If you can even come close to buying a home in Los Angeles, it is almost guaranteed to bring you a huge profit if you can hold on to it over the next few years. Perhaps not the profit that Brad Pitt is seeing but a big profit nonetheless.
In 1994 actor Brad Pitt paid 1.7 million for a property in Los Angeles. That property is 6700 sq feet. Today, that price for a house that size is a joke, as the average price for the most BASIC house in LA will cost you close to 1 million. And we are talking starting at 1500 square feet.
The irony is that he held onto it just shy of 30 years, and here we are 29 years later, and he recently sold it for 39 million. That’s a profit of 37 Million!!! Just for a home! How many apartments can you rent and walk away from when the lease is up for a single dime? You would be lucky to get your deposit back.
Apartment owners in LA also enjoy immense increases in equity as they go out of their way to update their units and raise the rent making it unaffordable for many. But are they to blame?
It is so hard to believe that people out there think renting is the way to go because owning a house is “too much work.” When you own a house in a good area and a good market, you live for free when you are there and can walk away with extra money in your pocket.
The current trend in LA is homeowners using their garages or building tiny houses in the backyard and either staying in the tiny house while renting their home (a more intelligent move for single people) or staying in their homes while they rent their tiny houses.
Either way, they are making enough income, or even a significant profit, and paying 0 for their mortgages or getting money back each month by doing this, which places them well UNDER what most people are paying to rent a one-bedroom apartment in the market. Depending on when they purchased their home, there is a good chance that living in a house is paying THEM.
The average rental rate for a one-bedroom in the LA market is anywhere from $1800 to as high as $10,000, depending on where you live, and it’s increasing.
The California market is tight right now, and it’s tough to get into unless you come to the table with a lot of money.
Currently, interest rates are the culprit that escalates some monthly mortgage payments that are financially unbearable. Some are buying in this market and paying exorbitant monthly mortgages as they want the interest rates to plummet.
This is because there is less competition in the market. They can make better arrangements with sellers, like paying closing costs, and the prices are not inflated for the home because of competition.
Once the election takes place, there’s a reasonable chance interest rates will go down again, but by how much remains to be seen. In the meantime, real estate agents in the LA market are doing very well too. If we (yes, I am an agent) can get one home to sell per quarter in LA, we’ve made enough money for the year. Location, location, location. Kudos to Brad Pitt