My second home was in Picfair Village. Priced at $245,000 in 2002, we purchased because we could not afford a home in the neighborhood where we wanted to live. A normal/average sized home in Picfair Village was around $350,000 at that time. We invested in updates to the house making it as nice as possible, and as prices peaked four years later our little home with 720 square feet sold for $599,000.
Had we been able to make the leap and spend $350,000 to $400,000 just $100,000 more, we would have been looking at selling a fixed up home at $800,000 vs. $600,000 sale for our additional investment of $100,000.
As the market tumbled during the recession, this little home we sold was hit harder. It never resold but once it recovered, the difference in value was still the same. $200,000 more for a big home on a larger lot.
Theory: Small homes on small lots rise at a slower pace than normal sized homes on normal sized lots but as housing prices fall, they decline at a higher rate than homes on normal sized lots that have average square footage.
Our advice: Don’t fall in love with the little home in the perfect neighborhood but rather choose the larger home that needs work for the same price or a little more and the investment will be rewarding. BUT if you decide all you can afford is a small home on a small lot vs. a condo: Always choose the house and not the condo if you live in Los Angeles. They can always build more condos but owning dirt is always the best investment.
Comments(0)