The following is a reprint of my column that appeared in Frontiers In L.A. magazine on August 4th, 2010
I work with a lot of first-time buyers, in every price range. Some who can barely afford to get into the market, some who’ve suddenly hit it big and are dropping $2 million on their first home purchase. Regardless of price range though, I’m often faced with buyers who have unreal expectations of what they’re going to get for their money. “I thought it was a buyer’s market,” I’m often told by forlorn buyers with sad puppy dog eyes. Well, it is. That’s why this house is only $850,000. It was $1,250,000 four years ago.
The most common thing I’m faced with is a buyer who has all their ducks in a row, has a pre-approval with a reputable lender, has their down payment safely socked away, and is bright-eyed and bushy-tailed, ready to find that perfect home. Quite often, they find out quickly that the pool of properties on the market isn’t going to quite measure up to what they’d envisioned for themselves. They hoped to walk right into a two-bedroom, two-bath, top-floor unit in a three-year-old building in West Hollywood with a balcony (city views, please), laundry in the unit, hardwood floors, stainless steel appliances and walk-in closets, and snatch it right up, all for the low, low price of $375,000.
Here’s the thing you have to know though, especially entering the market at the lower end of the price range. First and foremost, the most wonderful, magical, incredible, pride inducing thing about purchasing a home is exactly that—you are purchasing a home! You are becoming a homeowner! You’re getting in the game (at a time better than any in the last decade almost) and realizing the American dream. The most important function this great feat will provide—after the roof over your head, of course—is as a stepping stone to the next, bigger, more fabulous purchase. Just as that one will be the stepping stone to the next one. Do you think everyone you know who lives in a big beautiful house just stepped right into it? Most likely not.
When you purchase a property, over the years it increases in value—more so if you make improvements. When you go to sell that one, you’re able to take the profit from that one and use it to make a bigger down payment on the next one. Obviously the last few years have not been ideal for those who’d hoped for that, but fingers crossed and god willing, we are returning to the days of property value increases, slowly but surely.
Don’t necessarily look at this first purchase as the place you’re going to spend the rest of your life. And don’t be afraid to do a little cosmetic work, especially on a condo. Find something in an area you like that hasn’t been updated for a while. Have some vision. Ask your realtor for advice on upgrades and improvements. About a year ago, my boyfriend decided that he was ready to take the plunge and buy a condo. We looked for months for him, and found nothing. We looked at some really bad places. Finally we found a little crapshack. But this crapshack was in an amazing building, on a fantastic street. It had awful navy blue carpet throughout (including the bathroom), ‘70s linoleum in the kitchen, ancient appliances, peach walls, popcorn ceilings, mirrors all over the place and reeked of something I don’t have words for. But the second he walked in—the second—he said (and I thought to myself) “This is it. This is the one.” We spent the three weeks after he bought it tearing it apart and putting it back together again. For about $3,000 we did what would have cost him $10,000-$12,000 if he’d hired someone to do it. Not only does he now have a sleek, modern pad he adores, but the place is worth a good $20,000 more than he paid for it. He just remodeled the bathroom, which certainly increased the value another chunk.
Whether it’s a condo or a single family residence, don’t be afraid of a little work. It’s infinitely better to fix a place up yourself, finish it exactly how you want it and reap the financial benefits yourself. It gives you instant equity. Keep in mind there are things you can do down the road once you bounce back from the initial expenses associated with the purchase. Think the kitchen’s ugly? So what? Does everything work? Does the house have good bones? It can wait.
Now that I’ve broken you down, let me build you back up, stronger, better, faster, smarter. I said it before and I’ll say it again. The fact that you are getting into the market means you’ve made it. You’re on your way. You’re building your future! Congratulations of the highest order to you. Just don’t feel like you have to have it all now. You might only get some of it right off the bat. You can make the rest happen!