Condo associations in Los Angeles are combating investors looking for quick profits from rapidly appreciating values. Boards across the city are drafting new regulations that are aiming to stop short-term buyers and investors, according to Jill Epstein, an broker with Nourmand & Associates. We sat down with Epstein to talk about the new trend and the potential impact that these regulations may have on potential buyers.
GlobeSt.com: How have buyers looking for quick profits in real estate impacted the condo market?
Jill Epstein: There are two types of condo investors: one who wants to buy a unit that needs updating or a complete remodel, with the intention of selling upon completion; and one who wants the unit for a longer term hold, and intends to lease it out to cover the monthly expenses. The former buyer is enhancing the value of the other units in the building by selling at higher prices, and therefore increasing the competition. With the intent of renting out the unit, the latter buyer may affect the perception of the building, as tenants are not as likely to have the mindset of maintaining a home as an owner would.
GlobeSt.com: How are condo associations in L.A. amending their CC&Rs to resolve this issue?
Epstein: Most HOA's already have restrictions as to how many units or what percentage of units can be leased at one time; many are requesting a minimum one-year lease, which will likely weed out the people who are looking to lease a condo solely for Airbnb and Vrbo type rentals. More recently, a lot of HOA's are revising their CC&Rs to require that an owner must own their unit for 1-2 years before they're eligible to rent it out. Another amendment that I've seen become increasingly popular with HOA's, as a result of the limitation on the number of units leased at any given time in a building, restricts the maximum length of a lease to two years, so that other homeowners get the chance to lease out those units.
GlobeSt.com: How are these new rules impacting new buyers and sellers?
Epstein: These recent changes/restrictions will likely deter the non-owner-occupied units, because of the 1-2-year hold period before being able to lease. I don't think this will affect sellers much; the increasing cost of buying a home and the shortage of inventory means that there will still be plenty of condo buyers.
GlobeSt.com: How have owners reacted to these restrictions?
Epstein: For the most part, the owners I've been working with are comfortable with the new restrictions, but there are certainly owners who aren't happy with further restrictions on what they can and cannot do with their own home.
GlobeSt.com: How will these restrictions impact the condo market overall?
Epstein: l believe that the rental restrictions will weed out a handful of buyers but, I don't expect it to have a huge impact. Again, there is a big desire to own real estate in Los Angeles, and with the cost of buying a house only going up, purchasing a condo is the next best thing, and for a lot of people in LA, has become their entree into home ownership. There's certainly a lot of pros to living in a condo, but for all the benefits that condo living offers, there also comes some compromise.
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Kelsi Maree Borland
