Buying vs Renting in LA - Everything You Need to Know

The question of buying versus renting has eternally plagued buyers and renters around the world. This question rings true in Los Angeles, where homeowners gain lucrative equity through real estate ownership, and renters have the freedom to experiment and live across the many different Los Angeles neighborhoods without having to tie themselves down.

Renting does not provide Los Angeles residents any equity or ownership of their apartment, but aspiring buyers with the means to purchase real estate in LA are investing in their future through climbing onto the property ownership ladder.

Each option brings pros and cons to the table, but factors affecting the life of an aspiring buyer or dedicated renter weigh heavily on the decision to rent or buy in Los Angeles. 

Motivations and locations 

Renting allows people to easily live in different neighborhoods across the Greater Los Angeles area without much hassle. Local renters can experience the charms of Venice for a year, then make a move over to Pasadena for a new job without much hassle, especially if they are not locked into a long-term lease. If a renter is working remotely, the sky and their bank account is the limit in terms of where they can shack up and set up an at-home office in Los Angeles. 

A homebuyer, on the other hand, can not offload a property as quickly and will have to go through a lengthy sales process to finance a move to a different neighborhood. Finding a sense of community is a strong motivator for buyers and renters alike in Los Angeles, but while a renter may move on after a few years, property owners in LA are rooted in their neighborhood and have long-term interests in maintaining their community. 

For instance, buying a home out in Sherman Oaks or Encino provides buyers with opportunities to influence schools, parks, and the overall condition of the neighborhood through joining community boards or even going into local politics. Homeowners can take action to improve their community, compounding the value of the home as more people want to move in, thus providing extra equity that a renter cannot access.

Another factor buyers must consider is how far they will have to travel to get to work, as traveling to Downtown LA each day is a hefty commute for homeowners in Chatsworth. Renters have a leg up in this regard as they can spirit themselves away to Silver Lake if their office moves into a new DTLA Beaux-Arts office building. 

Conversely, tech workers renting in downtown Santa Monica might not want to shell out for the Mid-Century Modern compounds resting on a Pacific Palisades hillside. The ease of commuting is a great amenity, but renters garner no equity from their lease and cannot modify their apartment.

Customizing your home, not your rental 

Buying a house in Los Angeles means you can alter and tailor the details of your property. Wealthy or handy homeowners with an eye for renovation can bring extra value and permanent personalization to their home. If the craftsman-style house you purchased in Woodland Hills is the home of your dreams, but you want to remodel the bathroom, you are within your rights to do so as the owner, so long as you adhere to local ordinances. 

On the flip side, renters cannot do any substantive remodeling work, and if an artistic renter paints the walls, they must repaint them once they decide to move on from their apartment. 

While this constricts renters, it also alleviates them from having to fork over the cash for any needed repairs that arise in a rented residence. Plus, a renter can more easily move on from an apartment if a landlord is not willing to invest in much-needed upgrades or repairs.

Homebuyers in Los Angeles can purchase a fixer-upper in need of tender loving care at an affordable rate or acquire a sleekly-remodeled Post-Modern home at a higher cost. Buyers considering fixer-uppers must examine the property and deal with a fine-tooth comb and keep an eye out for any extensive damages that could get worse over time.

But if a buyer finds an affordable fixer-upper within their price range, the value of the property can skyrocket with the proper updates. On average, homeowners in Los Angeles spend about one percent of the value of their home on maintenance. But the value homeowners can unlock through customization usually outweighs the incurred costs of owning a property. 

The costs of buying versus renting

Buying a house in Los Angeles is an expensive endeavor, especially with the recent surge in sale prices driven by low-interest rates. And depending on the aspirations of a buyer, a property can cost an owner millions when combining the down payment, mortgage, and closing costs. While the expenses are costly, homeowners in LA invest in their future through long-term homeownership. Homeowners build up equity with each mortgage payment and give themselves the opportunity to benefit from potential price appreciation.

Renters in Los Angeles are essentially paying for the freedom to pick up and leave a property after spending a few months or years at a location. And while renters have to put up a deposit to move into a new home, it is much less onerous when compared to an all-cash buy, or the 20% down payment buyers face when purchasing Los Angeles real estate. 

But every month of rent paid to a landlord is money that is not working in your favor, and while short term renters can overlook this, long term renters will have spent thousands of their hard-earned money with only canceled checks to show for it.

Buying with the ability to rent to others

Equity isn’t the only benefit homeowners acquire when they close a deal on a prime slice of LA real estate. Buyers with the right property can earn extra money to pay off their mortgage by opening their home for renting or purchasing a multi-family property.

Buyers that close on a house suitable for generating passive income can use their renter’s monthly payments to offset the cost of their monthly mortgage. Additionally, buyers purchasing real estate in Pacific Palisades, Santa Monica, or Venice, can open their primary residence up for Airbnb rentals part of the year for some extra income.

Regardless of intention, renters in Los Angeles considering homeownership should always consult with a buyer’s agent, as these real estate professionals bring valuable knowledge and tools to the table. Equipped with a local knowledge of the various neighborhoods in LA, coupled with expertise on the homes and laws regulating their use, a buyer’s agent can guide a fledgling buyer on their path to homeownership in Los Angeles.

Prevu Real Estate, Inc. is a licensed real estate broker in California, license number 02134758.