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Condo vs House in Los Angeles

Rinde Philippe

Is Buying a Condo a Good Investment?

Condos

1. Cost and Affordability

  • Generally less expensive than houses.

  • Suitable for families if size and amenities match needs.

  • The shared financial burden for amenities like pools, maintenance, insurance, and updates. 


2. Maintenance and Upkeep

  • External maintenance is handled by the condo association.

  • Includes services like cleaning and trash pick-up. Upkeeping with the lawn and overall appearance. 

  • Research HOA's financial health, past litigations, and rules.


3. Insurance and HOA Fees

  • Often cheaper to insure.

  • Investigate what insurance is included (earthquake, flood insurance, etc.).

  • HOA fees are an extra expense and may affect loan qualification.

4. Suitability

  • Ideal for first-time buyers or those downsizing.

  • Be aware of HOA regulations and community living constraints.

5. Investment Considerations

  • HOA fees do not contribute to equity.

  • Consider long-term financial implications and resale potential.

Houses

1. Privacy, Space, and Flexibility

  • Offers more privacy and space.

  • Opportunities for property enhancements (expansion, ADUs).

2. Freedom and Control

  • More autonomy over renovations and changes.

  • No need for HOA approval for modifications.

3. Maintenance and Insurance

  • Greater responsibility for maintenance and repairs.

  • Need for a financial buffer for unexpected expenses.

  • Home insurance prices have been rising in Los Angeles.

    4. Investment Potential

  • Homes tend to appreciate more than condos in the Los Angeles condo market.

  • Understanding property potential can maximize returns. Know your property intimately.

5. Marketability

  • Homes in Los Angeles are often easier to sell than condos.

  • Homes in Los Angeles's appreciation rates are much superior to condos.

6. Long-Term Planning

  • Understanding zoning laws and property potential is crucial.

  • Knowledge of the property can help in capitalizing or marketing it effectively.

Decision-Making Factors

  • Lifestyle: Condo living suits those who prefer community living and less maintenance, while houses offer more independence and space.

  • Financial Considerations: Budget for upfront costs, ongoing expenses (HOA fees, maintenance), and long-term investment potential.

  • Future Planning: Consider resale value, potential for property enhancements, and how the property fits into long-term goals.

Loan Options and Down Payment Myth

Applying for an FHA loan can be a strategic way to enter the housing market, especially for those considering buying a condo or a multi-unit property. Here's a breakdown incorporating all the FHA loan limit options for Los Angeles County in 2023:

1. FHA Loan Basics:

  • An FHA loan allows for a low down payment of just 3.5%.

  • Closing costs typically range between 3% and 6% of the home's purchase price.

  • These favorable terms make FHA loans an attractive option for entering the condo market or buying multi-unit properties.

2. FHA Loan Limits in Los Angeles County for 2023:

  • Single-Unit Home: The limit is $1,089,300. This high limit facilitates the purchase of a quality condo or single-family home.

  • Duplex: The limit increases to $1,394,775. A duplex can be an excellent choice for generating rental income while living in one of the units.

  • Triplex: For a three-unit home, the limit is $1,685,850. This option offers even more potential for rental income.

  • Four-Plex: The highest limit is for four-plexes at $2,095,200, providing significant investment opportunities.


3. Investment Strategy with FHA Loans:

  • Purchasing a 2-4 unit property and living in one unit while renting out the others can be a smart financial move.

  • This approach helps in significantly reducing your mortgage burden as rental income is considered by lenders in loan qualifications.

  • For instance, if you purchase a triplex that generates $6,000 in rental income, this income can alleviate your financial pressure and be factored into your loan qualification.

  • This strategy not only provides immediate financial relief but also aids in building equity over time.

4. Equity Building and Financial Planning:

  • Multi-unit properties can be a path to building equity faster.

  • They provide a steady source of income while also appreciating in value over time.

  • Understanding the market and choosing the right property is key to maximizing this investment opportunity.

For example, utilizing FHA loans for purchasing condos or multi-unit properties in Los Angeles County can effectively enter the housing market with a lower financial barrier. It's a strategy that balances immediate affordability with long-term investment potential. Always consult with a financial advisor or a mortgage expert to understand the specifics of FHA loans and how they align with your financial goals.

When planning to buy a home, saving for the down payment is a key consideration, but the amount you need might be less than you think. It's a common misconception that a 20% down payment is always required. The average down payment is often significantly lower, depending on the loan type and lender's requirements. You might be closer to homeownership than initially assumed, with various loan options requiring smaller down payments. Remember, each lending scenario is unique, so exploring different mortgage options and discussing with lenders is essential to finding the best fit for your financial situation.

Understand 20% Isn’t Always the Typical Down Payment.

Freddie Mac put it this way:

“. . nearly a third of prospective homebuyers think they need a down payment of 20% or more to buy a home. This myth remains one of the largest perceived barriers to achieving homeownership.”

Down Payment Resources

The Homeownership Program Index by Down Payment Resource indicates that over 2,000 assistance programs in the U.S. are primarily aimed at helping with down payments. Check your state’s down payment assistance program.

Additionally, certain loan types offer low down payment options of 3% or 0%, like VA and USDA loans ( normally apply to rural areas), which may have no down payment requirement for eligible applicants. To explore these possibilities, conducting thorough research and seeking information from reliable sources like Down Payment Resource is essential. After gathering information, partnering with a knowledgeable lender is crucial to determine which programs and loan types you qualify for.

In conclusion, whether a condo or a house is the right choice in Los Angeles depends on individual lifestyle preferences, financial considerations, and long-term objectives. Condos offer affordability and less maintenance but come with HOA fees and regulations. Houses provide more space and privacy, with potential for higher appreciation, yet require more maintenance. Ultimately, understanding your needs and the property market in LA is key to making a decision that aligns with your goals.

I'm here to support you with all your real estate inquiries. Whether you're looking to buy a new home or curious about your current home's market value, don't hesitate to reach out. We offer a complimentary consultation to address your specific needs and questions.