You may know her as the Barbie-like figure on Netflix’s hit TV series who scores a multi-million dollar deal for a Los Angeles-based luxury real estate company. Selling Sunset. But Emma Hernan was a real estate investor long before she became an agent selling properties to superstars.
The self-made millionaire, former model, entrepreneur and real estate investor, made her fortune investing in the stock market and startups before buying her own home in 2017. The following year, she started working at her own company, Oppenheim Her Group. She used to focus on buying her own homes and selling luxury real estate to and for many celebrities. In 2023, she helped pop star Harry Styles sell an LA property for $6.7 million, defeating many challenges facing the local housing market, including the city’s newly introduced mansion tax. did.
Meanwhile, she also continues to run Emma Lee & Company, a Boston-based vegan food manufacturing company best known for its plant-based empanadas. The company supplies other food companies, but its real estate business benefits as well by working with CEOs and other executives, people who are more likely to buy luxury homes. she says. This bicoastal money maven owns several residential and commercial properties in both Los Angeles and Boston, and refers to his rental income as “money in the mailbox.”
“When I rent my house to someone, someone pays my mortgage and my mortgage is paid off,” she says. luck. “And now I only receive a check every month. So for me, the transition from the stock market to real estate was a natural thing.”
Even if you score some big wins in 2023, becoming a luxury real estate agent for the world’s rich and famous isn’t as easy and luxurious as you might think. High mortgage rates, which hit a peak of 8% in October, have hurt business, but the real hurdle has been the introduction of mansion tax, which imposes between 4% and 5.5% on the sale price of multi-million dollar properties.
Mansion tax puts Los Angeles real estate in trouble
LA’s so-called mansion tax applies to real estate sales of at least $5 million. Estates valued at more than $5 million are subject to an additional tax of 4%, and estates valued at more than $10 million are subject to an additional tax of 5.5%. Taxes are usually paid by the seller. Taxes are separate from the sale price of the home, so they can be “a huge amount,” Hernan said.
“If I had to describe the mansion tax in one word, it would be ‘nightmare,'” she says. “This has taken away a lot of business, not only as agents but also as developers. Even adding in this mansion tax doesn’t add up to the numbers, so the chances of a developer buying another home and trying to flip it are slim. It will be lower.”
In addition to Los Angeles, New York, New Jersey, Connecticut, and Vermont also apply mansion taxes.
However, the issue of mansion tax is a double-edged sword. The transfer tax introduced as part of the ULA measure allows the City of Los Angeles to use the money it collects to funnel more money into affordable housing and homelessness prevention efforts as more and more people live without a home. It went into effect in Los Angeles on April 1 for the purpose of shelter. An estimated 75,000 people were homeless in Los Angeles from June 2022 to June 2023, an increase of 9% from the same period last year, according to the Los Angeles Homeless Services Authority.
But as Hernan and other agents and housing experts point out, real estate in Los Angeles is already incredibly expensive compared to most other cities. In fact, not all of his million dollar homes in Los Angeles are actually considered “mansions.” According to Smith & Associates Real Estate’s unofficial definition, a mansion includes at least his 5,000 square feet of property made of premium materials and leisure spaces such as a gym, spa, and home movie theater. According to his November stats on Realtor.com, the median home price in Los Angeles alone is $1.3 million, more than three times his national median.
Now, Hernan warns his clients about mansion taxes before they prepare to sell. For example, if you sell your home for $5 million, you’ll have to pay an additional $200,000, which “we didn’t really take into consideration when buying the home because the mansion tax wasn’t applicable.” she says. Currently, pricing based on a home’s actual value can mean breaking even or even incurring a loss, she added.
“This is definitely difficult for buyers, sellers, and of course agents, because we lose business as well,” Hernan says.
The “sweet spot” for buyers
On a more positive note, Hernan said he’s seen buyers outside of the “condominium tax zone” getting better real estate deals this year, especially as mortgage rates have fallen. . By mid-October, the average interest rate on a 30-year fixed mortgage was 8%, but has since fallen to around 6.6%, according to Mortgage News Daily.
Hernan champions rate dates and marries the idea of home and recommends the method to luxury real estate clients.
“Buyers need to remember that while you can’t renegotiate the home price, you can renegotiate the interest rate,” Hernan said, referring to refinancing mortgage rates. “Right now, even if interest rates are a little higher, they want to get into housing. There’s not a lot of inventory right now, so there’s an opportunity to get a home at a really good price.”
As such, Hernan expects more buyers and sellers to “get back on their feet” next year, even if 2023 was a weak year. In fact, she’s seeing buyers getting better home deals than ever before. Half a year ago, it was only 10% to 20% off per house.
“I always tell my clients, if you renegotiate, you can get a better rate in the future, but the house is locked up, and that’s the most important thing,” Hernan says. . “You can’t control interest rates, but that’s what I advise my clients to do.”
Taking her own advice
Despite the ups and downs of 2023, Hernan expects 2024 to be his best year yet. Next year, Hernan plans to follow his own advice and buy more investment properties.
“What’s so unique about myself is that I’m not just an agent trying to sell homes,” she says.
However, real estate agents are also facing major changes to their salary structures heading into 2024. In late October, the real estate industry was rocked when a Missouri jury found that the National Association of Realtors conspired to artificially inflate the home sales commissions paid to real estate agents. Agent.
A $1.8 billion judgment could change real estate commissions as we know them. Normally, the total real estate brokerage commission paid by the seller is around 5% to 6% of the sales price. Some argue the outcome will threaten the livelihoods of real estate agents across the country and make it even more difficult for homebuyers looking to purchase a home. But still, nothing is “set in stone” about how the committee’s structure will change, Hernan said, likening the current outcome to high school rumors.
“Think about the mansion tax. There were whispers about the mansion tax even before it happened and whether it was ever going to happen,” Hernan says. “All of this is hearsay, but I think these are all things that really need to be thought about and thought through. We’ve been hit a lot this past year, so I think the decision that was made was the best decision. I hope so.”