Los Angeles Condo Purchase Advice

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alothelo
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Los Angeles Condo Purchase Advice

Post by alothelo » Tue Mar 27, 2018 12:18 pm

My fiancee and I are considering making an offer in the next couple days on a condo in our preferred neighborhood in Los Angeles (West Hollywood) but I am balking at the price tag and would appreciate any feedback. Her parents are willing to deploy some cash for us so we don't waste money on rent. Los Angeles rent is getting higher and higher, and the housing crisis is driving up real estate prices all around.

Condo Purchase Price: likely at $1,175,000 + $700/mo HOA; 2br 2ba, 1,500 sq ft
Down: 20% ($235,000) -- gift from parents
Total mortgage: $940,000 @ 3.75% 10-yr fixed, 20-yr variable
Monthly condo payments (inclusive of property tax, HOA, home insurance): $6,500/mo
Current Rent: $3,200/mo; 2 br 2 ba, 1,200 sq ft, same neighborhood

Age: 30/29
Combined gross annual income: $405,000. Income is secure/stable but may dip in 2-3 years if we go in-house from our current big law firms. Expected salary cut is 25% -- $303,750.
Combined after tax annual income: $216,000
Combined after tax monthly income: $18,000
401k: ~$75K; maxing, no match from employer
HSA: $3,450 + $3,450
IRA/Roth IRA: none (yet)
Emergency Fund: $45,000
Cash: $46,561
Student Loans: $159,000 @ 2.95% fixed, 13 years left; $70,000 @ 1.5% fixed, 9 years left
Living Expenses: $5000/mo (all bills, entertainment, food, gas, excluding rent). We eat out a lot and have succumbed to lifestyle creep.

We are saving for our wedding next year and expect that will cost $50K. We can save that much in about 4 months or less, after which we'll contribute to IRA and after tax accounts. No children for another 3 years. Would still like to take 2 weeks of vacations each year.

We could probably use a kick in the butt to cut our expenses and save more. Feel free to do so.

Appreciate it.
Last edited by alothelo on Tue Mar 27, 2018 6:06 pm, edited 1 time in total.

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Pajamas
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Re: Los Angeles Condo Purchase Advice

Post by Pajamas » Tue Mar 27, 2018 12:22 pm

I wouldn't worry about trying to cut expenses because your in-laws can always bail you out. How much do you have budgeted for decorating and furnishing the new condo? Is it going to require major renovations or just new window treatments and furniture?

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CaliJim
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Re: Los Angeles Condo Purchase Advice

Post by CaliJim » Tue Mar 27, 2018 12:24 pm

Congrats. Her parents like you. Do it.
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denovo
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Re: Los Angeles Condo Purchase Advice

Post by denovo » Tue Mar 27, 2018 12:47 pm

alothelo wrote:
Tue Mar 27, 2018 12:18 pm

Condo Purchase Price: likely at $1,750,000 + $700/mo HOA; 2br 2ba, 1,500 sq ft
Down: 20% ($235,000) -- gift from parents
Total mortgage: $940,000 @ 3.75% 10-yr fixed, 20-yr variable
About $600,000 is unaccounted for. Please edit your post.
"Don't trust everything you read on the Internet"- Abraham Lincoln

denovo
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Re: Los Angeles Condo Purchase Advice

Post by denovo » Tue Mar 27, 2018 12:51 pm

alothelo wrote:
Tue Mar 27, 2018 12:18 pm



We are saving for our wedding next year and expect that will cost $50K. We can save that much in about 4 months or less, after which we'll contribute to IRA and after tax accounts. No children for another 3 years
Appreciate it.

Say you have a kid in 3 years. Are you planning on raising the child in the condo or planning on moving again in 3 years? Do you plan on daycare or grandparents or unpaid leave to take care of the kid? That could crimp your budget.

50k is too much for a wedding...
"Don't trust everything you read on the Internet"- Abraham Lincoln

LarryAllen
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Re: Los Angeles Condo Purchase Advice

Post by LarryAllen » Tue Mar 27, 2018 12:54 pm

denovo wrote:
Tue Mar 27, 2018 12:47 pm
alothelo wrote:
Tue Mar 27, 2018 12:18 pm

Condo Purchase Price: likely at $1,750,000 + $700/mo HOA; 2br 2ba, 1,500 sq ft
Down: 20% ($235,000) -- gift from parents
Total mortgage: $940,000 @ 3.75% 10-yr fixed, 20-yr variable
About $600,000 is unaccounted for. Please edit your post.
I was wondering about that too.

If condos are $1.75m I would just rent a few more years. They'll be $1.25m within 5 years if history of LA real estate is an indicator.

whodatheads
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Re: Los Angeles Condo Purchase Advice

Post by whodatheads » Tue Mar 27, 2018 1:19 pm

How much is the property tax?

boogiehead
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Re: Los Angeles Condo Purchase Advice

Post by boogiehead » Tue Mar 27, 2018 1:48 pm

To be honest given your lifestyle and the possibility of wanting to change jobs near-term I believe renting would be more ideal so you still have the flexibility. You are almost doubling your payments once you buy and you'll basically be locked-in which will give you less flexibility in finding jobs outside of that area. Also if your current firm is not matching your 401k, why not use that money to open an IRA in Fidelity/Vanguard and be able to access a lot more funds,

2015
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Re: Los Angeles Condo Purchase Advice

Post by 2015 » Tue Mar 27, 2018 2:05 pm

LarryAllen wrote:
Tue Mar 27, 2018 12:54 pm
denovo wrote:
Tue Mar 27, 2018 12:47 pm
alothelo wrote:
Tue Mar 27, 2018 12:18 pm

Condo Purchase Price: likely at $1,750,000 + $700/mo HOA; 2br 2ba, 1,500 sq ft
Down: 20% ($235,000) -- gift from parents
Total mortgage: $940,000 @ 3.75% 10-yr fixed, 20-yr variable
About $600,000 is unaccounted for. Please edit your post.
I was wondering about that too.

If condos are $1.75m I would just rent a few more years. They'll be $1.25m within 5 years if history of LA real estate is an indicator.
Wrong. "LA" real estate is not the westside. The long term trend of West LA (of which West Hollywood is considered part) has always been up. And up. And up. When it's been down it's not been down for long.

I personally would not buy in the West Hollywood area as you are competing with the trendiest of entertainment individuals with big (and even obscene) bucks who have been priced out of Beverly Hills next door, and West Hollywood was in the near past one of the top five priciest areas per square foot in the State of California. Remember, you're buying into a place where the cheapest house on Orlando between Melrose and SM Blvd is around $2.5 mil (and it's a tear down) and the most expensive is around $12mil. If you hang out in that area, it's no wonder you're experiencing lifestyle creep.

Were I buying, I'd opt for areas around Hollywood Boulevard in Hollywood (perhaps one of the new or converted high rises?) which is undergoing it's own amazing transformation. You get about as much for less.

LarryAllen
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Re: Los Angeles Condo Purchase Advice

Post by LarryAllen » Tue Mar 27, 2018 2:38 pm

2015 wrote:
Tue Mar 27, 2018 2:05 pm
LarryAllen wrote:
Tue Mar 27, 2018 12:54 pm
denovo wrote:
Tue Mar 27, 2018 12:47 pm
alothelo wrote:
Tue Mar 27, 2018 12:18 pm

Condo Purchase Price: likely at $1,750,000 + $700/mo HOA; 2br 2ba, 1,500 sq ft
Down: 20% ($235,000) -- gift from parents
Total mortgage: $940,000 @ 3.75% 10-yr fixed, 20-yr variable
About $600,000 is unaccounted for. Please edit your post.
I was wondering about that too.

If condos are $1.75m I would just rent a few more years. They'll be $1.25m within 5 years if history of LA real estate is an indicator.
Wrong. "LA" real estate is not the westside. The long term trend of West LA (of which West Hollywood is considered part) has always been up. And up. And up. When it's been down it's not been down for long.

I personally would not buy in the West Hollywood area as you are competing with the trendiest of entertainment individuals with big (and even obscene) bucks who have been priced out of Beverly Hills next door, and West Hollywood was in the near past one of the top five priciest areas per square foot in the State of California. Remember, you're buying into a place where the cheapest house on Orlando between Melrose and SM Blvd is around $2.5 mil (and it's a tear down) and the most expensive is around $12mil. If you hang out in that area, it's no wonder you're experiencing lifestyle creep.

Were I buying, I'd opt for areas around Hollywood Boulevard in Hollywood (perhaps one of the new or converted high rises?) which is undergoing it's own amazing transformation. You get about as much for less.
Ya, I spent the first 25 years of my life in west LA and am familiar with the incredible growth. Tell me what happened in the early 90's and the late 2000's to prices in west LA?

2015
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Re: Los Angeles Condo Purchase Advice

Post by 2015 » Tue Mar 27, 2018 3:12 pm

LarryAllen wrote:
Tue Mar 27, 2018 2:38 pm
2015 wrote:
Tue Mar 27, 2018 2:05 pm
LarryAllen wrote:
Tue Mar 27, 2018 12:54 pm
denovo wrote:
Tue Mar 27, 2018 12:47 pm
alothelo wrote:
Tue Mar 27, 2018 12:18 pm

Condo Purchase Price: likely at $1,750,000 + $700/mo HOA; 2br 2ba, 1,500 sq ft
Down: 20% ($235,000) -- gift from parents
Total mortgage: $940,000 @ 3.75% 10-yr fixed, 20-yr variable
About $600,000 is unaccounted for. Please edit your post.
I was wondering about that too.

If condos are $1.75m I would just rent a few more years. They'll be $1.25m within 5 years if history of LA real estate is an indicator.
Wrong. "LA" real estate is not the westside. The long term trend of West LA (of which West Hollywood is considered part) has always been up. And up. And up. When it's been down it's not been down for long.

I personally would not buy in the West Hollywood area as you are competing with the trendiest of entertainment individuals with big (and even obscene) bucks who have been priced out of Beverly Hills next door, and West Hollywood was in the near past one of the top five priciest areas per square foot in the State of California. Remember, you're buying into a place where the cheapest house on Orlando between Melrose and SM Blvd is around $2.5 mil (and it's a tear down) and the most expensive is around $12mil. If you hang out in that area, it's no wonder you're experiencing lifestyle creep.

Were I buying, I'd opt for areas around Hollywood Boulevard in Hollywood (perhaps one of the new or converted high rises?) which is undergoing it's own amazing transformation. You get about as much for less.
Ya, I spent the first 25 years of my life in west LA and am familiar with the incredible growth. Tell me what happened in the early 90's and the late 2000's to prices in west LA?
I have been in the West LA area much longer than 25 years and have been in California decades longer. California real estate has always been boom bust, but the trajectory for major cities like SF/LA has always been up. And then way up. What has changed is virtually all major coastal cities from SF on down are no longer affordable.

If you will recall, early 90's West LA housing recession was brief and due to specific factors (namely, large loss of manufacturing base due to implosion of aerospace industry due to lost military contracts re Soviet Union collapse). This decimated middle class employment in the region.
However, housing prices shot right back up afterwards because the region is economically diversified. In fact, prices have been skyrocketing since 1996/1997. In the 2000's, prices in the West LA area only began to soften in 07/08 and began to climb again as early as 2009. Prices have gone stratospheric since then. Rents/housing prices in the West Hollywood area are supported by underlying educational and income levels, among other factors. Hollywood is on it's way there, but I don't believe it will ever match West Hollywood as WH is only one of 3, or maybe 5 designated "walkable" cities in all of SoCal. As I noted, I wouldn't pay for this amenity as Hollywood Boulevard is just about as "trendy" and somewhat walkable now.

What you're missing is Los Angeles is now what is referred to as a second tier city globally. It has and will continue to attract wealth and investment from around the world unlike ever before. Chief reason is globalism. The flood gates are open and there is no going back. I suggest reading three excellent books to get an idea of how LA, and the Westside in particular, is now hopelessly economically bifurcated, with only rich and poor (except there are no poor no more...):

A Theory of the Aspirational Class (of which OP could definitely be a member of by the book's definition)
Bobos in Paradise (a fantastic explanation of the West Hollywood area, and maybe even parts of Silverlake, Eagle Rock, et. al, too)
The New Urban Crisis (to understand why the rich are only getting richer in areas from West LA and now all the way to downtown)

bloom2708
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Re: Los Angeles Condo Purchase Advice

Post by bloom2708 » Tue Mar 27, 2018 4:00 pm

Rent is going up so you want to double your payment each month and take on repair/maintenance and upgrades?

I'd sit this one out.

Good luck!
Last edited by bloom2708 on Tue Mar 27, 2018 7:58 pm, edited 1 time in total.
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SrGrumpy
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Re: Los Angeles Condo Purchase Advice

Post by SrGrumpy » Tue Mar 27, 2018 4:31 pm

2015 wrote:
Tue Mar 27, 2018 2:05 pm

I personally would not buy in the West Hollywood area as you are competing with the trendiest of entertainment individuals with big (and even obscene) bucks who have been priced out of Beverly Hills next door ...
+1. But absolutely skip Hollywood, too. It's filthy and disgusting. Take a look at Studio City. Or the Cahuenga Pass/Hollywood Hills house down the road from me that's also priced at 1.75 million and can't sell.

2015
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Re: Los Angeles Condo Purchase Advice

Post by 2015 » Tue Mar 27, 2018 5:52 pm

Yea, parts are. But OP gave ages as 30 and 29, who may very well be attune to the "hip" factor going on in Hollywood, particularly Hollywood and Sunset Boulevards from La Brea until about Vine or so. I was in Silverlake this weekend and was amazed at how trendy the Hyperion area has become. Other areas to consider might be parts of downtown, Culver City (newish Expo line to downtown!), and definitely areas around the Grove, from Melrose down to Wilshire. In fact, Wilshire Boulevard from BH to La Brea has become quite walkable and trendy. And you're right, Studio City around Ventura Boulevard has changed remarkably (read: much more expensive and trendy).

Lots of options besides West Hollywood.

alothelo
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Re: Los Angeles Condo Purchase Advice

Post by alothelo » Tue Mar 27, 2018 6:07 pm

OP here. Apologies I didn't realize this would get so many responses while I am at work -- the purchase price is $1,175,000. Crucial typo there.

alothelo
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Re: Los Angeles Condo Purchase Advice

Post by alothelo » Tue Mar 27, 2018 6:25 pm

Pajamas wrote:
Tue Mar 27, 2018 12:22 pm
I wouldn't worry about trying to cut expenses because your in-laws can always bail you out. How much do you have budgeted for decorating and furnishing the new condo? Is it going to require major renovations or just new window treatments and furniture?
Well, we certainly don't want to rely on them. We want to be financially independent. The place will come ready-to-go; newly renovated, so no significant cash outlays there.
denovo wrote:
Tue Mar 27, 2018 12:51 pm
alothelo wrote:
Tue Mar 27, 2018 12:18 pm



We are saving for our wedding next year and expect that will cost $50K. We can save that much in about 4 months or less, after which we'll contribute to IRA and after tax accounts. No children for another 3 years
Appreciate it.

Say you have a kid in 3 years. Are you planning on raising the child in the condo or planning on moving again in 3 years? Do you plan on daycare or grandparents or unpaid leave to take care of the kid? That could crimp your budget.

50k is too much for a wedding...
We'll raise the kids (2 max) in the condo until they hit middle school, probably. Grandparents will help out but I definitely think daycare and unpaid leave will be the primary options.
whodatheads wrote:
Tue Mar 27, 2018 1:19 pm
How much is the property tax?
Property tax is taken into account in the monthly obligation amount listed above. It's about $15K a year.
boogiehead wrote:
Tue Mar 27, 2018 1:48 pm
To be honest given your lifestyle and the possibility of wanting to change jobs near-term I believe renting would be more ideal so you still have the flexibility. You are almost doubling your payments once you buy and you'll basically be locked-in which will give you less flexibility in finding jobs outside of that area. Also if your current firm is not matching your 401k, why not use that money to open an IRA in Fidelity/Vanguard and be able to access a lot more funds,
That is the counterargument definitely and is what gives me pause. Re 401k, the firm has pretty good options, though I agree I could allocate the max IRA contribution to an IRA rather than the firm 401k. Good idea.
2015 wrote:
Tue Mar 27, 2018 2:05 pm
I personally would not buy in the West Hollywood area as you are competing with the trendiest of entertainment individuals with big (and even obscene) bucks who have been priced out of Beverly Hills next door, and West Hollywood was in the near past one of the top five priciest areas per square foot in the State of California. Remember, you're buying into a place where the cheapest house on Orlando between Melrose and SM Blvd is around $2.5 mil (and it's a tear down) and the most expensive is around $12mil. If you hang out in that area, it's no wonder you're experiencing lifestyle creep.

Were I buying, I'd opt for areas around Hollywood Boulevard in Hollywood (perhaps one of the new or converted high rises?) which is undergoing it's own amazing transformation. You get about as much for less.
We are definitely betting on this condo appreciating and hence the focus on WeHo/West LA (including given the housing crisis here). I hear you re surrounding areas without sacrificing our young/trendy lifestyle. Hollywood is far from work for me but close for her so maybe that's better value, but again WeHo is the better bet with lifestyle to boot. More likely to rent the PH out as well if something were to happen.

All in all still not sure what to do but appreciate the thoughtful responses here.

bayview
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Re: Los Angeles Condo Purchase Advice

Post by bayview » Tue Mar 27, 2018 6:45 pm

alothelo wrote:
Tue Mar 27, 2018 6:25 pm
denovo wrote:
Tue Mar 27, 2018 12:51 pm
alothelo wrote:
Tue Mar 27, 2018 12:18 pm

We are saving for our wedding next year and expect that will cost $50K. We can save that much in about 4 months or less, after which we'll contribute to IRA and after tax accounts. No children for another 3 years
Appreciate it.
Say you have a kid in 3 years. Are you planning on raising the child in the condo or planning on moving again in 3 years? Do you plan on daycare or grandparents or unpaid leave to take care of the kid? That could crimp your budget.

50k is too much for a wedding...
We'll raise the kids (2 max) in the condo until they hit middle school, probably. Grandparents will help out but I definitely think daycare and unpaid leave will be the primary options.
My kids shared rooms as they were growing up (boy/girl/girl), but I will be astonished if (assuming that your two kids are different sexes) there aren't any issues with them sharing a room in 4th-5th grade. Not saying it's creepy, but that in a trendy area like the one you describe, there's gonna be an awful lot of pressure against this (sleep-overs, etc.) You'll be amazed how weird the parents of your kids' friends can be. Something to consider.
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jasonrecite25
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Re: Los Angeles Condo Purchase Advice

Post by jasonrecite25 » Tue Mar 27, 2018 7:13 pm

I will make this blunt and quick. I make as much as you, am 35 years old, have roughly 500k in retirement savings and live in a 600k house with no mortgage and no other debt. I am contemplating using 200k in cash, to put 800k down on a 1.3m home (i.e., 500k mortgage) and I am debating if I should do it... just trying to say that everyone thinks differently.

Now to your situation... no way should you touch this with a 10 foot pole. You have virtually no retirement savings, have 240k in debt and want to take on a 900k mortgage? Sorry, you are out of your mind.

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Pajamas
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Re: Los Angeles Condo Purchase Advice

Post by Pajamas » Tue Mar 27, 2018 7:26 pm

alothelo wrote:
Tue Mar 27, 2018 6:25 pm

Well, we certainly don't want to rely on them. We want to be financially independent.
If that is so, then you should take a deep breath, slow down, and scale back to put yourself on a firm financial footing now.

You are planning a $1.175 million condo purchase and a $50k wedding on your $200k income when you have lots of debt and little net worth. You are thinking about when your children graduate from middle school but you haven't gotten married and aren't planning on even having children for three years. None of it really makes sense to me; the numbers just don't add up.

You can live a great life on $200k but you can't live a $500k life on $200k.

Maybe start by rethinking a $50k wedding unless your in-laws will be paying for it and it's what your future bride and her mother want. Keep renting until you are ready to have children, pay off your debt, or at least divert your excess income to investing and saving for a down payment on the house if you decide not to pay off the student loans because of the low interest rates.

Focus on first things first: getting married, your careers, getting your finances in order, then a more permanent place to live, children, etc. It's good that you have some aspirational goals but you don't seem to have any viable plan on how to implement them financially.

https://www.bogleheads.org/wiki/Getting_started

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JMacDonald
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Re: Los Angeles Condo Purchase Advice

Post by JMacDonald » Tue Mar 27, 2018 7:31 pm

I am not commenting on the cost. Make sure you read the CC&Rs, the rules, and see the reserve fund. Find out if there are any special assessments in the near future. Also make sure you walk around the complex to make sure it is well maintained.

Consider if having kids in a condo complex will really work. People in my building move soon when they have kids. Give that some thought.
Best Wishes, | Joe

SrGrumpy
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Re: Los Angeles Condo Purchase Advice

Post by SrGrumpy » Tue Mar 27, 2018 7:31 pm

bayview wrote:
Tue Mar 27, 2018 6:45 pm
You'll be amazed how weird the parents of your kids' friends can be. Something to consider.
If they're living in West Hollywood, those parents won't come within a mile of their place.

crystalbank
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Re: Los Angeles Condo Purchase Advice

Post by crystalbank » Tue Mar 27, 2018 7:57 pm

Honestly, 1.175M in WeHo with an income of $400k doesn't sound bad at all. Even better, you're getting a nice gift for the downpayment. Sure, there might be surprises down the road, but on the flip side it's rather easy to sell the house and move out in a neighborhood like yours.

Edit: Also, from my own experience - once I signed up for a mortgage, my lifestyle creep gradually disappeared. Not saying it'll be the same for everyone but having a mortgage payment really made be frugal.

Traveler
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Re: Los Angeles Condo Purchase Advice

Post by Traveler » Tue Mar 27, 2018 8:14 pm

This seems like a pretty good rent vs buy question because you are comparing almost apples to apples (slightly larger square feet with the purchase). Given your rent and in the same neighborhood why would you want to spend double your current rent for more or less the same thing? Especially with so many uncertainties - not married yet, might change jobs, might have kids in a few years, etc.

2015
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Re: Los Angeles Condo Purchase Advice

Post by 2015 » Tue Mar 27, 2018 8:46 pm

SrGrumpy wrote:
Tue Mar 27, 2018 7:31 pm
bayview wrote:
Tue Mar 27, 2018 6:45 pm
You'll be amazed how weird the parents of your kids' friends can be. Something to consider.
If they're living in West Hollywood, those parents won't come within a mile of their place.
Why? People over 50 make up over 44% of the population, and people 65+ make up 16.65% of the population.

http://www.weho.org/business/facts-figu ... phics-1733

A must for every tourist in the world is to run the gauntlet from Hollywood to Beverly Hills, with WH sandwiched in between.

OP, have you given thought to the area on Wilshire around LACMA? Very cool down there and (possibly) cheaper than WH with the same commute to wherever.

ny_rn
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Re: Los Angeles Condo Purchase Advice

Post by ny_rn » Tue Mar 27, 2018 8:48 pm

Do you have to pay this "gift" back?

Derby
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Re: Los Angeles Condo Purchase Advice

Post by Derby » Tue Mar 27, 2018 10:32 pm

You have a negative net worth right now, and you want to buy a condo that's almost 4x your income? And have total debt of almost 1.2 MILLION Dollars?
(At least. Do you have car loans or credit card debt as well?)

Sounds like a really bad decision to me.
Carpe Diem.

harrychan
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Re: Los Angeles Condo Purchase Advice

Post by harrychan » Tue Mar 27, 2018 10:49 pm

jasonrecite25 wrote:
Tue Mar 27, 2018 7:13 pm
I will make this blunt and quick. I make as much as you, am 35 years old, have roughly 500k in retirement savings and live in a 600k house with no mortgage and no other debt. I am contemplating using 200k in cash, to put 800k down on a 1.3m home (i.e., 500k mortgage) and I am debating if I should do it... just trying to say that everyone thinks differently.

Now to your situation... no way should you touch this with a 10 foot pole. You have virtually no retirement savings, have 240k in debt and want to take on a 900k mortgage? Sorry, you are out of your mind.
+1

Not understanding the rush. From looking at your debt and retirement accounts, I suspect you are living a lavish lifestyle. Pay down your debts, put more into retirement, save for your wedding then look at buying your condo.
This is not legal or certified financial advice but you know that already.

nage234
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Re: Los Angeles Condo Purchase Advice

Post by nage234 » Tue Mar 27, 2018 11:34 pm

Are W.Hollywood schools good. If you have to send your kids to private school did you factor the additional costs? As you and your spouse just started in your careers, I would value flexibility of renting more than getting locked into a >$1M mortgage.

wdr1
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Re: Los Angeles Condo Purchase Advice

Post by wdr1 » Wed Mar 28, 2018 12:01 am

I lived in WeHo for a 3-4 years. Currently own in Santa Monica.

WeHo would be a hard place to raise kids, imho. The schools are good, but compared to Culver City or Santa Monica, there aren't a lot of good options for going out as a family. Same with the parks & kid friendly spaces.

Likewise, living in a condo with small kids & no yard is going to be *hard*.

I vote for renting, just because I think you're going to want to move in a few years.

Nate79
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Re: Los Angeles Condo Purchase Advice

Post by Nate79 » Wed Mar 28, 2018 12:06 am

Nope. Not a chance for all the good reasons mentioned above. Broke people shouldn't buy a house and this is too much for your income and net worth.

youdiditr2
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Re: Los Angeles Condo Purchase Advice

Post by youdiditr2 » Wed Mar 28, 2018 12:20 am

I have lived in downtown LA for 15 years and been renting the entire time. Sure, I could have bought a condo that was selling for $600k in 2008, and then back down to $300k in 2010, but it just doesn't make sense with the property tax and the $700 a month in HOA for these condos. It's been almost 10 years since the last bust, so your $1.2 million condo will probably be worth $600k in the next 10 years if history repeats itself. And then you're still paying property tax at $1.2 million and $700 every month on HOA.

LA had a bear market in the mid 80, mid 90, 2007-2012...so we're almost there unless you think it's different this time. It's like 2005 where everyone ask themself, HOW THE F IS EVERYONE ABLE TO AFFORD THIS STUFF? I ask myself this today...very few people are making $400k a year

denovo
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Re: Los Angeles Condo Purchase Advice

Post by denovo » Wed Mar 28, 2018 12:37 am

youdiditr2 wrote:
Wed Mar 28, 2018 12:20 am
It's been almost 10 years since the last bust, so your $1.2 million condo will probably be worth $600k in the next 10 years if history repeats itself. And then you're still paying property tax at $1.2 million

This is simply wrong. If your home falls in value from the purchase price, you file a decline in value application and get your property taxes lowered. (see link below)

https://assessor.lacounty.gov/decline-in-value/

I know a bunch of people who did this during the last housing crash.
"Don't trust everything you read on the Internet"- Abraham Lincoln

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unclescrooge
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Re: Los Angeles Condo Purchase Advice

Post by unclescrooge » Wed Mar 28, 2018 1:16 am

youdiditr2 wrote:
Wed Mar 28, 2018 12:20 am
I have lived in downtown LA for 15 years and been renting the entire time. Sure, I could have bought a condo that was selling for $600k in 2008, and then back down to $300k in 2010, but it just doesn't make sense with the property tax and the $700 a month in HOA for these condos. It's been almost 10 years since the last bust, so your $1.2 million condo will probably be worth $600k in the next 10 years if history repeats itself. And then you're still paying property tax at $1.2 million and $700 every month on HOA.

LA had a bear market in the mid 80, mid 90, 2007-2012...so we're almost there unless you think it's different this time. It's like 2005 where everyone ask themself, HOW THE F IS EVERYONE ABLE TO AFFORD THIS STUFF? I ask myself this today...very few people are making $400k a year
A surprisingly large number of people in sales make $150-$200k. Put two together and they can now afford a $1.2million condo in downtown.

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unclescrooge
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Re: Los Angeles Condo Purchase Advice

Post by unclescrooge » Wed Mar 28, 2018 1:20 am

wdr1 wrote:
Wed Mar 28, 2018 12:01 am
I lived in WeHo for a 3-4 years. Currently own in Santa Monica.

WeHo would be a hard place to raise kids, imho. The schools are good, but compared to Culver City or Santa Monica, there aren't a lot of good options for going out as a family. Same with the parks & kid friendly spaces.

Likewise, living in a condo with small kids & no yard is going to be *hard*.

I vote for renting, just because I think you're going to want to move in a few years.
I agree. Once you have kids your priorities will change. You'll want easy access to in- laws, good schools, parks and libraries.

You've pretty much missed the run up in real estate prices. The time to buy was between 2009 and 2016. Now there's no rush. Unless you think your condo will be worth $2 million in 5 years.

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Re: Los Angeles Condo Purchase Advice

Post by wdr1 » Wed Mar 28, 2018 1:36 am

youdiditr2 wrote:
Wed Mar 28, 2018 12:20 am
LA had a bear market in the mid 80, mid 90, 2007-2012...so we're almost there unless you think it's different this time. It's like 2005 where everyone ask themself, HOW THE F IS EVERYONE ABLE TO AFFORD THIS STUFF? I ask myself this today...very few people are making $400k a year
Two people making $200k/year in Los Angeles is far from crazy.

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Re: Los Angeles Condo Purchase Advice

Post by youdiditr2 » Wed Mar 28, 2018 1:46 am

wdr1 wrote:
Wed Mar 28, 2018 1:36 am
youdiditr2 wrote:
Wed Mar 28, 2018 12:20 am
LA had a bear market in the mid 80, mid 90, 2007-2012...so we're almost there unless you think it's different this time. It's like 2005 where everyone ask themself, HOW THE F IS EVERYONE ABLE TO AFFORD THIS STUFF? I ask myself this today...very few people are making $400k a year
Two people making $200k/year in Los Angeles is far from crazy.
On Bogleheads.com, yes, everyone makes $200k a year without uninterrupted employment for 40 years.

The bogleheads.com effect: "Can I retire at age 65 with $2 million and annual expense of $100k," response: "WTF, you crazy?? 5 % withdrawl, you'll be eating cat food in 5 years. You need to keep working!"

In the real world, "how did you amass $2 million...did you kill someone? I'm living on social security"'

I lived through the boom and bust. My siblings were worth $5 million on paper during the dot com period in the early 2000...too bad by the time they were vested the stock was worthless 2 years later. I remember people renting my parent's garage in 2000 for $2k a month and then the bust. Now we're back in the boom and people are renting rooms in San Francisco for $1,500 a month...yea...that's going to last. Let the good time roll because it will never end!

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Re: Los Angeles Condo Purchase Advice

Post by alothelo » Wed Mar 28, 2018 2:47 am

OP here. I am a Bogleheads noob and am getting conflicted advice from all over outside of this forum so I appreciate the reality check.

After crunching the numbers does the following analysis make sense?:

Perhaps a very oversimplified illustration: assuming we sell in 6 years at the purchase price, we will have paid $162,616.87 in mortgage interest, ~$90,000 in property taxes, $50,400 in HOA -- let's call it $300,000; assuming we stayed at our current place at current rent and saved the difference in amount we would have paid into the mortgage ($3300/mo), we will have paid $230,000 in rent and saved $237,600.

I see this purchase is a no-go.

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slayed
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Re: Los Angeles Condo Purchase Advice

Post by slayed » Wed Mar 28, 2018 3:27 am

If you don't buy now, will the downpayment gift be available to you in the future when you do buy? If not, then I would buy, to not lose the "free" 235k you are getting from her parents.

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Re: Los Angeles Condo Purchase Advice

Post by ssquared87 » Wed Mar 28, 2018 6:55 am

2015 wrote:
Tue Mar 27, 2018 5:52 pm
Yea, parts are. But OP gave ages as 30 and 29, who may very well be attune to the "hip" factor going on in Hollywood, particularly Hollywood and Sunset Boulevards from La Brea until about Vine or so. I was in Silverlake this weekend and was amazed at how trendy the Hyperion area has become. Other areas to consider might be parts of downtown, Culver City (newish Expo line to downtown!), and definitely areas around the Grove, from Melrose down to Wilshire. In fact, Wilshire Boulevard from BH to La Brea has become quite walkable and trendy. And you're right, Studio City around Ventura Boulevard has changed remarkably (read: much more expensive and trendy).

Lots of options besides West Hollywood.
I’m in the same age group and don’t find WeHo to be trendy or hip. Rather I find it to be arrogant, pretentious and self absorbed. I live in Santa Monica at the moment and have the same feelings about it here, although to a lesser degree.

I am from NYC and have lived in Seattle for a year and London for a year and found those places to be far more down to earth and culturally interesting.

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Re: Los Angeles Condo Purchase Advice

Post by ssquared87 » Wed Mar 28, 2018 7:05 am

alothelo wrote:
Wed Mar 28, 2018 2:47 am
OP here. I am a Bogleheads noob and am getting conflicted advice from all over outside of this forum so I appreciate the reality check.

After crunching the numbers does the following analysis make sense?:

Perhaps a very oversimplified illustration: assuming we sell in 6 years at the purchase price, we will have paid $162,616.87 in mortgage interest, ~$90,000 in property taxes, $50,400 in HOA -- let's call it $300,000; assuming we stayed at our current place at current rent and saved the difference in amount we would have paid into the mortgage ($3300/mo), we will have paid $230,000 in rent and saved $237,600.

I see this purchase is a no-go.
No, you are underestimating your savings. It seems like you are assuming that you are just saving the difference and not investing it. If you were to invest the savings into an index fund you would be generating a modest return over the long run, call it 3% after inflation to be on the safe side.

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Re: Los Angeles Condo Purchase Advice

Post by DVMResident » Wed Mar 28, 2018 9:59 am

IMO with kids in the plan in a couple years, a West Hollywood condo is not the way to go. I'd just enjoy your youth renting in a cool place and not bother with a purchase. Priorities will change.

If you had a huge itch to buy and depending on your commute, I'd be looking at Culver, West Wood (east)/Brentwood, Santa Monica, 'Silicone beach', or even the Hollywood hill. You can still find a family friendly SFH in Culver for $1.5m that will really hold it's value. On the school front, at your income, private school is an option and probably expected. If private school is the plan, don't get hung on local schools scores and focus on commute so you have more time at home with the family.

2015
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Re: Los Angeles Condo Purchase Advice

Post by 2015 » Wed Mar 28, 2018 10:18 am

ssquared87 wrote:
Wed Mar 28, 2018 6:55 am
2015 wrote:
Tue Mar 27, 2018 5:52 pm
Yea, parts are. But OP gave ages as 30 and 29, who may very well be attune to the "hip" factor going on in Hollywood, particularly Hollywood and Sunset Boulevards from La Brea until about Vine or so. I was in Silverlake this weekend and was amazed at how trendy the Hyperion area has become. Other areas to consider might be parts of downtown, Culver City (newish Expo line to downtown!), and definitely areas around the Grove, from Melrose down to Wilshire. In fact, Wilshire Boulevard from BH to La Brea has become quite walkable and trendy. And you're right, Studio City around Ventura Boulevard has changed remarkably (read: much more expensive and trendy).

Lots of options besides West Hollywood.
I’m in the same age group and don’t find WeHo to be trendy or hip. Rather I find it to be arrogant, pretentious and self absorbed. I live in Santa Monica at the moment and have the same feelings about it here, although to a lesser degree.

I am from NYC and have lived in Seattle for a year and London for a year and found those places to be far more down to earth and culturally interesting.
Oh absolutely! But since I'm moving soon, I have turned over a new leaf and have vowed to stop saying negative things about Los Angeles.

OTOH, I don't know if I find any of the globe's big cities "culturally interesting" anymore. Every major world city, regardless of location, has its own sense of identity, self-consciousness and pretense. A desert in all its vastness and beauty has more of the type of "culture" I'm looking for than NYC, Seattle, or London will ever have (I was in a deserted part of Nevada recently and it was the closest to Heaven I could think of--the natural beauty was almost overwhelming).

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Re: Los Angeles Condo Purchase Advice

Post by boogiehead » Wed Mar 28, 2018 11:34 am

A few other things to consider as a homeowner you would have had to pay for insurance for those 6 years, during the first 6 years of your mortgage your basically paying almost all interest so basically you are building no equity, and if you were to sell at purchase price you would have essentially taken a lost as well since there is the commission (~3%) you would have to pay an agent to sell the property.

Anyways glad to see you were able to rationalize through it.

alothelo wrote:
Wed Mar 28, 2018 2:47 am
OP here. I am a Bogleheads noob and am getting conflicted advice from all over outside of this forum so I appreciate the reality check.

After crunching the numbers does the following analysis make sense?:

Perhaps a very oversimplified illustration: assuming we sell in 6 years at the purchase price, we will have paid $162,616.87 in mortgage interest, ~$90,000 in property taxes, $50,400 in HOA -- let's call it $300,000; assuming we stayed at our current place at current rent and saved the difference in amount we would have paid into the mortgage ($3300/mo), we will have paid $230,000 in rent and saved $237,600.

I see this purchase is a no-go.

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Re: Los Angeles Condo Purchase Advice

Post by gunn_show » Wed Mar 28, 2018 1:04 pm

harrychan wrote:
Tue Mar 27, 2018 10:49 pm
jasonrecite25 wrote:
Tue Mar 27, 2018 7:13 pm
I will make this blunt and quick. I make as much as you, am 35 years old, have roughly 500k in retirement savings and live in a 600k house with no mortgage and no other debt. I am contemplating using 200k in cash, to put 800k down on a 1.3m home (i.e., 500k mortgage) and I am debating if I should do it... just trying to say that everyone thinks differently.

Now to your situation... no way should you touch this with a 10 foot pole. You have virtually no retirement savings, have 240k in debt and want to take on a 900k mortgage? Sorry, you are out of your mind.
+1

Not understanding the rush. From looking at your debt and retirement accounts, I suspect you are living a lavish lifestyle. Pay down your debts, put more into retirement, save for your wedding then look at buying your condo.
+1 no clue why the rush with so little in savings and so much debt, to take on 2x the cost of living for the same space in the same town. Odd.
Pajamas wrote:
Tue Mar 27, 2018 7:26 pm
alothelo wrote:
Tue Mar 27, 2018 6:25 pm

Well, we certainly don't want to rely on them. We want to be financially independent.
If that is so, then you should take a deep breath, slow down, and scale back to put yourself on a firm financial footing now.

You are planning a $1.175 million condo purchase and a $50k wedding on your $200k income when you have lots of debt and little net worth. You are thinking about when your children graduate from middle school but you haven't gotten married and aren't planning on even having children for three years. None of it really makes sense to me; the numbers just don't add up.
Also found this quote and comment from Pajamas to be very relevant, and most skipped over. OP "doesn't want to rely on them (GF parents)" yet the first major purchase in his life, worth over $1MM, will require... a MASSIVE (yes, how many friends do you have OP that have received this much cash from a girlfriend's parents?? massive amount of money being gifted here) $235K gift from said parents. That is the definition of relying on them. And you are not even married yet? Boy that is foolish. A lot can happen between today and the end of the ceremony, I've seen it with several friends. I would not get into this buying situation for this reason alone. Cart before the horse and then some, along with all the other reasons stated above. Then look into the future, but those future in-laws ever need help, need something, anything - hey Johnny remember that $235k we gave you, yeah I am gonna call on that favor for the next 30 years. May never happen, may happen weekly, who knows. Lot of money. Lot of reasons to wait on this purchase.
"The best life hack of all is to just put the work in and never give up." Bas Rutten

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Re: Los Angeles Condo Purchase Advice

Post by stocknoob4111 » Wed Mar 28, 2018 2:23 pm

I would not do this. Your buffers are way too small. I would want at least a $200,000 buffer for such a large mortgage incase you lose your job and can't find another one which is totally plausible. I'm not saying this will happen but we are overdue for a recession and think about it from that aspect, if you really want to stress about losing your home. In addition you may be upside down on your house soon if interest rates go up and prices fall.

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Re: Los Angeles Condo Purchase Advice

Post by DesertDiva » Wed Mar 28, 2018 2:34 pm

I would move to another state, elope, and pay cash for a house (given the parental help), but that’s just me.
♫ Stocks go up ♫ Stocks go down ♫ Stocks go up ♫ Stocks go down ♫ - Second verse same as the first

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Re: Los Angeles Condo Purchase Advice

Post by Lynx310650 » Wed Mar 28, 2018 2:45 pm

I'd be a little nervous about the condo market in these hot coastal CA cities. I'm in the Bay Area, and I do get the impression slowly but surely pro-development forces are starting to win out over NIMBYs. There seems to be more development coming online, but they ALL seem to be condos or townhome styled condos. I'm going to guess there will be a similar dynamic in Los Angeles. Makes sense since you can build more of these on the same amount of land vs SFHs.

My personal opinion will be condo values could stagnate or even fall in the upcoming years, while SFHs will hold their value and keep appreciating because there are just so few of them available in desirable areas.

So if you CAN, I'd try to get into a SFH rather than a condo, if you insist on buying something. Just my opinion, of course.

Slacker
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Re: Los Angeles Condo Purchase Advice

Post by Slacker » Wed Mar 28, 2018 3:16 pm

$50,000 wedding plans?

This may be of interest:
‘A Diamond is Forever’ and Other Fairy Tales: The Relationship between Wedding Expenses and Marriage Duration
Francis et al wrote:In particular, as compared with spending between $5,000 and $10,000 on the wedding, spending less than $1,000 is associated with half the hazard of divorce in the sample of men, and spending
$20,000 or more is associated with 1.6 times the hazard of divorce in the sample of women

2015
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Re: Los Angeles Condo Purchase Advice

Post by 2015 » Wed Mar 28, 2018 3:17 pm

youdiditr2 wrote:
Wed Mar 28, 2018 12:20 am
I have lived in downtown LA for 15 years and been renting the entire time. Sure, I could have bought a condo that was selling for $600k in 2008, and then back down to $300k in 2010, but it just doesn't make sense with the property tax and the $700 a month in HOA for these condos. It's been almost 10 years since the last bust, so your $1.2 million condo will probably be worth $600k in the next 10 years if history repeats itself. And then you're still paying property tax at $1.2 million and $700 every month on HOA.

LA had a bear market in the mid 80, mid 90, 2007-2012...so we're almost there unless you think it's different this time. It's like 2005 where everyone ask themself, HOW THE F IS EVERYONE ABLE TO AFFORD THIS STUFF? I ask myself this today...very few people are making $400k a year
Your real estate bear market dates are off as you are making the common mistake of comparing all LA real estate to the Westside (which is where OP is considering). Downturn was relatively short-lived on the Westside and prices skyrocketed back. Not so in places like Compton, Inglewood, Torrance, or even downtown (although downtown has changed dramatically in the last 10 years). As I stated above, the long term trend here is up, then up, then way up. I have friends who bought in the late 90's whose places are now worth 5 times what they paid.

"People can afford these places" because in LA the Westside is where the mega money is (parts of Pasadena, San Moreno, etc. notwithstanding), where the supporting underlying educational attainment levels are, and where the mega incomes are. As an example, the person who is putting up the $12mil "compound" on Orlando is some reality TV star's cousin's uncle's whatever whatever. The coasts are not the rest of the country economically and the Westside is not the rest of LA County. The Westside (from downtown) is also anchored by two major universities--USC and UCLA--and is where entertainment studios and support craft are located. The Oprah Winfrey Network (OWN) is located in WH where OP is considering.

You also fail to realize the change in global inequality since the 2008 meltdown has resulted in flows of investment money coming into LA real estate from all over the world, to include China, Russia, Europe, etc. The west side of LA has and continues to represent excellent safe investment vehicles for money fleeing other countries. Buyers are not just competing with Americans, but with the world. Sure there will be corrections, but there is no going back as far as west coast real estate is concerned. The key is to buy but plan to stay for at least 5 years, even longer.

wdr1
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Re: Los Angeles Condo Purchase Advice

Post by wdr1 » Thu Mar 29, 2018 10:41 pm

youdiditr2 wrote:
Wed Mar 28, 2018 1:46 am
wdr1 wrote:
Wed Mar 28, 2018 1:36 am
youdiditr2 wrote:
Wed Mar 28, 2018 12:20 am
LA had a bear market in the mid 80, mid 90, 2007-2012...so we're almost there unless you think it's different this time. It's like 2005 where everyone ask themself, HOW THE F IS EVERYONE ABLE TO AFFORD THIS STUFF? I ask myself this today...very few people are making $400k a year
Two people making $200k/year in Los Angeles is far from crazy.
On Bogleheads.com, yes, everyone makes $200k a year without uninterrupted employment for 40 years.

The bogleheads.com effect: "Can I retire at age 65 with $2 million and annual expense of $100k," response: "WTF, you crazy?? 5 % withdrawl, you'll be eating cat food in 5 years. You need to keep working!"

In the real world, "how did you amass $2 million...did you kill someone? I'm living on social security"'

I lived through the boom and bust. My siblings were worth $5 million on paper during the dot com period in the early 2000...too bad by the time they were vested the stock was worthless 2 years later. I remember people renting my parent's garage in 2000 for $2k a month and then the bust. Now we're back in the boom and people are renting rooms in San Francisco for $1,500 a month...yea...that's going to last. Let the good time roll because it will never end!
You're missing the point.

You asked how someone is able to afford housing, very few people make $400k/year.

My response is that in LA it's not that crazy to have a dual income household, with each making $200k.

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