To Rent or Buy??
It’s the age-old question, especially if you’re living in Southern California. No doubt, we’re in a SEVERE housing crisis. As of 2018, California ranked 49th among the US in housing units per resident. According to Wikipedia, that shortage has been an estimated 3 to 4 million housing units (about 20-30% of California’s housing stock). Prices are high, and it’s simply supply and demand. I’m originally from Oklahoma, and I could’ve purchased several homes with the rent I have paid over the years in Los Angeles.
But it’s still Los Angeles, and we love it. We’d gladly pay 400x more in rent and mortgages here for a taste of the beach and the impeccable weather than have a “reasonable” mortgage somewhere else where it snows, and there’s no Hollywood Bowl.
So what are the advantages to renting as opposed to buying? Yes, you’ve heard that renting is akin to flushing your money straight down the toilet (which you are), but the upshots are that you (usually) don’t have to take care of your own repairs, pay taxes on the property, and can give a 30-day notice should you need to upgrade or downsize. Oh, and if you live in California, YOU HAVE AH-MAZING RENTERS' RIGHTS.
Now, say you’ve been a somewhat responsible adult and have built bit of a savings, WANT to buy into some California real estate but are afraid you still can’t afford a piece of the dream, I’d say YOU’D BE VERY SURPRISED. Good credit and steady income can get you more than just a grocery bag at Whole Foods, and lenders are more than happy to get creative with you (legit creative, not 2007 creative). Yes, you can put down less than 20%. If you’re a first time homebuyer you can even put down as low as 3.5% for FHA. Good credit helps but isn’t the end-all, be-all. If you have a good lender who is able to work with what you have, you CAN get into that condo or single-family home and start building your equity. And let’s face it, Southern California is GREAT place to be to build equity.
But…isn’t there another crash/recession/whatever coming?? I get this question all. The. Time. Look, the market has been slowly softening over the last couple of years, but 1. What goes down must come back up and 2. This is a GOOD thing if you’re buying!! What I’ve seen lately in our very sloooowww transition from a seller’s to a buyer’s market is that homes are staying on the market a bit longer (many times due to overpricing) and buyers are getting more concessions.
Buying isn’t for everyone, though. Maybe you’re testing the waters out here in LA, your company is paying for corporate housing, or you just can’t seem to make the commitment (like me and tattoos), and then of course those pesky California property taxes. Hey, it’s totally cool. But if you’re curious, I found this handy dandy rent calculator form the New York Times.
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