Historically Los Angeles has been a condo town like Chicago, New York and other major cities. Here, people typically rent then buy a home with land. In recent years with a growing density in the center of the city, the changes in zoning laws, easy credit and low interest rates we have seen substantial development and an exciting renaissance in neighborhoods such as Hollywood, Downtown and Play Vista. Today this is more choice for the Angeleno looking for a cost effective way to get into the real estate market to start building equity or to diversify their investment portfolios. With interest rates nearing 4.5% for loan amounts under $625,500 and a first time home buyer credit as much as $7,500 before June 2009, the time to buy is excellent. The median price in Hollywood for example is $490,000 down 35% from October 2007.
In November 2005 I clipped an article from the Personal Finance section of the Wall Street Journal that I thought would be useful prospective condo buyers in any market. Lauren Baier article “Buying a Condo Is Getting Trickier: Location Remains Crucial as Prices continue to Soar; Avoid ‘White-Vanilla Boxes”” had the following tips which include my own observations as well.
1. Location is the key factor. Buying in a popular neighborhood will help assure a property maintain its value, although sellers might not always reap such big gains. Plus, you will enjoy a great quality of life. Appreciation may be better in a new or emerging neighborhood but resale is riskier. Watch for location within building. How many shared walls are there? Light inside the unit? Noise factor from street?
2. Avoid “white-vanilla boxes”. Buy something special or unique that will distinguishes your property when it comes to resale. Examples are private outdoor space, a view, a garden, or a celebrity resident – whatever gives it a bit of cachet.
3. Look for name recognition. A brand name may help fetch a premium price. A well-known builder, architect or designer within our local market tends to generate more buyer interest, especially among foreign investors.
4. Weigh old versus new. If you are buying in an older complex, make sure that the building and its grounds have been kept in good condition. It is probably better to buy a new condo if your objective is short term and your are banking on a quick resale. If you are willing to invest some elbow grease, purchasing a condo that needs hardwood floors, a paint job and smooth ceilings may be the best way to go.
5. Look for good management. A good condo association is crucial to maintaining your condos value. The association will cover expenses and maintain the property so it is important that it is well managed and has the money to make needed repairs. Before you buy find out what is covered in the home owner dues such as earthquake insurance, the amount that goes into reserves, the total reserves available, special assessments within the last 2-3 years, special assessment expected, claims pending against the association, etc. Once you own, get on the board so that you are informed and can influence management. This is the best way to protect your asset.
Let me know if you are curious about my favorite buildings and locations. I see a lot of properties each week. The good ones always stand out!
