investment: property in LA or HSBC Savings?
 

Hey Everyone-

My parents are about to sell one of their properties down in Carmel and they want to help me reinvest that money so that I have some investments when I exit law school in 2 years. I had thus far planned to use the money as a downpayment on one or two condos down in LA, but due to the horrible housing market and some friends' advice, I'm now strongly considering placing ALL of the money into an HSBC Savings account.

Any thoughts?

Thank you,

--Marc :)

First off, you are one lucky dude. Your parents are hooking you up bigtime.

Secondly, these are just some thoughts from a real estate neophyte. The housing market in LA is crazy nuts right now. It is probably worth waiting. Also, you are still in school so even if you did use it to purchase a condo or two, you'd still have to make the mortgage and unless your parents are going to cover that, you'll have to rent them out. If you're okay with that, fine, but I think you're not interested in being a landlord just yet. You need to consider where you want to live after law school. That should guide you as to where to buy property. If it's the Bay Area, for example, you're going to need all the money you can get to put a down payment.

I'm all for buying property as a long term goal. It might not be right timing wise for you in terms of the market and your situation. The HSBC savings accounts have a pretty good interest rate so maybe park it there for the short term while you sort out the other issues.

savings account? that will not be a good move as even 5% is not great. Talk to an FA and have them invest your $.

It all depends on how long you plan on keeping the property. If it's only for a few years, then it's not worth it because chances are property values will, at the very least remain steady, if not drop over the next few years. If you plan on holding on to the property for at least 7-10 years, then it really doesn't matter whether you buy now or later, because by that time, the real estate cycle should be on the upswing. Also, depending on your price range and location, some places in LA will hold their value better in this changing market than others. I agree with Sanguru, talk to an experienced FA and see what advice they give. I'm a Realtor here in LA, so if you have any questions about the market here, please feel free to contact me.

If you're looking at the housing market in LA, there are still places the represent great investments....

If you plan on looking down here, definitely give X5guyinLA a call - he is great at this stuff and brings vision to the real estate game that puts him a step above....

Good Luck!

I personally wouldn't recommend the market either here in San Diego or Los Angeles, it has repeatedly been called very volitle, not sure about the OC thou, have you considered a 1031 exchange? One of my best friends actually does that for a living and was explaining it to me, seems a wise way to go.

1031 Exchanges are a whole different beast... plus, you need to have property to start....

He said his parents are selling a property in Carmel, 1031 exchange it and buy another property without being heavily taxed

If you want to invest the money for 2 years, but want something safe, I would recommend purchasing Euros. All signs are that the dollar will continue to drop over the next couple of years. The Euro is a much more stable currency right now, and will most likely yield you a much better return. And even if there is no change in the Euro/Dollar exhange rate, you will still earn the usual savings interest on your money. The great thing about this is that there is no real great risk like investing in the stock market. You are basically opening a savings account similar to your HSBC savings account, except the currency is in Euros instead of dollars.

If they are not buying a like kind property and owning it the same way, they won't qualify. From the brief fact pattern above, it doesn't sound like a 1031 exchange will work. Of course if you can make it work, you should.

Here is some brief 1031 Exchange info. http://www.1031.org/about1031/faq.htm You will need to get your accountant involved.