San Diego Housing Bubble News and Analysis

CV2- I think you are perhaps neglecting to include the following in your calcualtions..

1) Assuming 100% occupancy rate?
Try running numbers at 70%

2) Insurance costs?

3) Maintenance costs- both routine and costs incurred between renters

4) Risk of increasing HOA costs as well as any special assessments?

5)Any Mello-Roos costs?

6) Don't know the area but property taxes seem low

As far as I know, there is no mello-roos because it is an established area. The property tax is 1% of sale price and the asking price is $89,000. Although it won't be the final price, I just put $1,000 a year as an estimate.

Yes, I missed maintenance costs. Since it is a condo complex, HOA carries insurance. Do I have to buy extra insurance?

Thanks!

With 70% occupancy rate, the income drops to $4,600. The CAP rate drops pretty significantly, but it still beats the negative saving rate in the bank.

Any thoughts?

That area has a reputation of being pretty gang infested.

how can income is just about $9,200? it's just about
$800 for 3bd/2bt?

I checked those out over a decade ago, IIRC. Though it might be Carlsbad SD, the area is pretty shady. You will not likely get good-quality tenants in there.

Still, there are many landlords who love exactly that type of situation. Just be sure that you know exactly what to do if you should run into any problems with the tenants.

Based on the price alone (~1999-ish), it looks like a good deal.

Actually, HOA is only $293. Isn't 70% occupancy too low? If you price it right, and the place is decent, there's no reason why it shouldn't by occupied in excess of 80%-85% of the time. What I'm missing here?

An important question is what the demographics are around there. $1000-rent for a 3BD appear reasonable, but are there jobs and incomes to support it?

CA Renter Why would some landlords love a situation with low-income tenants, crime, and high turnover? The only explanation I can think of is that you get a higher rent-to-house-price ratio in bad neighborhoods, but then, it's also more work to manage and maintain and when prices start picking up in the future, SFRs prices will go up first. Many condos don't even qualify for FHA-backed loans.

The low end of the housing market is the RE investors' bread and butter. Yes, these properties tend to provide the best cash-on-cash returns. They are also the best bet for capital gains. As you can see from home price appreciation charts, the low end tends to have the greatest volatility. Investors tend to get a better return, cycle after cycle.

As an investor, you don't have to have a high turnover rate, nor do you have to put a lot of money into maintenance. Just offer the best rental rate in the area, and leave the tenants alone. Lots of LLs have found that being a slumlord can be very profitable, indeed.

BTW, I don't advocate being a slumlord, etc. Just describing what I know of the rental market. You can see this in almost every low-end neighborhood you see. Lots of rich "investors" who rent to tenants who live in squalor -- but have an affordable place to live.

Also, you're right about condos being a greater risk than SFHs. I was really referring to the low-end SFH market, but have known a number of people who have done quite well with condos. The biggest problem is the HOAs. They tend to keep a lid on the slumlords, to some extent. Also, you get those special assessments that you have absolutely no control over.

You'd need a landlord policy.

Which isn't all that expensive. But if you have significant other assets you should consider also buying an umbrella policy, in case something bad happens in your rental unit and you're sued above your policy limits. In the grand scheme of things, that also isn't very expensive - it's a lot cheaper than the limited liability tax (CA incorporation fees.) But make sure you have these expenses on your spreadsheet when analyzing your numbers for this thing.

Thanks!

Where can I dig out more info on crimes? This properties on the south side of 78 and presumed to be a better area than the immediate north part of the freeway.

Thanks to all the people who have provided valuable info and perspectives to me. I could not thank you more.

This will be my second rental if I proceeds. My first rental is in a very desirable area and also a condo complex. My experience is that you provide a comfortable home and slightly lower than market rent, you can pick your tenants and they will stay long. I believe there are many responsible persons in the low income category too. And that's why I am interested in this property. Since it's my first foray into this income level, I want to tread water cautiously.

Thanks again for your good input. Please keep it coming. I have so much to learn.

Yup, slumlords get better returns. I frequent a forum where a lot of landlords gather (BiggerPockets), and many of them seem attracted to the low end. They also frequently seem stressed out and constantly post about problem tenants. I'd personally rather make a little less and give my blood pressure a break.

Here is some interactive crime stats:

http://mapping.arjis.org/main.aspx

Select Oceanside as the Juristiction then use the address selection button.
Good luck.

Racist.

Sorry.

Couldn't resist.

A friend of my mother was robbed at gunpoint at a gas station in the area by a youth of "unspecified race" several years.

I have a $1M umbrella policy and $300K for my auto and home. I bought landlord policy on the rental. Is this good enough?

This interactive crime web site is very cool. Thanks again. Maybe Google should look into this feature ...

I am shocked to see so many incidents north of 78 in Oceanside. South side is a much better place to live.

What are the criterion that you define as good-quality tenants?

In my rental in CV, I define them as FICO score of over 700 and combined income over $80K/year. I have no trouble finding those renters because I offer below market rent and really good service to them. But for the Oceanside, I would define it as FICO score over 600 and combined income over $40K. Is this realistic?

Where can I dig out more info on crimes? This properties on the south side of 78 and presumed to be a better area than the immediate north part of the freeway

You may want to try zipskinny

http://www.zipskinny.com/index.php?zip=9...

Yes, that sounds pretty realistic, but you could still have problems.

IMHO, a good-quality tenant is a long-term tenant who is clean, well-behaved (no drugs, alcohol issues, or other illegal activities), and who consistently pays the rent on time. It's a big bonus if they are willing/able to do light maintenance, and if they inform the LL if something is about to give out instead of waiting for it to break altogether. For instance, if the water heater isn't warming up the water anymore, or if there is a small leak, they tell the LL so he/she can replace it before it leaks all over and floods the entire unit/garage (depending on where it's located).

Basically, a good tenant is someone you'd like to have living next-door to you and your family.

BTW, a good landlord is one who maintains the property nicely, and who charges just below market rents in order to get the best tenant. In today's world, a good LL is a long-term owner who isn't going to sell or be foreclosed on.

I have a question concerning termite damage in a HOA. If the house is a REO and has termite. Who should fix it?

I think it is the HOA. But if the HOA runs out of money and could not afford it, could I force the bank to fix it before closing escrow?

Thanks.

http://www.sdlookup.com/MLS-090059719-34...

Another property is just sold in the complex. The sales history is really interesting:

12/31/2009 $105,000 4y 1m -63% -21%
11/14/2005 $285,000 1y 4m 147% 92%
06/24/2004 $115,303 3y 3m -6% -2%
03/06/2001 $122,500 6y 12m 83% 9%
03/11/1994 $66,900 4y 2m -20% -5%
12/14/1989 $83,500 6m 19% 38%
05/26/1989 $70,000 n/a - -

I do not understand why 2004 price is lower than 2001 and then doubled in 2005. My guess is that the owner could not afford the HOA fee or special assessment and got take over by the HOA.