This is how I can afford to own a home in L.A. (Los Angeles: hair salon, apartments)

[ucbedge]

:-)

I remember when my wife and I signed the contract on our Denver home, we thought the same thing. We both lived in So Cal for 18 years, went to college in the Bay Area, and then shared an apartment in Long Beach for 5 years. We couldnt imagine living anywhere outside of California.

Now - I honestly cannot imagine ever moving back. Even if I found a job that paid over $100K in California, I'd probably turn it down. For us, the quality of life is just so much higher. We never realized it while we were living in Cali because we were completely immersed in California culture. I'm not saying it's a horrible place to live....it's absolutely not. However, for the things we value, you get more for your money outside of California.

Good luck OP - when your house is worth 2x mine in ten years, you'll probably be laughing at me!

Originally Posted by Charles

If you were to work in LA, where abouts would it be?


I understand your decision but man, you're so close though. With $80K salary (which we would expect to increase in time), you should be able to afford a home at least as expensive as the original poster, maybe the low $400s. If you were to look a little bit outside of LA, then for $400K you could get a nice house in a nice neighborhood with good schools- and be close to your folks. In the mean time your spouse could be working and saving up for more down payment.

I'm sure you've thought of all of this but it has to be a tough decision if you are natives and you plan on having kids and your folks are still in LA.

[8bravo]

Sample calculation:

$500k purchase price
5% interest rate
1.5% start-up annual payoff

monthly rate = $2,700
total payoff time = 29.4 years
total payment = $955k (less some $ tax savings)

Spending the same $955k in the same 30 years in rent, which is about $2,650/mo, leaves me with the flexibility of moving to everywhere I want and not having to invest a penny into maintenance, I don't pay $400k to the banks which build another glass/steel/marble palais out of the money they get from me and should anything happen to the building itself (i.e. earthquake, hurricane, place favorite catastrophy here) I don't lose all my assets I have and can just move out of the wrecked place.

Did I miss anything important?

[Ultrarunner]

Originally Posted by 8bravo

Sample calculation:

$500k purchase price
5% interest rate
1.5% start-up annual payoff

monthly rate = $2,700
total payoff time = 29.4 years
total payment = $955k (less some $ tax savings)

Spending the same $955k in the same 30 years in rent, which is about $2,650/mo, leaves me with the flexibility of moving to everywhere I want and not having to invest a penny into maintenance, I don't pay $400k to the banks which build another glass/steel/marble palais out of the money they get from me and should anything happen to the building itself (i.e. earthquake, hurricane, place favorite catastrophy here) I don't lose all my assets I have and can just move out of the wrecked place.

Did I miss anything important?

I'd like to add the unknown of where rents will be in 30 years and the ability to adapt a home you own to suit a particular lifestyle is desired.

I do agree, for a lot of people, renting is a viable alternative... no major unexpected expenses and almost always able to live in a better neighborhood starting out.

I've seen rents double in 7 years... although, I have no idea what the future holds.

Several of my friends live in homes they built... the homes are considerable worth more than it cost them money wise to build... even in a down market.

There are non-traditional paths to Home Ownership... the whole 30 year mortgage really got off the ground in the post WWII days.

In the 70's my city was selling city owned abandoned homes for $1 with the requirement the owner spend $5,000 on improvement and live there for 5 years... some of these dollar homes sold for more than $400k as recently as 2007... just food for thought.

I come from Farm Stock and nothing is more important to a farmer than owning the land... so I'm admittedly biased when it comes to owning the roof over my head.

[Daisy32673]

Originally Posted by ucbedge

:-)

I remember when my wife and I signed the contract on our Denver home, we thought the same thing. We both lived in So Cal for 18 years, went to college in the Bay Area, and then shared an apartment in Long Beach for 5 years. We couldnt imagine living anywhere outside of California.

Now - I honestly cannot imagine ever moving back. Even if I found a job that paid over $100K in California, I'd probably turn it down. For us, the quality of life is just so much higher. We never realized it while we were living in Cali because we were completely immersed in California culture. I'm not saying it's a horrible place to live....it's absolutely not. However, for the things we value, you get more for your money outside of California.

Good luck OP - when your house is worth 2x mine in ten years, you'll probably be laughing at me!

My point exactly - it seems as if most people who live here are making triple digit salaries to live in a really good apartment (sometimes). The kinds of life you can live where you can have the nice home and money for vacations, kids, nice cars, etc. just isnt in the cards here unless you're making some serious money. Am I wrong?
Yes, its nice to live here - the weather is great. But what does the weather have to do with the price of any home? You're buying a structure and the property it sits on. If weather is somehow involved then how do you justify that in the purchase of the home? It seems as if its out of control down here and its not about the house anymore its about how much money they can milk you for. Because there is no way in hell I would pay half a million for some dump

[Charles]

Originally Posted by 8bravo

Sample calculation:

$500k purchase price
5% interest rate
1.5% start-up annual payoff

monthly rate = $2,700
total payoff time = 29.4 years
total payment = $955k (less some $ tax savings)

Spending the same $955k in the same 30 years in rent, which is about $2,650/mo, leaves me with the flexibility of moving to everywhere I want and not having to invest a penny into maintenance, I don't pay $400k to the banks which build another glass/steel/marble palais out of the money they get from me and should anything happen to the building itself (i.e. earthquake, hurricane, place favorite catastrophy here) I don't lose all my assets I have and can just move out of the wrecked place.

Did I miss anything important?

Ya, the quarter millions dollars better off you'd be by buying.

I ran the your numbers (except I used 4% interest rate mortgage), investment rate 8%. In the end your net worth is $227K better by buying.

Rent vs Buy Calculator, Should I Rent or Buy? - Yahoo! Real Estate

[Setsuko]

Originally Posted by Daisy32673

My point exactly - it seems as if most people who live here are making triple digit salaries to live in a really good apartment (sometimes). The kinds of life you can live where you can have the nice home and money for vacations, kids, nice cars, etc. just isnt in the cards here unless you're making some serious money. Am I wrong?
Yes, its nice to live here - the weather is great. But what does the weather have to do with the price of any home? You're buying a structure and the property it sits on. If weather is somehow involved then how do you justify that in the purchase of the home? It seems as if its out of control down here and its not about the house anymore its about how much money they can milk you for. Because there is no way in hell I would pay half a million for some dump

I'm not sure why Americans are so obsessed with owning a home but to pick up and move all for the sake of owning a house seems ridiculous to me. There are far more things to keep me here than owning an affordable 3000 square foot house. I'd rather rent a nice apartment or house and live in CA than pack up and move to Oklahoma or Colorado just so I can buy a house. I can see if you don't have a job and need to go find one, but if you have a nice job making good money I can't imagine leaving for that reason. IMO Home ownership is highly overrated. Most people end up moving before they even pay off their homes so it's basically renting from the bank.

[Daisy32673]

Originally Posted by Setsuko

I'm not sure why Americans are so obsessed with owning a home but to pick up and move all for the sake of owning a house seems ridiculous to me. There are far more things to keep me here than owning an affordable 3000 square foot house. I'd rather rent a nice apartment or house and live in CA than pack up and move to Oklahoma or Colorado just so I can buy a house. I can see if you don't have a job and need to go find one, but if you have a nice job making good money I can't imagine leaving for that reason. IMO Home ownership is highly overrated. Most people end up moving before they even pay off their homes so it's basically renting from the bank.

Good point! It must be an LA thing - people settling for living in an apartment as opposed to a house (even renting one). Back home you rented an apartment because you couldnt afford anything else and it would be frowned upon if you werent in college or 25 y/o

[EscapeCalifornia]

Originally Posted by Daisy32673

Good point! It must be an LA thing - people settling for living in an apartment as opposed to a house (even renting one). Back home you rented an apartment because you couldnt afford anything else and it would be frowned upon if you werent in college or 25 y/o

Its the same here except when you double the price of housing across the board, a higher percentage of people get pushed the housing scale.

[ndfmnlf]

Originally Posted by Charles

Using $500K as the target house price:

The words in bold are tough to read in one sentence. Maybe two surgeons could pull it off in a few years.

Also, with rates less than 4%, why would anybody (under 50) not take out a mortgage even if they could afford to pay cash?

If you have a paid off house, will you take out some equity from it to invest in stocks or some other asset if you can get better than 4% returns? That's the same situation as having enough cash to buy a house and choosing to get a mortgage instead to leverage on 4% interest rates. By your logic, all homeowners with paid off homes should re-mortgage their homes as long as rates are low.

[Charles]

Originally Posted by ndfmnlf

If you have a paid off house, will you take out some equity from it to invest in stocks or some other asset if you can get better than 4% returns? .

It depends. If the benefit of investing is higher than the cost of borrowing then that hypothetical situation makes sense. There wouldn't be a mortgage interest deduction so that is something to work into the math.



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