Let’s talk about condos!
*Please note… this article does not apply to apartments in major vertical living cities such as Paris and New York… This article applies to cities like Los Angeles that mostly comprise of single family dwellings.
Condos are a mainstay of the real estate industry. Whether you are downsizing, purchasing a second home, or just moving to a new city, condos provide a stable, more affordable style of living.
However, there is a lot of confusion when it comes to buying condos, which means that buyers don’t always come out ahead on their purchases.
In Los Angeles, condos are a great alternative to rising home prices, and they can either be a very prudent investment, or a serious waste of cash.
When Buying a Condo Think about Long-Term Value
The truth of the matter is that a house is a diminishing asset! That sounds weird doesn’t it? Let me digress… in terms of your home, the actual structure goes down in value over time. The land is what appreciates! Think about it for a second… Pretend you bought a home in Beverly Hills in 1970 and it was one of those gorgeous amazing houses of tomorrow in Trousdale with all the fun gadgets of the time. 50 years later, what do you think that house looks like? Well, let’s just say it looks like it is ready for the bulldozer.
So now what is the value of this property? It’s whatever the land is worth. The land is what appreciates over time and in Beverly Hills the land is the most important thing. That home that was purchased for $200,000 back then is probably now worth $10 million because of the dirt and of course the location. Again the structure is likely valueless. In fact it may be better to have no structure on the land at all because then you wouldn’t have to pay for the demolition fees!
This is important to recognize, because even the nicest of condo buildings get old over time. If the building becomes ugly and crappy over time, there’s really no recourse because when you buy a condo you are making an investment into that building. Now if you’re buying into a fabulous pre war building,
That’s one thing, but there are very few things in Los Angeles that are pre-war. In fact there are very few things in Los Angeles that are over 20 years old truth be told. Things seem to come down every five years here.
While some buildings age very well, others don’t, and consequently the value of condominiums in aging buildings won’t fair well in a competitive market.
Many of my clients argue, “but Josh, we won’t live there for very long!”
Everyone believes they are going to make more money next year, or that their career is going to take off, however you shouldn’t buy based on those predictions.
Instead, when you are spending a lot of money you should always make a wise investment that can actually earn you money in the future, instead of settling for something in the interim.
When considering your future investment in the property, keep in mind that it’s always more valuable to purchase a house then a condominium.
If A Condo Is For You, Spend More and Get the Best View Possible
With the purchase of a condo you are only paying for the space within the building and the view.
The higher up you go in the building, the more valuable the condo becomes because the view is essentially what creates the value.
One thing to keep in mind, however, is that buildings are hot and fashionable for a brief time, and then they become old and something better comes on the market.
So of course if you’re getting older in years and you are just looking to downsize to a condominium after owning a house and you’re not interested in resale value, a condominium is just great.
If your heart is set on owning a condo, then by all means get the best view possible, because in twenty or thirty years the view is what will be driving the resale value. In 30 years when the condominium is old and the building is tired, someone is going to come along and redo the unit but they are going to buy your unit over other units in the building because it has the best view.
So always go for the view, unless of course you have vertigo!
Be Careful Buying in the Height of the Market
Keep in mind that if you’re buying something at the peak of the market, the first properties to decrease in value are always secondary homes such as those in Malibu, and condominiums.
Single family primary residences are always the last ones to drop and usually drop by a much smaller percentage than secondary homes or condominiums.
Remember these tips the next time you think about buying that dream condo. Always think RESALE!
Below I have included my top picks for condominium living in Los Angeles