Author Topic: Buying land and building in Los Angeles  (Read 2754 times)

mattmando

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Buying land and building in Los Angeles
« on: May 20, 2017, 08:18:33 PM »
I'm a newly converted mustachian living in Los Angeles.

My girlfriend and I  (planning to propose this year!) currently have $60k saved up towards a home. Her salary increased dramatically this year and we are expecting to be in range to buy a house within 12-18 months.  I will be in grad school for the next 2 years after which we would be looking to buy a home or at least move to a nicer rental.

We have toyed around with the idea of buying a piece of land and then contracting a home builder to construct a place of our own.

Is building a good or bad idea for a first time home buyer? 
Is building on a steep lot in LA actually going to be cheaper than buying an existing home?
How challenging/costly will the permitting process be?
Are modular/ 3d printed homes changing the playing field?

Any and all insights are appreciated!

clarkfan1979

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Re: Buying land and building in Los Angeles
« Reply #1 on: May 20, 2017, 08:57:27 PM »
Probably not a good idea for a first time homebuyer on limited funds. Building a home is also a huge investment of time. My best recommendation would be to bid on ugly houses in need of cosmetic repair.

Dicey

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Re: Buying land and building in Los Angeles
« Reply #2 on: May 21, 2017, 01:09:08 PM »
Probably not a good idea for a first time homebuyer on limited funds. Building a home is also a huge investment of time. My best recommendation would be to bid on ugly houses in need of cosmetic repair.
This. Just for grins, try to find someone eho's done it.

jeromedawg

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Re: Buying land and building in Los Angeles
« Reply #3 on: May 21, 2017, 08:54:57 PM »
Probably not a good idea for a first time homebuyer on limited funds. Building a home is also a huge investment of time. My best recommendation would be to bid on ugly houses in need of cosmetic repair.
This. Just for grins, try to find someone eho's done it.

I met a guy at a local REI meetup I went to last month who locates land to develop on in/around LA with his cousin, builds a home, and then sells it. He seems like he does well from talking with him. I didn't get a ton of detail though. If you are in the business and have the connections, organizing a lot of that stuff seems relatively trivial. But if you have no experience whatsoever, it could be a huge investment of time and potentially money. If you really want to do it, it might be worth while networking at REI meetings to see if anyone is doing anything like that. But I agree on trying to find a fixer-upper to rehab.

Also buying on a steep lot - I'm assuming you mean physically steep? Why would you want this? I don't think I could ever live on a hillside - losing your house to a potential landslide would be awful.
« Last Edit: May 21, 2017, 08:57:36 PM by jeromedawg »

Another Reader

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Re: Buying land and building in Los Angeles
« Reply #4 on: May 21, 2017, 11:07:24 PM »
Not a good idea.  First, you are building a custom home.  That will cost significantly more than a tract home.  You have no experience with homeownership, so designing a usable house with reasonable finishes is going to be difficult.  Second, hillside construction can cost as much as 50 percent more than building on a flat lot.  The structure generally has to engineered for the site.  Third, hillsides in Southern California are high risk locations.  Think fire, earthquakes, and landslides. 

As the market slows down and you get closer to buying, start looking at houses on the market for 30 days or longer.  A cosmetic fixer is discounted more when inventory is higher and days on market can be useful in finding them.

Mr. Green

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Re: Buying land and building in Los Angeles
« Reply #5 on: May 23, 2017, 05:40:02 AM »
Agree that it is not a good idea unless you was willing to micromanage the project. If you were to pick out all the materials, etc. you might keep the cost equal to what another house could cost but otherwise you are going to lose that one because of economies of scale. If you have other reasons for considering building, like the house you want is significantly smaller than what you can find on the market, then that's a little different. Though that too can has its down side if you think there would be difficulty reselling due to its marketability. As a general rule of thumb, having someone build a new house costs more than buying an existing house of similar size, craftsmanship, etc.

I was days away from pouring concrete on our house before I stopped the project due to stress. I estimated we were going to build our house for half of what I could buy a new one but I was doing all the work. Dealing with all the county permitting. Locating, buying materials. Lining up some contractors. I planned to do much of the work myself. The house was also tiny by area standards, ~850 sq.ft. vs. ~2300 sq.ft. This is the only way I think you can win the price game on a house, if you were heavily involved.
« Last Edit: May 23, 2017, 05:45:21 AM by Mr. Green »

freeatlast

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Re: Buying land and building in Los Angeles
« Reply #6 on: May 31, 2017, 01:39:22 AM »
IMHO building a house with a brand new spouse is not a good idea if you want to keep that spouse.  Just sayin'.... there are a huge number of choices and decisions that you have to make together - all effecting your budget and how you will live in that house. Building a house is stressful. Been there, done that, and I'm now on spouse number 2 :)

Good luck and congrats!

NorCal

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Re: Buying land and building in Los Angeles
« Reply #7 on: May 31, 2017, 07:12:48 AM »
I tried to do this in the Bay Area several years ago.  I was far enough along that I had quit my job to work on it full time.  The project eventually fell apart because the land I was trying to acquire would cost north of $200K, and that was the best deal on land I was going to get. The math wasn't going to be compatible with my FI plans.   I had also spent plenty of time at the planning department learning about permitting and related issues.

To answer your questions specifically:
1.  It will not be cheaper in LA unless you can get land for next-to-nothing.  I can almost guarantee it will be more expensive.  You might get a house you like better, but it will be a more expensive house.  Steep lots will be more expensive to build on than flat lots.  Probably much more expensive.  There's a reason you see all the expensive fancy homes on steep lots.

2.  Permitting process varies widely by locale.  You need to talk to locals for a good answer to this.  Some CA cities are reasonable to deal with.  Most are pretty anti-development.  As a proxy, look around the neighborhood and see how many major renovations you see going on.  If it's not many, don't have high hopes for the permitting process.  In my case, the city wasn't too bad from an approvals standpoint, but I probably would have been $100-$150K between permits and utility hookup (mostly sewer) fees.

3.  The new modular companies are interesting, but I doubt they're what you're looking for.  I doubt you'll find something modular for a steep lot.  Also, the modular companies are clustering either at the super cheap or super expensive ends of the market.  Essentially, you'll either get a double wide, or a modular home that costs as much as a high-end custom designed home.  I never found anything in the middle of the market.

4.  If you decide to do this, go in with much more starting capital than you think you need, and plan to use much more equity than a traditional home purchase.  Unexpected expenses will come up, and don't assume you can finance them.  I've heard plenty of horror stories of people getting midway into a project and then running out of money.  Also expect that managing the project will be close to a full time job.  If you and the girlfriend are both working, this will be nearly impossible.

Larsg

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Re: Buying land and building in Los Angeles
« Reply #8 on: June 03, 2017, 02:15:57 AM »
My best advice, given your young, is to explore other states besides CA. CA is expensive to live, rent, own, build, and the taxes are way up there and getting worse. I spent many years in CA when young due to work and then relocated cross country - on the corps dime (I was lucky to have that opportunity) and explored West, East, Mid-West, South West. After living all over the US, my wife and I have had no desire to go back to CA ever, despite it's beauty on the coast. The cost of living in every other place we have lived is far less, crime is less, quality of housing and education has been better, less traffic, pollution, have met wonderful, kind people (Inside - they could care less about what you wear, do for a living, or how much you weigh which is often front and center for lots of folks in Cali). I will say that we favor the ocean and lack of humidity in the West vs East and settled in the PNW. Though it is becoming very expensive...but we do love it.

Get out and explore the world - even if just in the US - before getting bogged down in debt so young. Lots of places and people to see and meet.

Have fun!