Los Angeles – How to buy an Apartment in Hollywood, Bel-Air, or downtown. We give you a full explanation and step-by-step guide to everything to know when buying an apartment in Los Angeles. From mortgage, to which areas to buy in Los Angeles, and everything else you need. Real Estate properties, like apartments, penthouses, lofts in this California city mean you can be beach-side, in your pool, or on your terrace with Hollywood just next door.
Los Angeles, where dreams come true. The home of celebrities, hollywood, a sprawling cityscape, beach and surf, and everything else you can imagine. From Malibu to Bel Air, Silver Lake and Venice Beach. It’s worth the traffic and chaos of the metropolis, to experiennce the unique atmosphere of this city. So you want to live in Los Angeles, but don’t know where to start? It’s certainly not easy wrapping your head around where and how to live. Do you choose Mid City or and a retail paradise, or Silver Lake, and hang out with the young students? We give you the full run-down below. Some people buy a house in L.A., but no doubt, buying an apartment is a good decision.
Los Angeles Economy – Overview
Los Angeles has a massive economy, third largest in the world behind Tokyo and New York. Its strength is of course the creative sector. Hollywood is the world’s largest film production area, and countless stars and starlets have their villas and mansions in the city. This does not paint the full picture though. It is also home to a booming high-tech industry with a surge of startups heading to the seaside city. There is also a strong aerospace and transportation industry, as well as, perhaps unexpectedly, the nation’s largest international trade industry.
Whether to buy or rent, you’re going to be paying a high price in L.A. Whether to buy or rent depends on the classic ‘break-even point’. How long you would have to pay rent in order to break even the amount which you would need to pay off a house. E.g. in Los Angeles, a median-priced home is around $630.000, and you may be paying rent around $2.000. That means, once you’ve lived in your residence for 6 years, you would have paid as much rent, to have been able to buy it. In short, whether to buy or rent depends on this: Assuming you live in a residence for at least five years, your rent needs to be lower than $2.600 in order to make renting more viable.
Also, in Los Angeles, it may be even better to buy than in other places, considering manageable property taxes in L.A. That means owning real estate is not a high recurring investment.
Buy if your rent > $2.600
Is it a Good Time to Buy an Apartment in Los Angeles?
Maybe. At the moment, high vacancy rates mean low rent prices. That means it may be more beneficial to rent at the moment. Considering the growing market though, it may be clever to invest at the moment, where high vacancy rates may have more landlords selling their property at higher rates than usual, driving down prices. That means, when the market inevitably recovers, you’re likely to make profit quickly.
What state has the highest property tax rate? Ranking
The Los Angeles real estate market, like so many of U.S.’ super cities, is doing well. For example, the year-over-year amount of sales of single-family homes increased by 23,2%. The median home price is at a strong $630.000, showing just how exclusive properties are here. Los Angeles is neither a sellers nor a buyers market. There are just as many real estate listings as there are sales. Combining this with the high increase shows the strong turnover, and ripe investment opportunities. Prices are also increasing, taking single-family residences, by over 16%.
Real Estate Price Development
Home prices in the metropolitan area of Los Angeles increase by about 13% annually, with the number of sales also increasing over the past year. The median price of an apartment is now $667.000. On top of this, rental prices have been steady in the past years, when looking at average rent.
2017: 2.281 $/m²
2018: 2.385 $/m²
2019: 2.516 $/m²
2020: 2.524 $/m²
What you have to know About L.A. Areas
Los Angeles is a massive city, spanning multiple counties. It’s near impossible to decide where to live. Generally, there are those that want to live in the famous residential areas of Bel-Air or Beverly Hills, there are also people who want the tumult of downtown LA, or younger people, and those looking for a more comfortable atmosphere will head to e.g. Silver Lake or Mid City. In general, for Los Angeles, it’s a good choice to rent, as opposed to buy. With purchases prices being comparatively high.
Lowest rent: Jefferson Park $1.355
Highest rent: North of Montana $4.690
How to Buy an Apartment
It’s of course a long and arduous process to buy an apartment, and takes a lot of time as well as financial investment. From beginning to end, there are irreplacable steps which, if you miss them, could be costly. If you’re not sure what real estate you should invest in, start here:
Find an attorney, real estate agent, and home inspector
When buying any property, you will need to pay a downpayment on your mortgage. In L.A., with comparatively high real estate prices, your downpayment should be at least 20% in order to avoid the likely very high mortgage interest rates.
Buying Apartment – Process from Negotiation to Close
To buy the apartment finally, you will want to start negotiating.
Make an Offer – How to Negotiate Sales Price
So you decide that this is your dream apartment. What now? Well now it’s time to make an offer. That means approaching the seller with an offer. There are two sides on which to negotiate, and you must pick one or the other. Either you try to reduce the size of the sale price. I.e. buying a property for $800.000 as opposed to $850.000. The other option is to negotiate the closing costs, e.g. agreeing on the sales price, but asking the seller to pay some of the additional costs, including real estate purchase taxes. These tactics of course mean either having more money in your bank account at that moment, or reducing the amount of montly costs in the future. You can typically expect to negotiate 5%-10% of the sale asking price.
Next Steps – Building Inspections
Your lender will most certainly require you to have an inspection of the apartment building, as well as the unit itself. This usually shows slight flaws, such as necessary maintenance in the future, or e.g. structural flaws.
Reducing Sales Price on Real Estate
Now you can renegotiate. You have found flaws in the building, and now have a strong negotiation stance. Let the seller know your concerns, and they will likely be more lenient in their negotiation.
There’s also a ton you can save on the many slight additional costs which come up when buying real estate, we give you the full guide
Don’t forget the walk-through! This is one of the most frequent beginner mistakes. After moving out, things may change, the previous owner may have broken something, or a cabinet may have been covering up a flaw. Not doing a final walk-through can be your number one regret later on. It doesn’t take that long, and will most certainly be worth it, at least for the peace of mind.
What’s Different in Los Angeles?
There’s of course some caveats to buying an apartment in L.A. as opposed to elsewhere in the U.S. That means a few things to keep in the back of your mind when considering your purchase of an apartment. Of course, the normal process takes place, you buy a unit using a downpayment as part of your mortgage, pay closing costs, then taxes, and then move in.
Popular Types of Properties in L.A.
In L.A., there are a few different types of popular properties. The most popular being, as in most other suburban areas, single-family homes, duplexes, and condos. These are popular because they allow for a fairly private space, without the hassle of neighbours which are door-to-door with you. Note, duplexes (or even triplexes) are typically hard to own for the resident, as investors tend to buy these and rent them. Other types of property are townhomes, small lot homes (advantage: no homeowners’ association!), coops, much like the apartment market in New York, TICs (Tenancy in Common), and of course the infamous vacant lots, where you just buy a piece of empty land.
Single-Family Home
Duplex
Condo
Townhome
Small-lot Home
TICs
Vacant Lots
Before – Buying Apartment Preparation & Planning
In L.A., it’s just as important, if not more important to get pre-approved. That means having your loan provider provde certification that you will be able to finance the mortgage on your home.
Get Mortgage Pre-Approval!
Negotiation – Paying too Much on your House
In L.A., strong changes in price as a result of negotiation are rare. The vast majority of properties are sold at or around listing price. Meaning there is little to no negotiation, and when, this negotiation takes place in small degrees.
Taxes – Extra Real Estate Costs
Of course there’s different taxes in Los Angeles than elsewhere in the country. It’s important to be in the know about the unique taxes, from property taxes to transfer taxes in California if you’re looking to own property in Los Angeles.
Pretty much everyone pays too much in taxes. It’s especially easy to save on real estate taxes. Learn how:
Not to forget is that you will have to pay homeowners insurance. Los Angeles has a broad span in homeowners’ insurance amounts. In some parts you can pay as little as $837, with L.A.’s average amount being $1.116.
$1.116/year homeowner’s insurance
Tips to Save Money – Lower your Homeowners Insurance!
These are the number one tips to reduce the amount you’ll have to spend on homeowners insurance.
Install a safety system for your home that includes fire, smoke and carbon monoxide alarms
Convert your older house to comply with earthquake regulations
Replace your roof with fireproof materials
Inquire with your insurance agent if you qualify for discount programs
Repair and replace wiring and plumbing to bring it into line with current building codes
Where to Live in L.A. – Best Neighborhoods
You’ve probably heard of Compton, Inglewood, Hollywood, and the like. You also probably have some preconception about how dangerous or safe it is here, whether you’d like to live here or not. We give you a full-researched list of the worst neighborhoods to live in Los Angeles.
Homes for the Ultra-Rich
Of course, some of the super-rich of the USA have ultra-luxury houses in L.A. Among them, superstars from all over, and pretty much every film star has at least one residence in Los Angeles. Below we have one of these ultra high-end properties, worth $50 mil. Of course, you’ll find it in the legendary Bel-Air neighborhood.
Worst Neighbourhoods in Los Angeles – Danger, Crime, Low Standard of Living
You’ve probably heard of Compton, Inglewood, Hollywood, and the like. You also probably have some preconception about how dangerous or safe it is here, whether you’d like to live here or not. We give you a full-researched list of the worst neighborhoods to live in Los Angeles. Best to keep in mind, L.A. is more dangerous roughly everywhere east of Broadway.
Skid Row
Fashion District
South Central L.A.
Compton
Central City
Jefferson Park
The Places to be in Los Angeles
There are a few neighborhoods you can’t miss. These are the classics like Hollywood or Bel Air. The top neighborhoods in Los Angeles to invest are the famous ones of course, but there’s a few ones to keep in mind if you’re looking to be in the place to be. Hip neighborhoods are plenty in L.A., like Culver City or Silver Lake. Some that you may have missed include Echo Park, Frogtown, and Tujunga.
Thinking about moving to L.A.? These are the best school districts, taking into account quality of education, safety, and more.
Hermosa Beach City Elementary
Newhall
South Pasadena Unified
Palos Verdes Unified
San Marino Unified
Walnut Valley Unified
LA Canada Unified
Temple City Unified
Manhattan Beach Unified
Arcadia Unified
Should I Rent a Co-op Apartment?
Co-ops are probably more famous and more popular in New York than anywhere else. Still you’ll find them from time to time in Los Angeles.Co-ops are slightly more challenging to get, with a complicated and time-consuming process, but the time investment is worth the reward, with typically lower property taxes, the possibility to build equity, and more.
What is a Co-op Apartment? Real Estate Corporation
A co-op apartment is an apartment which is administrated by a housing cooperative. If you buy a co-op apartment, you are not actually buying the property, i.e. the four walls which you intend to live in. Rather, you are buying a share in a legal entity. The shares you buy entitle you to use a specific part of the building. Therefore, you are not the owner of real property, but rather a membership which allows you to use the apartment you live in. This also means of course that you do not take out a mortgage, but rather share loans, i.e. a loan to pay for the shares.
You buy shares, not property
Why you Should choose a Co-op – Explanation
Because you are not the owner of the property itself, you do not have to pay property taxes. Rather the cooperative pays the property taxes for the whole building, and these are divided among the members, i.e. residents. The main advantage of a co-op is that it is cheaper. The property taxes which each resident pays are lower, and any additional fees are also lower, because the co-op is not intended to make profit. Lastly, residents in co-ops, despite not actually owning the property, are entitled to many tax deductions which real estate owners are entitled to.
Cheaper
How to buy a Co-op Apartment in Los Angeles – Step-by-Step
There are a few steps to go through before buying into the cooperative. Before approaching a co-op, or identifying an apartment which you are interested in, you have to gather an attorney, a mortgage broker, and an engineer. Although this is not necessary, it greatly increases your chances of getting the apartment you want. This is because, once you’ve identified the apartment you want, you apply. Your application is decided upon by the board. This board obviously wants the best possible residents, therefore it’s important to present yourself as a serious buyer. All co-ops have a certain list of requirements, which include the amount of downpayment you need to pay, and how much financial reserves you have. Following this, you contact the seller, begin the title search and mortgage application, and close the purchase.
Buying an Apartment Los Angeles – Checklist
If you want to buy an apartment in L.A., these are the most important things to do and keep in mind.
Decide! Rent or buy?
Prepare! Visit the city, research the market
Lawyer Up! Find your attorney
Choose affordable! Sponsor units, coops, or up-and-coming neighborhoods
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