I figure it’s worth $95,760.

Yeah that’s right.

It’s a cap multiplier of 8 with a 95% occupancy. It’s a condo so the HOA fees disrupt the value. If it wasn’t, a cap multiplier of 13 could be used.

Alternatively, I get a value of $127,000 by aligning the $1050 rent against the cost of the PITI & HOA.

Vrudny, I think your rent sounds pretty good. I just recently moved and did a LOT of searching around for places along the 15 and 56. Three bedrooms in Rancho Bernardo were a minimum of $1400-1500, and that was for pretty ugly and small places. Decent places were about $1600-1800. Getting into nicer areas like Torrey Highlands or Carmel Valley, you can’t touch a three bedroom for below $2000.

To give you an idea, I consider myself very lucky to have found a 3BR 2.5BA 1800 sqft. new townhouse in Torrey Highlands (off the 56 at Camino Del Sur) for $2000/mo. I think it should be another $400-500 more per month. If this is within your price range, you should take a look around the area. There’s a number of places for rent by me (behind the Albertson’s shopping center).

BTW, I’d like to point out that I think rents are more expensive than they should be, but that’s the way things are right now. People are trying to cut their monthly losses as much as possible.

I may have said cap rate, in reality I did a quick rule of thumb GRM (Gross Rent Multiplier).

In the OC, they matched up (GRM in the 8-13 range based on quality) for most of the 1990s.

In fact, the first townhome I bought in California, I bought at 8X the equivalent rent multiplier as a residence.

It’s a matter of time before rental properties fall back to fundamentals. The investment rental market has been distorted even more than the housing market by speculators thinking they’ll flip it in a year or two for mega profit.

Condo’s won’t continue to sell at $400K, in fact won’t sell for much more than $200K if they can be rented for $1200. Condos are just apartments that you’ve leased for 30 years where you get to do your own maintenance and taxes.

Your equating owning investment property as the same risks as bonds. It isn’t. With a GRM of 13, you’re looking at 7.5% return. With CD’s yielding 5.5% that would be an extremely poor risk adjusted return.

Yet, even with a GRM of 13, the OP’s original condo renting at $1050, would be worth $163,000 $1050 x 12 x13. At $189K he’s at a GRM of 15, at $219K – $240K the owners are at 17-19.

A condo at $1500 / month with a GRM of 13 would net $234,000. If there are concerns the property won’t appreciate, there are significant HOA fees, vacancies increases, that goes down. With low investor mortgage rates or lower risk free rates, it goes up.

When I said condos won’t compete at over $200K, I already allowed for the premium that SoCal prices into properties.

If you search carefully, you can find Carmel valley’s 3BR 2.5BA townhome from 1900-2200. If you have good credit score, the owner would like to lower the rental fee. so don’t let them rob ya.