San Diego Housing Bubble News and Analysis

It is priced really well. Note however that this condo requires cash offers only and the HOA is not solvent. Finally this is a TDS exempt sale.

SD Realtor

I understand it is a cash offer. And I would think there are probably people out there w/cash. Apparently people are competing to buy million dollar properties w/20% down. I figured there would be some investor w/cash who would probably get it and rent it out. Also, once paying cash, wouldn't they be able to take a HELOC against it and get cash back out?

I did not know about the HOA not being solvent and certainly that is a problem.

SD Realtor,

What does that mean that the HOA is not solvent? Thanks for your comments. I appreciate the information you provide to this site. You are a piggington asset.

Yeah they could get the cash back out if they want. I am not so sure prudent investors do that. There are a couple of pretty seasoned guys who post here occasionally who have shared thier experiences with us. Most of them do not buy rentals here in SD or even in CA.

Also yeah the HOA solvency is the troubling aspect. Once that is resolved I am sure the place will move pretty darn quick.

SD Realtor

Wouldn't HOAs not being solvent mean they do not have enough money in a fund to cover their expenses, insurance, groundskeeping, pool, etc?

That's my understanding. I could be wrong. It happens sometimes. I've heard of it, especially complexes w/units sitting empty not paying into the fund. Eventually, they get it straight, raise the HOAs for some units and when full occupancy and in the black, reduce the HOAs.

records I am not sure of the details of the solvency but it is simply that the HOA does not have enough money to pay the bills. So most likely they are not meeting minimum reserve requirements by the state. Also there could be deferred maintanence that needs to be done but cannot be due to no funds. Other issues such as insurance, exterior maintanence, and all the things that HOA's may pay for may now start to seriously suffer.

jp - you got it right. Unfortunately they may have to make an assessment to get things right immediately, then also raise the HOA's. It all depends who they owe, what the reserve requirement is, and the timeline of things.

That's true. Forgot about that. They'll give the owners a "special" bill to bring everything current. Not a good sign of proper bookkeeping, but I imagine it must be somewhat common occurrence, especially now w/foreclosures and banks sitting on places empty. But wouldn't the banks pay the HOAs? In any case, depending on how insolvent they are, it could get expensive. Definitely something to check into first.

I was just suprised about the listing, but those factors do explain the more unusual price drop.

I grew up a few miles from there, and that area was completely ghetto 20 years ago. I'm sure it hasn't improved since then. As a general rule, I personally wouldn't buy any rental property that I wouldn't visit at night.

This calls for a little Ray Stevens:

Everything is beautiful in its own way.
Like the starry summer night, or a snow-covered winter's day.
And everybody's beautiful in their own way.
Under God's heaven, the world's gonna find the way.

Can you feel the love?

This listing is obviously about starting the bidding war. Still.....

At $100k this puppy breaks even with the rents over there, and that's before the tax benefits.

Rental property is for making money. You don't have to live there and you don't have to visit at night.

Maybe this would be a better investment for an investor with impeccable taste:
http://bubbletracking.blogspot.com/2008/...

$12,000 a month carrying cost and only asking $5000 rent. I'm sure this place would be safe for you to visit at night at a loss of $86K a year. Maybe getting mugged in the ghetto would actually save you money.

This condo in Escondido was offered to a cash buyer. Right now CD's are paying less then $400 (on 70K) a month with no tax benefits. This condo would rent for $900+. There are currently renters in other units in this complex paying $1100-$1200 a month. The HOA is only $160/month (although not solvent at this time). So as a cash buyer you would be earning anywhere between $650-$950 a month with tax benefits. The HOA is not solvent because there are only 12 units out of 24 paying currently. There are 4 units listed for sale and the cheapest one after this unit is asking $109K. The HOA is not in debt and is able to pay water and insurance. The Roof was just done 3 years ago and the exterior was just painted this year. The HOA is not able to due routine clean-up. The pool is not usable. The current homeowners are pitching in with some routine maintanence and there is one tennant that has been cutting the grass. This is a primarily Spanish Speaking community (within the complex) and although very ghetto looking has a family atmosphere. The 7-Eleven across the street has an agreement with management to stop selling liquor after 11:30pm. There is an elementary a block away. This condo complex is surrounded by SFR. The neighborhood actually looks well kept, but this could be deceiving. I'm sure that there is crime issues in this area, but this is probably one of the best investments currently for a rental (dollar for dollar).

$12,000 a month carrying cost and only asking $5000 rent. I'm sure this place would be safe for you to visit at night at a loss of $86K a year. Maybe getting mugged in the ghetto would actually save you money.

I'm not interested in being a slum lord. Family-oriented or not, it's a poor neighborhood with a lot of drugs around, and has been for decades. You'll be lucky to get reliable tenants there, and there's also the possibility you'll end up with several illegal families living in your rental, so be sure to count out two or three months every year for vacancies and cleanup/repair. Maybe you would profit over time, but I don't need the headache.

Temecula houses in nice areas are penciling out as cash flow positive, and will be even better in the fall and winter.

Since I posted this thread about 70% reduction, I was enlighted further about HOAs and started this thread:
http://piggington.com/hoa_solvency_marke...

HOAs can be a can of worms. This area of Escondido may not be the greatest to some of us Piggs, certainly not to me, but it does indicate a decline, greater in less desirable areas, neverthless major. I'm not sure how this compares to SESD. People living in that area w/their minimal incomes can almost afford this w/out trick loans.

I hope this is a sign that there's hope in desirable areas, where income will be close to allowing one to actually reasonably afford to purchase w/out tricks. Slightly out of reach is quite different than completely ridiculous.

Ren,

I would have to agree with you about Temecula penciling out and probably with better tennants. If I lived in Temecula I would seriously consider buying rental units there.

This condo has fallen out of Escrow at least 3 times already and is currently pending since May 9th. The first buyer didn't understand the HOA problems and backed out of the deal (they said that they didn't understand English very well). The second buyer couldn't get the financing (the bank has this property as a cash only purchase, but still took an offer from a non-cash buyer). I'm not sure what happened with the 3rd buyer.

If it falls out of escrow again, let me know. I would be interested to buy at this price point.

TDS Exempt what is that?

TDS exempt means that the owners of the home are exempt from providing any disclosure information. This is generally the case for homes that are bank owned or there has been a trustee sale. That is perhaps the owners of the home have passed away and the executors of the trust then sell the home.

In all these cases the people selling the home have never lived there and have no knowledge of any preexisting conditions thus they are exempt from having any disclosure responsibilities because they have never been in the home or know little/nothing about the home.

SD Realtor

This condo finally closed. Sold for 80K. I put in an cash offer at 69K. The buyer got a good deal and the HOA is still operational at this point.

I'm not sure what happened with the 3rd buyer.

He's at the bottom of the algea covered pool.

recordsclerk just out of curiosity what would have been your cap rate based on projected operating expense and rental income at 69k?

If you don't want to answer that is ok... just curious.

SD Realtor

SD Realtor,
I'm sorry I missed your question back in June. I really just went with a gut feeling and didn't feel it was worth more then the asking price of 69K. This was the first 2bed/2bath under 90k at the time of listing. It would still break even at 85K with a rental of $900 month. I liked the fact that it was 1 story building (no one on top/bottom)and 1 block from the elementary. I also like HOAs under 200, this one was $160 month. No matter how many times you go over the numbers there are so many variables it's almost impossible to narrow it down to just one number.

CV2,
There is a new unit in this complex listed at $73,900. I haven't done any more investigations on the current situation with the HOA, but at the time they were paying water/insurance and didn't owe any money. At the rate that condos are falling, this doesn't seem like such a good deal as it did just a couple of months ago. This would still be a good investment, but it's a little too far away for me to make a move at this time. I've been watching some condos closer to my residence that would be more convenient to manage.
Here's the link: MLS #080048826
http://www.ziprealty.com/buy_a_home/logg...