To Buy or Not to Buy?
A client sat across from me a few weeks ago and asked the question I get more than any other right now: should I even be doing this?
Not just, should I buy this house. Should I buy any house. Should I be putting money into real estate at all, or should it just go into the market and let my money grow while I go on renting?
With the state of the world and the cost of ownership, this is a more than fair question.
The Old Answer
The old answer, the one real estate agents have been giving for decades, is simple: buy. Hold on long enough, take care of it, and the house will very likely give you an excellent pay day. History backs this up over and over, in almost every window you look at.
I moved to Studio City in 2018. 156 homes sold in Studio City for under $1.5 million in 2018. This year, that number is 21. In just eight years, housing prices in my neighborhood have escalated so much, that even a “starter home” is likely to run you almost $2 million.
The New Anxiety
If you'd bought in Studio City in 2018, you'd probably be sitting on a lot of equity right now. But I understand why that fact alone doesn't feel reassuring anymore.
We're living through a time where unprecedented is an everyday occurrence. AI has a lot of people wondering if their job will still exist in five years. LA has lost a huge share of its entertainment industry, the thing this city's economy leaned on for a century. Wildfires took out entire neighborhoods two years ago. Insurance premiums keep climbing, and so does the cost of just living.
So when someone tells you "buy a house, it's the best way to build generational wealth," a completely valid response is: “It was. Will that continue to be true, given everything else going on right now?”
Listen, I know I’m not doing a great job of convincing you to buy a house right now. That’s because my job isn’t to convince you to buy a house. If you’re considering it, it’s my responsibility to ensure that you are buying for the right reasons, and you know exactly what you’re getting yourself into.
So Maybe the Answer Is Just... Invest Instead?
Maybe! I mean that sincerely.
The first question I ask every client now is: why do you want to buy?
If the honest answer is "to make the most money possible over the next twenty years and cash out," there are probably better ways to do that. Real estate is a good investment, but on a pure return basis, it’s probably not the best investment anymore.
However, if renting is not offering you the lifestyle you want, ownership might be a good option. Maybe you're planning to have kids, and you want a backyard, rooms you can paint and renovate, a place that's yours to shape as your family grows into it.
A quick note: renting a house is absolutely an option. But I've had clients get unexpectedly hit with a lease termination, suddenly scrambling to find a new place while rental prices in the area had jumped since they'd last moved. They decided to buy because renting was an unreliable long-term solution.
For most of my clients, the best value they get from their house, is the life they get to build inside the walls. Happily, the appreciation curve works in their favor in the background.
The Real Question
So, to answer the question “to buy or not to buy?” you first need to answer the question I ask every client before we look at a single listing: what are you actually trying to build?
If you’re not sure, I send a list of questions to my clients who are in this “considering it” stage. It’s ten questions and I encourage you to sit down, and hand write out your answers. They are designed to help give you clarity on what ownership entails, and hopefully get you closer to answer on the “to buy or not to buy?” question. If you want a copy, shoot me a note, and I’ll send them your way.
Until next time,
Dana
________________________
See my favorite homes on the market:
________________________
Follow along:
________________________
I love meeting new people! If you want to chat real estate, living in LA, or just a little bit about life, shoot me a note: