[quote=Ren]It’s not that the value of my house in Temecula will enable me to retire early on the coast, it’s that my $1k mortgage will enable me to save several thousand more per month than I would otherwise, over the next 15 years, all of it reinvested in rental property. Our current property will become a rental as well, and it was chosen with that in mind. For the retirement property we’re thinking 40% down and a 15-year loan, so it won’t be completely mortgage-free, but because other sources of income will cover it, it’s not a concern . . .
Anything near the coast would be a better long-term investment than TV, if you buy at the right price. In my opinion, we’re not there yet.[/quote]
[quote=bearishgurl]Ren, how much (%) lower would the “right price” be for SD County coastal zip codes? And how long do you think it will take the market to get there? Do you think the market on the “coast” will come down in price enough by the time you’re ready to buy a property to retire in?[/quote]
[quote=Ren]All I know is that coastal properties are overpriced today, maybe by 20%, and being artificially propped up. The reason I consider the coast a better long-term investment is because it will always be easier to rent out a property there[/quote]
Ren, I don’t know how old you are but since the “coast” is where you want to retire, why don’t you consider purchasing a fixer (w/no MR or HOA) to rehab and then place into rental service there, using today’s low fixed interest rates, instead of investing in low-priced rentals in TV that may never appreciate and may even go down further. When scoping one out, do not get so caught up in “square footage” as long as it’s over 1000 sf with at least a one-car (attached or detached) garage and on a decent-sized lot. Remember, it will be a rental home and your retirement home.
I consider myself a bear in general but believe desireable “coastal” properties (west of the 5 in SD County) will NOT further deteriorate 20% like you think they will.
With the scenario you painted, I see you over-invested in TV by the time you want to retire and not being able to easily unload your rental properties or successfully retrieve your full downpayments from sale. You’re banking here that all these newer +/- $100K condos in TV will still be looking good and crisp, fetch good rents and their HOA’s will be managed perfectly for the long term. How do you know the bulk of entire complexes won’t become 100% rentals, bought up by REITS (blocks of investors) and turned over to the Section 8 program? This has HAPPENED in PQ and a few other areas which were considered “upscale” at the time of buildout and for a few years afterwards. When this happens, the REIT’s pay about .50 on the dollar (or less) for these units and THAT IS THE *NEW* COMP.
More than a few times, I’ve seen retirees who end up regretting they invested so heavily in low-income rentals they can’t easily unload. If you choose to leave TV when your kids go away to college, you may then find yourself running back up there several times a week to cope with endless tenant issues since you state you will manage your units yourself.
Also, with your “investment strategy,” keep in mind a couple of things. HOA dues always go UP, never down. Even though you can write HOA dues off on your taxes for a rental unit, you STILL have to PAY the dues first and they (as well as unexpected “special assessments”) can be VERY detrimental to your monthly cash flow. And when you go to purchase more property and already own rental unit(s), a lender typically only gives you credit for 9 mos. year rental income, NOT 11 months, as you previously stated. And you may have to prove to the lender the steady receipt of rental income over a period of time, when seeking another mortgage loan.
Just offering another perspective re: not putting all your eggs in one basket :=}
