Amazing Deals in DTLA Right Now

SOUTH PARK

Flower Street Lofts #123

A double-story, 1423sf loft with 2 bathrooms and 2 parking spaces for $439/SF. 

Unreal, this is like 2012 prices. Asking $626K.

KW, Joseph Iulucci

ARTS DISTRICT

Barker Block Lofts #131

Double story 2+3, 2830 super loft with 2 parking spaces. Priced at $521/SF.

Asking $1.475M

Compass, Thomas Atamian

SOUTH PARK

Market Lofts #412

2+2+Den, 2 parking spaces, 1460SF

Within 2 blocks of The Bloc, Whole Foods, 10 min walk to Crypto.com Arena, etc.

Asking $799K

ReMax, Art Avaness

FASHION DISTRICT

Cornell Lofts #602

1+1, 740sf, 1 parking space, Mills Act

Calstar, Jasmen Vartanian

FASHION DISTRICT

Textile Lofts #901

2+2, 1 parking space, 1 private storage unit, 1370SF, Mill Act

Stunning corner unit with massive factory pane windows

KW, Pete Buonocore

It's Time to Get Real About 2023

Let's face it, selling as-is, 20% over asking and within 7 days, is so 2021. 2022 has been humbling to a lot of sellers, and the ones that were aware of the softening market, and the obvious outcome of doubling interest rates, still won out. These sellers priced accordingly, prettied up their properties, staged them, and still sold at or above list price before the market fell further. 

And there will be more slowdown in 2023. I don't think there will be a massive contraction, but unless there is a big interest rate cut, the housing market will stagnate. Don't get me wrong, there are still a lot of wannabe buyers out there, but the rates are hindering them, and the recent price slowdowns are not enough to get them to make the move just yet. 

So if you're needing to sell, upgrade to a larger house, sell to relocate, etc., it's time to get real. Be prepared to pay for rate buy-downs for buyers, spend a couple thousand on painting or staging, and at the very least, declutter. And be real about what's going on in the market. Just because your neighbor sold for $1M three months ago, doesn't mean that your similar property is going sell for the same or more 3 months from now. 

ULA or the "Mansion Tax" Passes, Effective in March and April 2023

Measure ULA has passed. It is called the "Mansion Tax" as it affects properties, residential or commerical, valued at more than $5M. 

Editorial: Measure ULA is the best gift Karen Bass could get as mayor - Los Angeles Times (latimes.com)

Here's what you need to know:

Beginning March 1, 2023, for City of Santa Monica property owners and April 1, 2023 for City of Los Angeles property owners, two new tax measures will have a significant impact on all Real Estate transactions valued at $5 million and above. Please take a quick moment to read the following information regarding these tax measures, which both passed during the most recent election in November. If you've considered selling and your property is valued at more than $5M, you might want to consider selling before these dates.

Measure ULA, a new tax law specific to the city of Los Angeles, will take effect on April 1st, 2023:

Properties sold at $5 million or above will incur a total transfer tax of 4.6% (additional 4% tax), and properties sold at $10 million or above will be taxed a total 5.7% (increase of 5.5%).

Measure GS, a tax law specific to the city of Santa Monica, will take effect on March 1st, 2023:

Properties sold at $8 million or above will be taxed a total of 5.7% (an 833% increase).

This tax is on the sales price, so it doesn't matter what you paid for it. For example, say you bought a multifamily building for $2M ten years ago. It's now worth $6M. If you sell after the measure takes effect, you'll now be paying an extra $276K. Yikes. Let's say it's worth $11M now. If you sold for that price, you'd pay $627K. Double yikes.

This applies to both residential and commercial real estate, but incorporated cities such as Beverly Hills and Malibu are not included. At the point of sale, the one-time tax will be deducted through escrow, regardless of whether the seller is taking a loss on the property or not.

For small landlords whose livelihoods depend on their apartment buildings, this is harsh.

The Net Worth Required to Be in the Top Wealth Tiers

 According to Kiplinger's recent research, these are the tiers of the Net Worth of households. Remember, net worth is all assets minus all liabilities. If you have a house worth $800K, a $600K mortgage, a paid off car worth $10K, and credit card debt at 5K, then your net worth is $205K. If you rent, lease a car, and have $20K in the bank, and $10K in credit card debt, you have a net worth of $10K.

Anyway, according to Kiplinger and the Net Worth of households here in the US:

Tier / Required Net Worth

Top 1%  / $10.8M

Top 2% /  $2.5M

Top 5% / $1M

Top 10% / $800K

Top 50% - $500K

And don't forget, that two-thirds all net worth comes from home ownership!

Buy Down Your Interest Rates and Get the Rate You Want

Once markets shift, people get creative. We're in a 6.75%-7.25% interest rate range right now. While this is WAY higher than last year, it's still only 1% higher than it was in 2007. That said, did you know you can ask the seller to buy down a mortgage rate? Yes, in this climate and depending on the house and the builder, you can ask the seller to pay a point or two. This is pretty damn amazing, and the little loophole that buyers can use to get rates from a few months ago. I just did this for a buyer recently, and the seller didn't even argue.

Some criteria:

- Must be primary residence

- Approved for condos, 2-4 units, SFRs

- 30 year fixed only (no ARMs)

- Borrower will still need to be preapproved and qualify 

Interest Rates Set to Rise to 9% in 2023

To those who are waiting and waiting and waiting...Given 2023 projections are even higher, this week's rates around 6.8% seem low. And don't forget that is is pre 2007 interest rate levels. The 30-year fixed is around 6.8%, while a condo 30-year fixed is more like 7.2%. It's interesting with the rate of inflation around 8.5% currently (lots of economists say it's more like 12%), housing is still considered a hedge at the moment, particularly income housing since rents are NOT dropping.

And remember, you can always refinance! Oh yeah...

To AirBnb or Not? That is the Question.

With hotel costs continually rising, AirBnb, VRBO, etc are killing it too. So many people are wanting to take that step towards renting out their place via AirBnb rather than a steady annual lease--why? Because you make so much more gross income with AirBnb. Like up to 4 times as much in certain markets. But there's also a lot more costs and headaches involved in managing an AirBnb. Are you ready for the reality?

- You have to kit out the place (please hire a designer so that the place doesn't look like a college dorm) and furniture is getting more costly these days (Typically costs around 15k to kit out a small 1 bedroom, and this is if it's done on the very cheap--think appliances, bedding, towels, kitchenware, TV, WIFI, secure entry system, all the streaming subscriptions, )

- Wear and tear on the furniture and replacement costs

- Cleaning fees (please use a professional)

- Faster wear and tear on everything, from the HVAC to the plumbing to the fridge

- Potential hassle with neighbors who hate the constant flow of different parties

- Managing the guests (you have to cater, otherwise your reviews will suffer)

- Professional photography (ideally)

- Security issues (please use a secure locking service and ideally have some kind of security on the property)

- Liability

- Increase costs of home insurance

- You'll need a permit from the city

And check out the laws in your city/county about AirBnb restrictions. https://www.airbnb.com/help/article/864/los-angeles-ca

The Accidental Pandemic Landlords

Did a lot of people make pandemic house purchases? Yes. Did some of them overpay? If you call bidding $560k over asking overpaying, then yes. Are many of them happy? For those who are locked into the most ridiculous interest rates ever and are not renting anymore, heck yes. 

Do some of these people regret their purchases? Of course. I personally don't know of anyone in this boat, but some are feeling remorse because they reacted in a panic. And some of these new homeowners are wanting to move, relocate, etc. But rather than give up the house and their stupidly low mortgage lock, they are opting to rent out their homes while the rental market is hot. They're becoming accidental landlords, and as a result, discovering the joys of landlord tax writeoffs. 

Mills Act Contracts - City Wants to Re-assess the Impact of the Mills Act

The city is contemplating modifying the Mills Act, and hopefully not, end the program. This is a big issue since it affects a huge number of homeowners of single family homes as well as renters and owners of condos in many building in DTLA, Hollywood, Mid City, etc. 

Contact the City Planning Dept to voice concerns: https://bit.ly/3yregJF

The Mills Act:

In California, the Mills Act can be linked with the 20% historic preservation investment tax credit provided by the Federal Historic Preservation Tax Incentives Program and the Tax Reform Act of 1986. Federal affordable housing tax credits may also be utilized with these incentives to offset rehabilitation costs. Over a half billion dollars of private investment in California’s historic buildings is due in a large part to this program. Preservation tax incentives used on under-utilized or abandoned hotels, offices, stores, schools, warehouses, and factories give new uses that maintain their historic character and revitalize the property.

Benefits of the Mills Act:

- Historic Preservation 

- Housing Affordability via tax incentives

- Revitalization of once-derelict buildings

- Restoration instead of tearing down and increasing landfill waste

- Contributions to city economy due to restoration efforts

- Contributions to city in terms of historic and cultural monument status 

- Reversal of blight in many areas

Mills Act Building in DTLA (in addition to the many structures and single family homes around LA!)

https://reinventingdtla.com/search-by-feature

Learn more about the Mills Act:

https://planning.lacity.org/preservation-design/historic-resources/incentives-resources/mills-act

Buyers Taking Advantage of Softening But Not Crashing Market

Interest rates may not go down for a while, and buyers are taking advantage of the softening market before it begins to head up again. 

Some buyers are waiting it out, seeing if the market will implode like it's 2009. But that doesn't seem to be happening while supply remains tight. 

I don't know anyone who is giving up their 30-year fixed 2.5% interest rate anytime soon. 

Frank Gehry designed GRAND LA opens!

The Frank Gehry designed GRAND LA is now open, along with LA's first Conrad Hotel, and the fantastic San Laurel restaurant by chefs Jose Andres. This will be a fantastic addition to the Grand Arts Corridor, within a few steps to The Broad, Walt Disney Concert Hall, MOCA, Dorothy Chandler Pavilion, Mark Taper Forum, Redcat Theater, etc.

Mills Act Lofts for Sale in DTLA

Anyone wanting to save up to 70% off their property taxes per year should look into Mills Act properties. It's one of the best tax loopholes, and there are some fantastic Mills Act lofts for sale right now.

See all available props for sale here and inquire to see what's coming soon here:

https://reinventingdtla.com/mills-act-lofts

Increase in Renters in US since 1970

Number of Renters in U.S. in Past Decades 1970 - 22.4M Renters 1980 - 27.3M Renters 1990 - 33.7M Renters 2000 - 34.6M Renters 2010 - 37.1M Renters 2020 - 43.3M Renters 2022 - 44.1M Renters

DTLA Residential and Office Occupancy Rates Increasing

No doubt people are going back to work, and the price points in DTLA are still affordable compared to the rest of LA (meaning you can still find modernized condos and lofts for well under $1M).

DTLA’s residential occupancy rate for the fourth quarter of 2021 was 94%, up from 88% a year earlier, and the average rental rate was $2,759 per unit, compared with $2,400 in the fourth quarter of 2020.

The office vacancy rate was 20%, up from about 16% a year earlier. Retail vacancy fell to 6% from 7% in the fourth quarter 0f 2020, and hotel occupancy stood at 54%, up from 40% during the fourth quarter of 2020. 

https://www.dailynews.com/2022/06/05/despite-pandemic-dtla-showing-remarkable-growth-report-says/

Investor Opps in DTLA

Units that get high rents and low price/SF in relation to recent comps. These are interesting opportunities to for investors.

Barker Block #131

$1.595M

2+3 / 2830sf

Arts District Massive industrial split/level loft with multiple living/working areas. Live/work space with a wide audience pool.

Compass, Thomas Atamian

Barker Block #102

$1.349M

2+2 / 2660sf

Arts District Massive industrial split/level loft with multiple living/working areas. Live/work space with a wide audience pool. Distressed sale with court confirmation. Cash preferred.

Coldwell Banker, June Ahn

Flower Street Lofts #123

$726K

1+2 / 1423sf

South Park Massive industrial split/level loft with multiple living/working areas. Live/work space with a wide audience pool. Amazing location within blocks to Crypto.com Arena, The Bloc, Fashion District, Financial District, etc.

Keller Williams, Joseph Iuliucci

Market Lofts #619

$799k

2+2 / 1370sf

South Park spacious 2 bedroom 2 bath loft style condo with front desk security and amenities galore. 

Loftway, Christiano Sampaio

Pan American #307

$599k

1+1 / 1000sf

Historic Core classic loft conversion with separate bedroom area, windows on opposite walls, balcony, Mills Act property tax savings.

KW, Miranti Bornvorsin

Yes, the Building Where Johnny Depp Once Owned Penthouses

The Eastern Columbia building has had some serious exposure lately. It's the building where Johnny and Amber used live. And there are some fabulous lofts for sale there right now. Located right at the south end of the historic core, the building is within a few block from the Museum Building, Ace Hotel, Whole Foods, Fashion District, Proper and Hoxton Hotels, The Bloc, Apple Flagship Store, Paul Smith, Cliftons and more. And did I mention that the building is a Mills Act Cultural Monument?

Loft #603

$2.25M / 2+3 / 2230sf /  2 Parking Space Privileges

Penthouse #4

$1.795M / 1+2 / 1780sf / 2 Parking Space Privileges

Douglas Elliman, Ernie Carswell

Loft #611

$1.495M / 2+2 / 1740sf /  2 Parking Space Privileges

Urban RE, Alex Limandri

Loft #708

$1.395M / 1+2 / 1540sf /  2 Parking Space Privileges / 2 Deeded Storage Units

Coldwell Banker, Yuri Huxley

Loft #701

$1.299M / 2+2 / 1390sf /  2 Parking Space Privileges

Executive Realty Group, Beata Mandel

Loft #902

$925K / 1+1 / 1280sf /  1 Parking Space 

KW, Anh Tran

Loft #202

$895K / 1+1 / 1150sf /  1 Parking Space 

Coldwell Banker, Yuri Huxley

Loft #805

$849K / 1+1 / 890sf /  1 Parking Space 

Compass, Jennifer Gainey

Loft #M7

$785M / 1+1 / 1120sf /  1 Parking Space 

Coldwell Banker, Yuri Huxley

Interesting Investor Opportunities Right Now in DTLA

849 S. Broadway #M7 

$785k / 1120sf

Famous for it's iconic clock tower and now the Johnny Depp and Amber Heard Trial, this unit is the lowest price/sf in the building right now at $700/sf. The most recent sale was #806, the same size unit for $865k. Unit #M7 comes with 1 parking space, and the building offers property tax savings with the MILLS ACT. Courtesy of Yuri Huxley, Coldwell Banker Realty.

--

215 W. 7th #1302

$598k / 800sf

Fabulous unit with barrel ceilings and exposed brick walls. 13th floor loft with views view views! The Bartlett building offers property tax savings with the MILLS ACT. Courtesy of Agnes Ferreyra, Realty Source.

--

108 W. 2nd #611

$575k / 750sf

Coveted east facing loft with DTLA skyline views! The Higgins building offers property tax savings with the MILLS ACT. Courtesy of Robert Howell, KW Beverly Hills.

Getting Ready to Sell Before Winter--and Another Interest Rate Hike

The window to sell is closing, so you want to get the place listed asap if you want to cash out this year. The rule of thumb is to have the place listed now, so you have time to get offers and into escrow by August. That way, you close on the sale before activity really starts to die down.

What to do to prepare to sell, in order of priority

1. Declutter

2. Paint the entire place, including ceilings and cabinets, if needed

3. Change out simple and easy things like faucets, cabinet hardware

4. Refresh bathrooms with a nice new mirror

5. Stage an empty place

6. Replace vanity in bathroom

7. Replace kitchen cabinets if within budget

Investor Deals in DTLA

Some interesting properties on the market with built-in equity. All because interest rates are rising and sellers are getting motivated. Cash buyers will have leverage, but these are properties that even financed buyers can snap up to flip or immediately rent out.

Cornell Lofts #604 - 1+1 - 1000sf - $499K

Mill Act Tax Savings

Courtesy of Jonathan Yuen, Iota

Barker Block #102 - 2+2 - 2660sf - $1.349M

Split level rare live/work space

Courtesy of June Ahn, Coldwell Banker

Eastern Columbia #M7 - 1+1 - 1120sf - $785K

Mill Act Tax Savings

Courtesy of Yuri Huxley, Coldwell Banker

Flower Street Lofts #123 - 1+2 - 1423sf - $757K

Rare split level

Courtesy of Joe Iulucci, Keller Williams

Rowan Loft #813 - 2+2 - 1000sf - $595K

Mill Act Tax Savings

Courtesy of Cindy Lorimer, Corcoran

EMCEE Studios to Take Over Trophy Building in Historic Core

Gamechanging  news for 9th and Broadway:

The stunning Museum Building is getting a new owner. EMCEE Studios based in NY. If there was ever a building to buy, it's this one. Completely one-of-a-kind in scale, location and architecture, it's also situated next door to the historic Art Deco Eastern Columbia Lofts, as well as on the same block as the first DTLA Apple Store in the Tower Theater, Paul Smith, ACNE Studios, Mykita, Gentle Monster, Orpheum and within 3 blocks of Ace Hotel, Hoxton Hotel, Proper Hotel, Whole Foods, CMC, United Artists Theater, Globe Theater, Fashion District, Cooper Design Space, and a slew of other companies and buildings. 

https://about.emceestudios.com/emcee-studio

https://www.glossy.co/fashion/exclusive-creator-platform-emcee-announces-physical-metaverse-hub-in-la/

https://dot.la/emcee-downtown-la-tech-2656677337.html

Interesting Properties for Sale in DTLA Right Now

257 S. Spring #4G

2 bed, 2 bath 1 underground parking space, corner unit

Mills Act Building

Walk to Grand Central Market, The Broad, Little Tokyo, Arts District, Gallery Row, Spring Arcade

Coldwell Banker - Call for pricing (310-869-2655)

1100 Wilshire #2202

2 bed, 2 bath 2 parking spaces, corner unit with 270 degree views

Down the street from Fig & 7th, Staples Center, Restaurant Row

$1.168M

Courtesy of KW Executive - Silvia Cheung

416 S. Spring #810

1 bed, 1 bath 1 parking space, charming former residence of Charlie Chaplin

Mills Act Building

Walk to Grand Central Market, The Broad, Little Tokyo, Arts District, Gallery Row, Spring Arcade

$519K

Figure8Realty - Nicole Kilmer

530 Molino #211

1 bed, 1 bath 2 parking spaces, massive loft over 3000sf

Walk to Soho House, Arts District Shops, Bestia, Bavel, Girl & Goat

$2.1M

Iota Realty - Jonathan Yuen

738 S. Los Angeles St #203

2 bed, 1 bath 1 parking space, massive private patio

Mills Act Building

Walk to Proper and Ace Hotels, Fashion District shops, Flower Market, Whole Foods

$545K

Roxana Godinez, Loftway

1130 S. Flower #102

2 bed, 2 bath 2 parking spaces, Massive patio and split level orientation

Walk to Staples Center, The Bloc, Fashion District, Whole Foods, Financial District

$998K

Lotus - Chi Lieu

DTLA Prices Rising and Days on the Market Decreasing

With COVID-19 getting somewhat contained, the weather as glorious as ever, and the steady flow of transplants to Downtown from places like New York, San Francisco, London and Sweden, prices are either holding steady or going up. 

Just in the past 6 months, there have been high profile building projects nearing completion (Frank Gehry's Grand LA https://www.thegrandla.com/) , some completed (CMC in the Fashion District https://www.californiamarketcenter.com/) and a slew of new businesses opening, and long term leases being signed (Adidas, Forever 21), and EMCEE buying up the Museum Building, which will keep the momentum for the 8th street corridor.

The window for deals in DTLA is finally closing.

California Major Cities to Get Funding for Housing and Development

Newsom wants to allocated $2B towards housing and other development in areas like DTLA, to help move people away from rural fire areas, tackle housing shortages, and climate change.

https://www.latimes.com/california/story/2022-01-13/newsoms-latest-housing-fix-more-californians-living-downtown

Where are the Deals?

Good luck, as there aren't many deals anymore, and even less in the foreseeable future. A good agent will let you in on interesting opportunities such as fixers, tenant-occupied props, and construction next door. The point is, good deals are not as easy to find in real estate as you might think. In a tough buyer's market, you need to ask yourself, do you like the property, and does it make financial sense? The agent should be able to help give you the rest of the picture.

Prices Creeping Up in DTLA

While DTLA was pretty stagnant price-wise since the pandemic began, the end of 2021 showed more turnover and a pickup in sales. 2022 has started off strong for DTLA, with an increase in prices, which is great for sellers. Buyers will have some competition as more people are coming out of the woodwork to buy their first home and or invest in a second property. 

A lot of buyers who had bought their main home are now looking to buy a second property to take advantage of the low interest rates--before they increase even more. With the stock market a little unstable recently, and the increased projection of renters and rental prices, real estate is looking like an excellent hedge compared to other assets.