How I Bought a House in L.A. for $1,670 Per Month

How I Bought a House in L.A. for $1,670 Per Month
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What’s up my friend, it’s Simeon.

Let me show you how I bought a brand new 5-bedroom house in Los Angeles for $1,670 per month and the lessons I learned from my first ever real-estate deal. This video is inspired by Graham Stephan who made an awesome video called How I bought a Tesla for $78 per month.

So, here’s the story of how I got this incredible house so cheaply.

I moved to the U.S. in 2017 and my wife and I lived in this great studio apartment in a high-rise building near downtown L.A.

Less than a year later, my wife got pregnant with twins and I knew we needed to find a bigger place fast. So I started researching everything in L.A. but for some reason, I wasn’t able to find any great option for us that was worth less than 5 to 6 thousand dollars per month to rent.

So I started researching options to invest and purchase our first home instead. And luckily, I found this amazing brand new community that was just being built in north Los Angeles. My wife and I went to see it, we loved the model homes, and we decided to buy a 5-bedroom house. In fact, we were the first one to purchase a house in the community.

As you can see from the specs of the model home, it’s a 5-bedroom, 4 and a half bathroom, 2 car garage, two stories and 2800 square feet home, and obviously brand new since they are building it for you.

The community has a swimming pool with a spa area and a great clubhouse with a shared kitchen and barbeque areas. It also has great views overlooking Los Angeles since it’s situated on a hill.

Overall, this looked like a great deal to me.

The problem was, I was not going to get approved for a mortgage because I didn’t have much credit history at that time. So my only option was to purchase that house in cash.

Now, I had enough cash reserves from selling my previous business, but at over a million dollars, this was going to eat up almost everything that I had.

But the clock was ticking and my wife was going to give birth just a few short months later. We loved the house, I thought it would be a great investment so I decided to pull the trigger and pay everything in cash.

Now, exactly two years later, we sold this house which by the way is my first ever real estate investment, and here’s how we were able to own it for two years for just $1,670 per month.

There were a few major reasons that made this possible:

First – we were the first to purchase a house in a brand new community. Major builders in the United States usually start with the lowest price and bring the prices a few percent up every time they sell 5 to 10 more houses.

Second – we were lucky we weren’t hit by a recession and prices between 2018 and 2020 were steadily going up.

Third – banks are currently giving incredible mortgage rates so buyers are extremely motivated to purchase new homes.

So, overall, with some simple initial calculations and some luck, things turned out pretty great. And if we waited for 6 to 12 months more, we could’ve probably gotten this place completely free thanks to the constant increase in prices.

Anyway, just as a comparison, the only thing you can rent for $1,670 a month in L.A. that has 3 or more beds is… well, there is nothing really in that price range.

So here’s the simple math.

When we sum up the base price of the house, the lot premium, all the taxes, and the $140,000 in upgrades which we included in the house, the total comes up to $1,086,110.94. That’s how much I paid to get the keys to a brand new house.

Later, we included tome more upgrades for the cost of $7,299.

For the two years that we lived there, we paid about $25,000 in property taxes.

Now to show you how things might get pretty bad if you get an all cash deal, here’s what happened when I decided to sell the house. It was February 2020 when I first decided to speak to an agent and start getting ready to list the house for sale.

By the time we were ready with the documents, the pandemic began, and real estate sales went from incredible to virtually non-existent. Literally, everything stopped just when we listed the house for sale. That’s not great! And because there was almost zero interest in the first few months after listing the house at $1,249,950, I decided to drop the price down with $50,000.

A few more months passed and there were only a few showings but no real interest and no offers on the property. So I finally decided to bring the price down to the minimum I was ready to sell it for which was $1,149,950.

That’s when the interest spiked and in about a month we received the first offer for purchase. Unfortunately, that offer was $100,000 lower than the list price. So I sat down and did some market research to show the buyers that they were actually getting a great deal at full price. And sure enough, our counter offer for $1,149,950 was accepted and we went into escrow.

But here’s the catch with real estate investing. Just like Warren Buffet says, if you don’t plan to hold an asset for 10 years, don’t even think about holding it for 10 minutes. Meaning – if you are not going to hold a property or stocks or any other type of asset for at least 10 years, don’t invest in it.

I learned that first hand here.

Because after paying 5% in brokerage fees, title charges, escrow charges, and all additional fees related to the sale of the property, you are going to end up with a much lower sum in your bank account.

Meaning, I didn’t get $1,149,950 in my bank.

Instead, I had to pay over $71,000 as cost of sale fees or about 6.2% of the sales price. That’s a lot of money.

So you pay a lot of money in fees when you buy an asset and similarly, you’ll pay a lot when you sell it.

So it makes much more sense to hold an asset for longer, in order to wait for it to appreciate enough in value before you sell it.

Either way, that didn’t work out in our case, because I didn’t want to hold over $1,000,000 locked in a single home even if I started using it as a rental property. I would much rather cash out now and use that money to spread it throughout several different properties or other assets that will bring me a much better return in the long run.

So the final figures ended up as follows.

At a purchase price of $1,086,110.94
Additional upgrades at $7,299.68
Property taxes at $25,394
Cost of sale of $71,241.13
And a sales price of $1,149,950

Our total out of pocket expenses to live in this great 5-bedroom house in L.A. was $40,095.75. That’s $20,047.87 per year or $1,670.65 per month.

Considering that hassle this took to accomplish, I won’t rate it as my best investment in life but the fact is that it saved us about 3 to 4 thousand dollars per month which is definitely not bad.

At the same time, I learned a ton of great lessons from all the mistakes I made, and now I can apply them in any other investment I make from now on.
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Until I see you again, remember, you are always just one action away from extraordinary.

See you soon, my friend!

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