least as complex as any market you might think to invest in. Most homes are purchased for the purpose of setting up a household for years into the future. In fact, the length of time that homeowners remain in a home is one huge factor in reducing current market supply, thereby driving up prices. We will speak primarily to the the owner-occupier in this post, but the information will apply equally to investment purchases.

Where to start? Let’s begin with history. The Los Angeles residential real estate market is famous for wild swings. Everyone whose has lived here for more than a couple of decades will tell stories of the house they should have purchased (e.g. Venice in 2001.)

However, regardless of the swings, the LA market has moved ever upward. Each correction is followed by a new top. Of course, each top is followed by a selloff of 30% or even more.

First observation: We are not at a new top. We are just now reaching parity with 2007 in nominal terms. When adjusted for inflation we are still 12.4% below 2007. No one knows how far above the old top we will go, but 30% would not be unheard of. Thus, we might have more than 40% to go before reaching the top.

How is the Spring 2017 market doing? Generally, other than an economic crisis, there will be some evidence of topping as homes take longer to sell, or sellers start dropping their price. As of this writing, the average days on market in LA County is 40 days. It is common in flat markets for homes to average 90 days or longer to sell. Continued shortages of quality properties for sale or rent in Spring of 2017 suggest a continuation of the strong market.

Moreover, due to permitting difficulties and a lack of places to build, it is unlikely that even bullish builders can flood the market within the next 30 months.

Second observation: The lack of supply is going to continue, and will drive up prices and rents for at least another 3-4 years.

What about affordability? We’ve all read the headlines that LA residents can’t afford these rents and/or purchase prices. Read a bit further and you’ll find out that LA is undergoing a massive demographic shift. Those who can’t afford the prices are moving out. Those who can are moving here from colder and less interesting places.

LA is now a World Class City like London, NYC, or San Francisco. The tech folks are moving in to LA, because the nerds are just like everyone else. They love sun, beaches, snow boarding, and night life. The gentrification of DTLA is absolutely stunning in the transformation and the pace of change. With two incomes in the six-figure range, you can afford a lot of house. So the incomes of the folks who live here don’t need to go up. The incomes of those moving in need to be high enough to afford the housing.

Third observation: Affordability has not been tested yet. The stats don’t tell the entire story.

The wealth effect. We are currently undergoing by far the largest transfer of wealth in human history. Baby boomers are inheriting from their parents, and many are already “helping” their kids and grandkids just like earlier generations. If grandma makes a big enough down payment, the monthly payments are more affordable. Expect this factor to only get bigger and bigger over the next decade.

Another huge wealth effect is the amount of equity currently in homes. After the meltdown of 2008, the equity has shot up with many homeowners owning their properties outright. When it is time to move, these folks have all cash or a very large down payment. Once again, the affordability isn’t in question based on income.

Fourth observation: If you have enough wealth, you don’t need a lot of income to afford a home. If you have wealth and income, you can afford a lot of home.

In addition to an influx of US citizens from Seattle, San Francisco, Silicon Valley, and other tech hot spots, Los Angeles is a draw for those seeking to immigrate into the US. If you pay close attention while walking down the local mall, it doesn’t take a rocket scientist to see that the ethnic makeup of Los Angeles is heavily made up of recent arrivals.

Some of these folks are coming for school. Others because they have employment offers or want to establish a business here. Some are merely attempting to offshore some of their wealth. Foreign buyers have represented a large part of the purchases over the current boom.

Fifth observation: There is no expectation that the lure of LA will be over any time soon. We are a land of immigrants.

A consistently accurate way to measure housing prices is to take a look at the housing price compared to the rental income that home could provide. This makes great sense as residential real estate investors will move out of the market place if this ratio doesn’t make sense. Moreover, the “crowd” seems to sense when it makes more sense to rent or more sense to buy on a purely economic basis.

The LA market tends to fluctuate between 15 and 24 on this formula. If the rent is $5000 a month, that would be $60,000 a year. If you multiply that by 15, that home is worth $900,000. If you multiply by 24, the home is worth $1,440,000. The current price to income ratio in LA is 17.1 according to Zillow. Once again, this suggest that we are far from overpriced.

Obviously, one can make the argument that both rents and prices are too high, and LA is experiencing a bit of a building boom in apartments right now. However, no pundit I’ve read seems to think this boomlet in apartments will solve the shortage.

Sixth observation: Landlords are still able to get higher rents, and that is currently keeping the ratio quite acceptable. If rents stagnate, then it could be evidence of a top.

Less closely tied to the value of residential property, but still a factor, commercial, industrial, and raw land do impact overall real estate values. If homes and apartments are hard to find right now, these three categories are almost non-existent in LA County. This means builders have no place to build. The one exception is retail, but because office and commercial is so tight, retail properties that come on the market are often converted to employee or warehouse space.

No one who knows LA has any doubt that there is little land that hasn’t been built on. The ocean and the mountains have set the limits, and like other similar cities, this land limitation will also drive up prices. OC’s prices are already higher than LA, and the Inland Empire is where folks are heading who can’t afford LA.

Seventh Observation: Alternative ways to increase supply are not viable. If supply doesn’t increase, and demand remains steady or goes up, prices must follow.

Mortgage interest rates continue to sit close to historic lows. Someday they are likely to go up to historic averages around 5.5% - 6%. There is no doubt that this will put downward pressure on prices as the cost of the mortgage will affect affordability. If this increase is slow enough, the impact may not be substantial. A 1% increase on a $1,000,000 home with 20% down adds about $650 per month to the cost. This would suggest that prices might have to drop 10% to offset the interest.

Our earlier assessment was the prices will go up another 40%. If interest rates go up by 1 or 2%, this might result in prices only going up 20% or 30%. Historically, at some point, there will be a 30% correction.

Eighth observation: Interest rates on mortgages will probably go up, and this will affect sales prices.

Buying high seems like such a bad idea, but if you are buying for the long term, even if you might move to another home in the future, your initial purchase price will have little to do with your long term economic benefit.

Huh?! I don’t blame you. It took me a while to get my arms around this one. As long as you stay in a purchased home, you will not “realize” a profit or loss. Say you buy a home for $500,000, and it drops in price to $350,000, but you don’t sell. Later the home goes up to $480,000 and you sell. You lost money, but you now take your stake (down payment), and you are investing in the next home in the same market condition of the one you’re selling. Somewhat depressed. So you sell at a bargain rate and also buy at a bargain rate.

In the opposite situation, you might sell for $700,000, but all the homes you hope to buy have also gone up 40%. You sell at a high price, but you have to buy at a high price. The only time any of this matters is when you sell the last time and leave the market.

Ninth observation: If you plan to own a home or a string of homes over the next 10 – 50 years, don’t worry too much about where the market is today.

What about the economy? We are part of the strangest economy in the last 70 years or longer. We have very slow growth, but it has been protracted over the past 7+ years. While this created long term problems for many workers who were unemployed or underemployed, we seem to have now reached some kind of stable growth, with low inflation, and employment at good numbers.

Since we have not seen wage growth even at “full” employment, one has to suspect that many in the workforce are still substantially underemployed in both their position and hours. If the economy continues this anemic growth rate, those with good jobs and decent income and wealth may continue to love the economy (see the stock market.) However, this would not be good for those who are still underemployed or who have given up.

On the other hand, if the economy starts to grow at 3%, there should be better jobs and hours, creating a demand push on wages. This will help many to afford more rents and higher home prices. Either way, the economy looks to be our friend for the next several years when it comes to demand for housing.

Tenth observation: Crazy things happen (1999, 2008), so the economy could always spin downward. Right now that seems to be the least likely of scenarios.

Summary: If you are thinking of buying a house, whether it is your first or your 10th, the primary motivation for moving now is the interest rates. Buy before they go up!! As noted in the 9th observation, it won’t matter in the long term if you overpay. But as noted in the first eight observations, there is little likelihood that home prices are going down any time soon.

As noted above the market for homes is extremely tight with very little supply of better homes in the better neighborhoods. That’s why you should call Belle Tsai to help you find the perfect home for your needs. Belle has been active in the West Los Angeles real estate market for almost 30 years, and more recently has also found good options in Mid-Wilshire and along the 10 Fwy. Call her today at 310,738.7118

Saturday, May 13, 2017

Save $600 a Month with 10 Simple Steps and Afford $100,000 More on Your Next House

Save Big Money with a Few Simple Ideas

A few phone calls, and an hour of planning could save you $7000 a year

No, this is not another article about clipping coupons or going without things you like to have or do. The following are tested methods that won’t change your lifestyle in any significant way, and that only take a few moments.
There are many, many options available for using the $600 a month after you’ve achieved the savings. We are going to suggest using these funds to afford $100,000 more on your next home. Right now, with 4.15% 30-year interest rates, each $100,000 you spend on a home will result in about $600 in monthly payments.
  1. Call your cable TV provider. Tell them you are considering going off grid or switching to satellite. If you have satellite, call the provider and tell them you are thinking of switching to cable. Watch the dance begin. You are very likely to end up with at least $20 or more in savings. Now call the competition with your new rate and see what they will do. You are likely to end up with the same or better rate and some kind of promotional money or free stuff for switching.
  2. Go off the grid on cable. Between Apple TV, Hulu, Netflix, RedBox, Amazon Prime, and other TV offers, it is hard to justify any upgrades to basic service on cable or satellite. The savings for getting off of cable could easily be $50 or more.
  3. On to your cell phone, internet, and land line providers. This gets a bit more complicated, but the cost of all of this is dropping fast. By changing providers, bundling, unbundling, and just shopping, you are very likely to end up saving another $30 a month and improving MBPS. Recently I tried to end my land line service, but the bundle cost less with it that without. 
  4. Saving on your utilities. The water company (at least in California) will be happy to help you cut down your water use. Check with your supplier to find out how to get free or reduced costs products to reduce use in bathrooms and irrigation. Then check to see what the recommended water needs are for your yard. The electric company will help you with lighting and other ways to save on electricity. LED lights are fantastic and save a huge amount of money. Switch appliances to natural gas to save even more. Saving $50 a month for these changes should be a cinch.
  5. Budget. Keep a penny by penny ledger of all expenses for three months. There are many online tools that can help with this process. Once you see where the money is going, you will almost certainly be able to find ways to cut that won't hurt even a little bit. We’ll put this down as $25.
  6. Shop your car insurance. We have 4 drivers on the policy, so your results may vary. Don’t forget to check Costco or AAA. It is not unusual to save $100 or more. You should also review your other insurance policies annually to make sure you have the coverage you need, and to see about savings on rates. Life insurance is another very likely savings point.
  7. Speaking of Costco. The savings by purchasing your groceries and other items at Costco are real and significant. Costco marks up all items by 15%. What they buy for $10.00, you pay only $11.50.  Most discount department stores mark up 50% to $100.  So you would pay $15.00 - $20.00. I know you have to buy huge quantities. Find nooks all over the house for storing commodities. Buy and extra freezer. A one time small cost for huge savings. Multiple online sources report Costco as cheaper than Walmart, Sam’s, and Amazon Prime. Imagine the savings compared to your local chain market. Potential savings of at least $25 per month per person.
  8. Amazon Prime. When it isn't a Costco item, why not buy on Amazon Prime?!? Pricey toothpaste, supplements, household items and more are almost always cheaper on Amazon than at Target or CVS. And there is no freight and no auto expense. When you need more, you have a record of what you bought. Savings of another $10 per person per month.
  9. Get rid of any high interest credit card. Use the savings from these other suggestions to first pay off all credit cards with interest rates higher than your mortgage interest rate. The only good use for a credit card is to build credit. Pay them off every month. Or get an interest free credit card and transfer all balances into the interest free card. Most families will save at least $25 per month.
  10. Get rid of one expensive, useless or worse, habits. Smoking, buying booze in bars, fast food, gambling (including lotto.)  This could be the biggest savings of all. An expense of just $10 per day is $300 a month.
There is potentially a lot more than $600 a month in savings in this list.

If you are now ready to go buy that bigger house in a nicer school district, call Belle Tsai, and she’ll help you to get the most bang for your buck on that purchase, too.

Thursday, April 13, 2017

Don’t Believe the Scare Headlines – Buying a Home in Los Angeles Still Beats Renting – It Isn’t Even Close

Buying a Home Beats Renting - Even in West Los Angeles 2017

This isn’t a scientific study, but the math is the math. Since 2013, we’ve been watching the value of one West LA home that today is worth just under $1 Million. Each year we compared Zillo.com’s Zestimates for purchase and for rent. We then looked at current mortgage rates using a 20% down, 30-year fixed-rate mortgage. We assumed $500 per month of maintenance on the home. We assumed about 1% closing costs if the home were purchased in that year. We spread those closing costs over 3 years. We also assumed that someone who could afford this home was probably in the 25% income tax bracket, so we used 25% of interest and property taxes as a savings. 

We recognize that home prices have been rising rapidly in this period, so it is not representative of all real estate situations, and may be a terrible predictive tool for the next 4-year period. But even if values drop, the out of pocket costs will not be effected, as rents have not dropped in the previous two real estate recessions. 

The results that follow give the out of pocket expense for renting versus buying, and also show the wealth building for each. For wealth building, we assume the home would be sold with real estate commissions at 5%. The renter invested the down payment and made 6%, compounded on the investment. Results are approximate and rounded for ease of viewing.

2013 – Purchase Price $650,000 - Rent  $3150
Year one – Out of pocket cost to buy $3066 vs Rent $3150
2014 – Purchase Price $795,000 – Rent $3125
Year one – Out of pocket cost to buy $3550 vs Rent 3125
If purchased in 2013 – Out of pocket still $3066 
Wealth Increase -  $98,000 buy vs $7800 rent
2015 – Purchase Price $840,000 – Rent $4000
Year one – Out of pocket cost to buy $3900 vs Rent $4000
Year three if purchased in 2013 – Out of pocket for purchase still $3066 vs $4000 to rent
Year two if purchased in 2014 – Out of pocket for purchase still $3550 vs $4000 to rent

Wealth increase if purchased in 2013 - $148,000 buy vs $16,000 rent
Wealth increase if purchased in 2014 - $3000 buy vs $10,000 rent

2016 – Purchase Price $930,000 – Rent $4000
Year one – Out of pocket cost to buy $4300 vs Rent $4000
Year four if purchased in 2013 – Out of pocket for purchase still $3066 vs $4000 to rent
Year three if purchased in 2014 – Out of pocket for purchase still $3550 vs $4000 to rent
Year two if purchased in 2015 – Out of pocket still $3900 vs $4000

Wealth increase if purchased in 2013 - $233,000 buy vs $26,000 rent
Wealth increase if purchased in 2014 - $90,000 buy vs $20,000 rent
Wealth increase if purchased in 2105 – 44,000 buy vs $11,000 rent

2017 – Purchase price $970,000 – Rent $4000

(Caveat – The big jump in rent 2015 after a slight decrease in 2014 and the subsequent flat rents in 2016 and 2017 could be smoothed out and still be good for comparisons)

Year one – Out of pocket cost to buy $4300 vs Rent $4000
Year five if purchased in 2013 – Out of pocket for purchase still $2766 vs $4000 to rent
Year four if purchased in 2014 – Out of pocket for purchase still $3550 vs $4000 to rent
Year three if purchased in 2015 – Out of pocket still $3900 vs $4000
Year two if purchased in 2016 – Out of pocket still $4200 vs $4000

Wealth increase if purchased in 2013 - $270,000 buy vs $34,000 rent
Wealth increase if purchased in 2014 - $125,000 buy vs $30,000 rent
Wealth increase if purchased in 2105 – 80,000 buy vs $23,000 rent
Wealth increase if purchased in 2016 - <$10,000> vs $11,500 rent

After four years of running this experiment, and even with a supposedly overheated seller’s market in Los Angeles, it seems that buying just makes way more sense than renting. We can imagine scenarios where this would not be the case. The housing market is subject to downturns just like any market. It is possible to imagine this home dropping by $300,000 if there were a typical drop in market values.

Even then, these markets correct, and over time the likelihood is that the home will continue its upward valuation curve. On the other hand the market may continue strong and deliver another $100,000 or so in appreciation over the next three years.

A major issue in the current market is whether you can even find a home to buy in Los Angeles. Inventories of Los Angeles homes are the lowest ever recorded.

We can help you with that.  Belle Tsai has the experience, the focus, and the backing of real estate powerhouse, Sotheby’s International Realty to help you. Call Belle now to get the ball rolling at 310.738.7118

Belle Tsai - Sotheby's International Realty
15308 Sunset Blvd.
Pacific Palisades CA. 90272

Wednesday, April 5, 2017

10 Key Secrets - 2017 Los Angeles Guide to Home Buying

The housing market is still super tight in Los Angeles

The following 10 Key Secrets apply regardless of market conditions, but they are especially true in a seller’s market such as we are experiencing in Southern California 2017. Home sellers are generally receiving multiple offers from qualified homebuyers within days of putting their home on the market. How can you increase your chances of competing in such a market?

  1. Prove You Can Pay. Many buyers are showing up to open houses prepared to pay all cash. These are usually sophisticated buyers who may offer less than market, because they know that their all cash offer has leverage. There will be no need for contingencies or surprise extensions due to mortgage issues. If you are not paying all cash, be sure you have a letter from your mortgage company declaring that you are preapproved for $X amount.
  2. Have a well though-out plan. In this market it pays to be flexible about everything. When you go view a home, you’ll need to be ready to put in an offer if it will work for you. Know your acceptable ranges on neighborhood, price, number of bedrooms and bathrooms, home or condo/townhome, square feet, school district, etc
  3. Hire an amazing real estate agent, like Belle Tsai. There is no benefit in hiring a second tier agent. You want someone with experience in the area you are moving to, and with great skills in negotiation. You also want someone who knows how to manage all the moving pieces of the process and paperwork.
  4. Give your agent an exclusive, at least for 60 days or so. A great agent isn’t going to give you’re their best if you have other agents on the job. The best agents have plenty of clients who will give an exclusive, so you don’t want to be treated like second class. If they haven’t done a great job within 30 days, change agents. If you like them, but after 60 or 90 days the agent appears to be out of ideas, that may be the time to add a second agent. Be sure to tell your agent when you do this, and set up criteria for how you will decide which properties belong to which agent.
  5. Do your own research on potential properties. You agent will likely only “see” 80% of the places available at any given time. This is not due to any failing on the agent’s part, but rather due to the amount of activity on the Internet. You might even find a property by driving around that is for sale by owner, or not yet on the multiple listings.
  6. Eliminate any contingencies you can live without. Contingencies can be the deciding issue in a close contest for a great home.
  7. It is legitimate to want to come back a second time to any property you are considering. You may need to show it to a co-owner, contractor, or someone offering you direction in making the purchase. However, keep in mind that you may only have hours or a day or two to make the offer. Being nimble is important in a tight market. If you are in an area that is not so buyer friendly as LA or you are reading this later when things have cooled off, you may have much more flexibility on time than during April to July of 2017.
  8. If cash flow is an issue (and it almost always is), be sure to have your agent provide you with estimates of the cash you’ll need to close and move in. The down payment, closing costs, moving expenses, necessary repairs, window covers, utility and cable company deposits, can all start to add up.
  9. If the home or condo is part of an HOA (Home Owners Association), ask your agent what he/she might know about this HOA. Some of the rules can be really restrictive. Some HOA’s are not well run or have financial problems. You may even want to call the president of the HOA or talk to the management company for the HOA.
  10. There are many dozens of cities in LA County. Each of these cities has its own issues related to crime, regulations, transportation, local taxes, and so on. These issues are readily available to research online. You could find a lovely home, in a perfect neighborhood, in a city that is known to be in decline. Your agent is likely to be able to give you some direction, but do your own homework.

If you are ready to start your search or have questions that need answering before you do, or if you need to switch to a different agent, call Belle Tsai to set up an appointment. Call now at 310-738-7118.

Monday, March 13, 2017

When to Buy a New Home - SoCal Home Buyers Get Most Choice in March-June

For those who are looking to buy a home in Los Angeles, the story for 2017 is pretty much a repeat of 2016 and 2015. Inventories are at historic lows (Only about 100 homes for sale in Santa Monica), and there is serious competition for the best homes that come on the market. So when is your best chance to score the home of your dreams?

In general, the best time is immediately.  Your first step should be to concentrate on selecting an excellent, hard working realtor, and be prepared to spend six months to a year in your search. You can dramatically shorten the time to locate and buy a home if you are flexible about the home, the neighborhood, or the price. But the more you care about each of those elements, the longer your search is going to take.

The high season of real estate starts in March. More product comes on the market in the Spring as sellers are interested in using the Summer to move. This has generally been related to school and moving the kids to a new district during the Summer. While this is still an issue, even families with no children are generally hoping to move during the Summer months.

As a result, substantially more inventory will be available during March-May. The converse is also true - the shoppers are also out in droves. And yes, prices go up due to the number of shoppers in the market competing for the best properties.

What steps can you take to make the process as smooth as possible? Start by calling Belle Tsai. She has many years of experience helping buyers find a great property in the Los Angeles Market. She is also associated with Sotheby’s International Realty, and that relationship provides you with massive additional resources.

Belle will help you to get set up with an outstanding mortgage broker where you can be preapproved for a loan. Unless you are an all cash buyer, home sellers are going to give preference to offers that have proof of ability to borrow. In this market, you are hugely handicapped if you don’t have your lender preapproval letter.

Next, Belle will listen carefully to your dreams and expectations and then provide professional recommendations for homes that will best fit what you are looking for.

Once the plan is in place, you will receive suggested homes to go visit. Belle will accompany you on these visits to help evaluate each property.  When you find a property that you like, she will help you prepare an offer that will be designed to the right price for that house in that market, and that will appeal to the seller.

If you are ready to start looking for your new home, call Belle today @ 310.738.7118

Thursday, February 9, 2017

West LA – Santa Monica Homes Average Three Years to Break Even on Rent VS Buy

You are so tired of paying the landlord and keep thinking you ought to be buying instead of renting. There are lists of benefits and detriments to each choice, but financially you keep watching your friends and family members amassing huge assets in their primary residences.

Zillow produces an analysis that tells you how long you need to live in a home before the costs break even when compared to renting. For most of West Los Angeles, that is a mere three years. As you head more toward mid cities, it can take less than two years to break even.

While no method for scoring costs of ownership compared to renting is perfect, Zillow says they have tried to take all the costs including mortgage expenses, moving, repairs, utilities, and such. It also includes the likely rent increases and home value appreciations for each neighborhood.

How does the three year breakeven math work?

For instance, LA County is predicted to have rents increasing by an average of 3.46% per year, while housing values are predicted to average 4.26 increase each year. Therefore only taking into consideration the out of pocket cost, a homeowner will be paying 10% less per month by year 6 and 20% less by year 9 than if they were renting the same house.

In the meantime, based on historical information, that same homeowner would see the underlying asset value increasing by 4.26% each year, or roughly doubling within a bit over 16 years. (Your results may vary widely based on when you bought your home.)

Example of three years on rent versus buy

Using the average price of a West LA home as an example to flesh out these numbers, you would see the following:

Home price early 2017  $800,000 
Down Payment 20%      $160,000
Mortgage, Tax, Ins          $3,783 per month  ($630 is principle)
Closing costs (appx)       $13,500 ($375/month over 36 months)
Total cost per month      $4158.00

Rental for that home would currently be around $4000. Cost per month over first three years will be about equal, not including repairs. Repairs will drive homeownership higher than rent during that time.

The renter could also put his $160,000 in an investment. It might pay $30,000 or so over that time.

At the end of three years the cost will drop form $4158 to $3783. In the meantime, the rents are projected to increase to about $4400.00. This provides $600 a month in repairs, which should be a fair expectation.

However, during this time, the homeowner has reduced his mortgage by $22,680, and the expected value of the home has increased by over $100,000. Sure, if the homeowner sold, there would be a cost of around $50,000 to sell. So the gain would only be $70,000, compared to the renter who has gained about $30,000. The gains are not the same, as the owner will have tax benefits and will clearly have no taxable income if he stays or sells and buys another home. The investor may have had to pay some taxes on his gains.

What happens after six years?

Move ahead another 3 years. The rent is now $48,400. An argument can be made that the homeowner is now pocketing at least $400 a month in cash flow. There has been another 23,000+ in equity gain from principle payments, and another $120,000 in value increase. A sale will now cost $60,000, so the gain is $115,000, plus the cash flow benefit of $15,000.

The tenant may have made $40,000 or so. His rent is now almost $5000 a month, the owner is still paying a mortgage of under $4000 (property taxes would increase somewhat.)

As the years go on, the benefits get even bigger for ownership.

We won’t use this space to discuss the myriad other plusses and minuses associated with rent versus buy such as flexibility, community, stability, etc., We only hoped to provide the details of the Zillow estimate that after three years, a owner will have achieved parity with a renter financially from a cash flow standpoint, and have a huge gain when taking into consideration principle payments and tax savings.

Belle Tsai is an experienced professional home seller for the entire DTLA to Santa Monica region. She can help you find the home of your dreams. Call her today to discuss your needs at 310.738.7118