- This topic has 20 replies, 9 voices, and was last updated 7 years, 1 month ago by
HLS.
-
AuthorPosts
-
October 8, 2017 at 7:11 PM #22429October 8, 2017 at 8:12 PM #808091
bewildering
ParticipantDo you live in Irvine?
Do you own your own house?
What other investments do you have?
October 8, 2017 at 8:42 PM #808092kev374
ParticipantI don’t live in Irvine but close, around 6-7 miles away. I don’t own a home, I rent. Investments I have some in my 401k, I have a large chunk of change in cash that I kept liquid to use as a 20% down payment to jump on a home in case one popped up but have not been able to find any inventory that I liked in my price range so that has been a huge waste as I kept it out of the market and missed all the huge gains but oh well, whatever.
So, at this stage it is either get back into stocks (which are at all time peaks) or get into real estate investment at a $700-800k price point which is nerve racking.
October 9, 2017 at 10:44 PM #808112HLS
ParticipantYour friend may not understand exactly what’s involved.
Based on your scenario,
You are going to tie up $165,000+
and need a jumbo loan with a monthly obligation of over $4200 PLUS HOA .
How much can you rent it for ?Based on loan pricing, it makes much more sense to put 25% down on an investment property. I don’t think it makes sense to consider this property as a rental.
Also, many stocks are nowhere near “all time peaks”
(The manipulated indexes are at peaks)
Plenty of ways to make money if you think the indexes are going to fall. Plenty of stocks may be cheap today.You should seek out some competent rational advice with a focus on something other than what the masses are doing.
October 10, 2017 at 3:24 PM #808129ParticipantI countered with the argument that if a recession hits and I lose my job I may be effectively screwed if I am unable to rent it out. He said that is pretty much impossible to lose since if I would give a $1000 discount there would be hordes of people willing to rent particularly in a recession when people are looking for discounts. So $1000 x 12, even a 12 month buffer is just $12,000 that I need to have.
Somehow, I am more uneasy about this, it can’t be so simple and risk free or can it?
An $825k home can rent for around $4500? I am guessing but is there that much rental demand in this segment? I think not. Not many people rent such homes, they usually purchase them.. that is what I am thinking.
The type of people that can afford to lay down $4500 a month is slim and even if they could it’s more likely they would be buyers not renters. That was my thinking. Now one can always rent individual rooms out but that is also a challenge I guess.
I felt $1500-2500 is the sweet spot to find renters.
October 10, 2017 at 4:00 PM #808130ParticipantYou will ALWAYS find tenants willing to rent a new townhome in that area; however whether you want to rent to them OR the amount that you can get will vary. There is always a risk of a problem/deadbeat tenant.
You can’t rent anything new for anywhere near $1500 in that area,
There are always people who have no interest in buying (for various reasons) and will pay a top price to rent a nice place.I don’t think it makes and sense to consider buying an $825K place that would only rent for $3000 mo.
How much is the HOA that you will pay ?
Don’t forget that your property taxes will be $800+ a month.
You will need cash out of pocket every month, in which case your tenant is not paying down your mortgage (you are)If you’re open to the idea, look at other parts of the country where $800,000 will buy you an apartment building (10-20 units or more) that can gross $8,000 a month rent (or more)
…..After expenses and management fees you could have a nice return and greater depreciation than an OC townhome.
There are good property managers out there and you wont be involved in the repairs/maint other than making decisions.October 10, 2017 at 6:04 PM #808134FlyerInHi
Guest[quote=HLS]
If you’re open to the idea, look at other parts of the country where $800,000 will buy you an apartment building (10-20 units or more) that can gross $8,000 a month rent (or more)
…..After expenses and management fees you could have a nice return and greater depreciation than an OC townhome.
There are good property managers out there and you wont be involved in the repairs/maint other than making decisions.[/quote]I agree. But do you think he can quality for loan? Usually 7 years adjustable with balloon payment.
October 10, 2017 at 10:31 PM #808139carlsbadworker
Participant[quote=kev374]I don’t own a home, I rent.[/quote]
I always think the best rental property is to own your own house. You get the best tenant: yourself, so it is guaranteed occupancy 100% of the time. And you get lower owner-occupied rate.
[quote=kev374]So, at this stage it is either get back into stocks (which are at all time peaks) or get into real estate investment at a $700-800k price point which is nerve racking.[/quote]
Yes, savers are screwed as all assets are very pricey at the moment, and I don’t see any reason for the liquidity to dry up anytime soon. As GMO says, “Either valuations will revert to historically normal levels and near-term returns will be very bad [purgatory] or valuations will remain elevated relative to history [which means]… near-term returns will be less bad but still insufficient to investors to achieve their goals [hell].”
[quote=HLS] many stocks are nowhere near “all time peaks”(The manipulated indexes are at peaks)
Plenty of ways to make money if you think the indexes are going to fall. Plenty of stocks may be cheap today.[/quote]While there’re plenty of stocks that may be cheap today, I don’t understand the argument that they are cheap because there are nowhere near “all time peaks”. Individual stock doesn’t follow mean reversion. Bad stock goes to zero and good stock goes close to trillion dollar valuation. Individual stocks at all time peaks do not mean they are bad investment, as long as they are still priced lower than the future discounted cash flow, or grow faster than the market currently predicts.
October 11, 2017 at 8:31 AM #808144Anonymous
Guest[quote=carlsbadworker]While there’re plenty of stocks that may be cheap today, I don’t understand the argument that they are cheap because there are nowhere near “all time peaks”. Individual stock doesn’t follow mean reversion. Bad stock goes to zero and good stock goes close to trillion dollar valuation. Individual stocks at all time peaks do not mean they are bad investment, as long as they are still priced lower than the future discounted cash flow, or grow faster than the market currently predicts.[/quote]
Well said.
The historic high of an individual stock is a useless metric.
October 11, 2017 at 9:11 AM #808145Participant[quote=FlyerInHi][quote=HLS]
If you’re open to the idea, look at other parts of the country where $800,000 will buy you an apartment building (10-20 units or more) that can gross $8,000 a month rent (or more)
…..After expenses and management fees you could have a nice return and greater depreciation than an OC townhome.
There are good property managers out there and you wont be involved in the repairs/maint other than making decisions.[/quote]I agree. But do you think he can quality for loan? Usually 7 years adjustable with balloon payment.[/quote]
Qualifying for commercial property is different than 4 units or less. Many different programs. OP has strong income & good credit. There will always be money available at some rate.
The income from the property carries more weight in qualifying.
It’s also possible to buy units with partners etc.
Many variables, just general advice.Conventional loans with 30yr fixed rates are available on 1-4 unit properties. Although not common around here, there are many areas that have 2- 4 unit buildings that can be financed separately.
Not a concept for those who want to be hands on landlord.
October 11, 2017 at 1:12 PM #808149GuestYes, I know about 4 plexes. But you were suggesting 10-20 units before.
October 11, 2017 at 1:35 PM #808150spdrun
Participantcarlsbadworker — it’s good to own your own home, but it’s better to own a cheaper home AND a rental. So you can have another ATM on the hoof (aka tenant) paying expenses on your own home.
Best way to be is worry-free, and if you create your own controlled environment (someone else paying your housing expense), it can be beautiful.
October 11, 2017 at 2:20 PM #808151sdsurfer
ParticipantFor starters…I’d try to buy a place I can live in that is a little dated that I can upgrade along the way for some sweat equity in addition to your downpayment and your rent never getting jacked on your again.
If you decide to go the investment property route I’d spend as little as possible so you have less skin in the game and get a feel for being a landlord (or working with a management company) without as much risk man. Why go so huge on the first one? Some might mention leverage and cheap money right now, but it works both ways and nobody is certain what the market will do.
I agree on rents in a recession based on personal logic, but I honestly wish I could find more data on that. I’ve always wanted to find a graph/chart that goes back 30 years showing rents. I’ve searched quite a bit and the closest thing I’ve found is this (Rich actually found it and shared it with me a while back…thanks Rich!).
https://fred.stlouisfed.org/series/CUUSA424SEHA
The chart is quite compelling since it shows the past 3 recessions (shaded in), but I’ve always wanted to find something that says what North County SD has done in my lifetime since that is where I live and like to invest because I like managing my own properties. My guess is that it’s even more “up and to the right” as they say, but I’ve been unsuccessful in finding solid data.
Lastly, I’d say meet up with someone who has done what you are looking to do and can share real insight. Is your friend recommending you to do something with your money that they have not even done? I’d find someone that has done it to share the good and the bad to help you with your decision. Feel free to send me a message with any specific questions I might be able to help with too.
Good luck whatever you do!
October 15, 2017 at 10:01 AM #808169dumbrenter
Participant[quote=HLS]
If you’re open to the idea, look at other parts of the country where $800,000 will buy you an apartment building (10-20 units or more) that can gross $8,000 a month rent (or more)
…..After expenses and management fees you could have a nice return and greater depreciation than an OC townhome.
There are good property managers out there and you wont be involved in the repairs/maint other than making decisions.[/quote]Are these on Redfin?
October 16, 2017 at 8:03 AM #808180ParticipantYES.
Redfin is just a feed of the MLS system nationwide.
Pick a city, then go to ‘More Filters’ then ‘Multi Family’
You can also use Realtor.com or Zillow etc etcAs an example:
Here is a 12 unit apartment bldg for $425,000 in Oklahoma City.https://www.redfin.com/OK/Oklahoma-City/3500-S-Pennsylvania-Ave-73119/home/72105802
Poor listing info, doesn’t mention the rent.
up to 4 unit properties can be financed with 30 year mortgages.
5 units and above have various options for financing.Owning property from a distance isn’t for everyone. It comes with added risks, but has worked well for many people.
-
AuthorPosts
- You must be logged in to reply to this topic.