933 Loma Vista closes at asking

https://www.redfin.com/CA/El-Segundo/933-Loma-Vista-St-90245/home/6641416

Closed at asking. $879K for 1100 sqft on a 5000 sqft lot. The tiny house movement is alive and well in El Segundo. All hail HGTV for selling people on the idea! And shocker, Bill Ruane repped the buyer and seller, good for $44K commission!

With 20% down someone is writing a check for about $5000 a month to “own” this house.

That’s about $4.50 sqft while rents in the area at the ridiculous high end (like 533 Concord) is at $3.18/sqft. (more on Concord later)

There is no economy or situation where this is a good decision. There isn’t enough tax write-offs in the world to make this work. Plus the fact that you are paying for a tiny house that only a small handful or buyers are willing to own. Do you want to live in a home with one bathroom?

The only way this makes sense is for a flip. But even then the math gets really bad. To add square footage you should estimate ~$400/sqft. There’s also limitations on the size of your footprint on the lot so let’s say you add a master suite. Let’s call is 400 sqft x $400 = $160,000. But wait, you need plans, permits, contractors and if you are lucky 12 months of your life. Add $100K for overages, plans, etc… plus the 12 months of mortgage payments ($60K).  No intelligent flipper is getting involved in that nonsense.

Then there’s the history on zillow to show you what it’s really worth. In 2013 it was renting for $2600/month. Let’s say you have a greedy landlord and they managed to get 10% per year rental increase. The 2017 rent would be ~$3800. Even if we call is $4000 you are dumb for dropping $175k and spending $5k/month.

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