advice re potenial beach condo purchase

[seashaw]

WOW.

you all are awesome!

thanks for all the info. def some valuable things to investigate.

we currently live in a ‘complex’ situation so i’m well aware of the drawbacks it can have(unfortunately). we also live in the neighborhood so we aren’t too worried about any surprises in that regard. we are more concerned with the future $ issues.

we have checked into the area rents for equally sized dwellings and IF we were able to get the going rate we could cover out mortgage (even at the current asking price).

still not sure how much the prices will drop in the next year+ so that’s really the biggest deciding factor in all this…

🙂

[temeculaguy]

It is not about if you can cover the mortgage, the question about the rent price is so you can use a time tested formula of rent to price ratio that will give the rest of us an idea of how it pencils out. Places that pencil out have a support level, where an investor would buy it, giving it a floor price, that way we can see the risk.

If it is in a complex, then finding a comparable rent should be easy, not for the area or a house, but for one in that complex. If the going rent is 2k, and the place is 400k, then your rent to price ratio is out of whack and there is still room for it to fall before investor price support kicks in. Try not to exceed 150x rent for the price, 2k rent x 150=300k, 3k rent x 150= 450. If the rent is 100x the price, jump on it, ie. 4k rent, 400k price.

anything above 150x is a risky play, the lower the multiple the better off you are. Location is irrelevent, beach is irrelevent, the added benefits shoud also translate into added rent. If it doesn’t, wait for it, the train is on the way.

[temeculaguy]

It is not about if you can cover the mortgage, the question about the rent price is so you can use a time tested formula of rent to price ratio that will give the rest of us an idea of how it pencils out. Places that pencil out have a support level, where an investor would buy it, giving it a floor price, that way we can see the risk.

If it is in a complex, then finding a comparable rent should be easy, not for the area or a house, but for one in that complex. If the going rent is 2k, and the place is 400k, then your rent to price ratio is out of whack and there is still room for it to fall before investor price support kicks in. Try not to exceed 150x rent for the price, 2k rent x 150=300k, 3k rent x 150= 450. If the rent is 100x the price, jump on it, ie. 4k rent, 400k price.

anything above 150x is a risky play, the lower the multiple the better off you are. Location is irrelevent, beach is irrelevent, the added benefits shoud also translate into added rent. If it doesn’t, wait for it, the train is on the way.

[temeculaguy]

It is not about if you can cover the mortgage, the question about the rent price is so you can use a time tested formula of rent to price ratio that will give the rest of us an idea of how it pencils out. Places that pencil out have a support level, where an investor would buy it, giving it a floor price, that way we can see the risk.

If it is in a complex, then finding a comparable rent should be easy, not for the area or a house, but for one in that complex. If the going rent is 2k, and the place is 400k, then your rent to price ratio is out of whack and there is still room for it to fall before investor price support kicks in. Try not to exceed 150x rent for the price, 2k rent x 150=300k, 3k rent x 150= 450. If the rent is 100x the price, jump on it, ie. 4k rent, 400k price.

anything above 150x is a risky play, the lower the multiple the better off you are. Location is irrelevent, beach is irrelevent, the added benefits shoud also translate into added rent. If it doesn’t, wait for it, the train is on the way.

[temeculaguy]

It is not about if you can cover the mortgage, the question about the rent price is so you can use a time tested formula of rent to price ratio that will give the rest of us an idea of how it pencils out. Places that pencil out have a support level, where an investor would buy it, giving it a floor price, that way we can see the risk.

If it is in a complex, then finding a comparable rent should be easy, not for the area or a house, but for one in that complex. If the going rent is 2k, and the place is 400k, then your rent to price ratio is out of whack and there is still room for it to fall before investor price support kicks in. Try not to exceed 150x rent for the price, 2k rent x 150=300k, 3k rent x 150= 450. If the rent is 100x the price, jump on it, ie. 4k rent, 400k price.

anything above 150x is a risky play, the lower the multiple the better off you are. Location is irrelevent, beach is irrelevent, the added benefits shoud also translate into added rent. If it doesn’t, wait for it, the train is on the way.

[temeculaguy]

It is not about if you can cover the mortgage, the question about the rent price is so you can use a time tested formula of rent to price ratio that will give the rest of us an idea of how it pencils out. Places that pencil out have a support level, where an investor would buy it, giving it a floor price, that way we can see the risk.

If it is in a complex, then finding a comparable rent should be easy, not for the area or a house, but for one in that complex. If the going rent is 2k, and the place is 400k, then your rent to price ratio is out of whack and there is still room for it to fall before investor price support kicks in. Try not to exceed 150x rent for the price, 2k rent x 150=300k, 3k rent x 150= 450. If the rent is 100x the price, jump on it, ie. 4k rent, 400k price.

anything above 150x is a risky play, the lower the multiple the better off you are. Location is irrelevent, beach is irrelevent, the added benefits shoud also translate into added rent. If it doesn’t, wait for it, the train is on the way.

[an]

tg, wouldn’t the 100-150x rent ratio get affected greatly by interest rate? Even in hard hit places like Eastlake, they’re barely hitting the 150x mark and they already lost 50+% from peak value. Also, this fixed rent ratio doesn’t take into consideration of HOA and MR. A huge deal when some places, those two can add up to 300-500/month easily.

[an]

tg, wouldn’t the 100-150x rent ratio get affected greatly by interest rate? Even in hard hit places like Eastlake, they’re barely hitting the 150x mark and they already lost 50+% from peak value. Also, this fixed rent ratio doesn’t take into consideration of HOA and MR. A huge deal when some places, those two can add up to 300-500/month easily.

[an]

tg, wouldn’t the 100-150x rent ratio get affected greatly by interest rate? Even in hard hit places like Eastlake, they’re barely hitting the 150x mark and they already lost 50+% from peak value. Also, this fixed rent ratio doesn’t take into consideration of HOA and MR. A huge deal when some places, those two can add up to 300-500/month easily.

[an]

tg, wouldn’t the 100-150x rent ratio get affected greatly by interest rate? Even in hard hit places like Eastlake, they’re barely hitting the 150x mark and they already lost 50+% from peak value. Also, this fixed rent ratio doesn’t take into consideration of HOA and MR. A huge deal when some places, those two can add up to 300-500/month easily.

[an]

tg, wouldn’t the 100-150x rent ratio get affected greatly by interest rate? Even in hard hit places like Eastlake, they’re barely hitting the 150x mark and they already lost 50+% from peak value. Also, this fixed rent ratio doesn’t take into consideration of HOA and MR. A huge deal when some places, those two can add up to 300-500/month easily.

[temeculaguy]

well, that’s why there’s a 50x spread in the number, the variables you mentioned move the number a little, but not in a pure sense. Hoa fees can be offset, because they sometimes include things you would otherwise pay for in an sfr(structure fire insurance, exterior water, gardener, etc) sometimes the higher hoa fees cover more things, but not always. In many cases m/r is deductable and may be in lieu of higher overall taxes, once again, not always, but yes, they are soft factors, unless it is exceptionally high hoa, like a downtown highrise. Interest rate is a factor but it’s another soft one. It lends itself more to the “renter will become an owner at rent nuetral” price floor, not so much with investors who are often not borrowing money, and they compare it to the possible earnings in other investments, another wash really, cause if interest rates are lower, so are the yields. These are all factors to consider but none should be considered a fundamental, don’t confuse a factor with a fundamental. You wouldn’t ignore a 90x just because of a $200 hoa that amounts to 10x, you still total 100x, another property might be 150x with no hoa, going for the non hoa property costs you net 50x, that’s where you have to look at the totality of the situation, that’s where savvy comes in.

I can’t believe that eastlake isn’t below 150x, at least for the smaller houses and condos, many posters have been buying in less hard hit areas and mentioning it being rent nuetral. I found an 65x potential investment the other day, of course I didn’t post it cause I’m greedy that way, but 100x is so commonplace it doesn’t get my blood flowing anymore. I’ll admit that the 65x place was just a list price, which means very little these days as other investors will spot the value and bid it up a little. The thing with the investor pricing floor is they don’t care if it is a nice neighborhood or has good schools, that’s already priced into the rent, in the case of condo purchasing, you need to look at the rent even harder than with sfr, as places get larger and more expensive, they become less attractive as rentals so it becomes less of an issue as you move up the scale, the investor pricing floor kinda drops off. 3000+ sq fters are less likely to be rentals and less likely to pencil out, but the op was asking about a beach condo, very often they are rentals, so that’s the measuring stick I’d start with, plus part of the plan was to eventually convert it to a rental, might as well evaluate like a landlord now if it is part of the plan.

The op also didn’t mention it’s relationship to peak value or it’s price chronologically compared with other years, especially 2001, 2002 and 2003. We are all in different camps on what price year to shoot for, but 90% of us feel one of those three years should be targeted to compare it to pre bubble pricing.

[temeculaguy]

well, that’s why there’s a 50x spread in the number, the variables you mentioned move the number a little, but not in a pure sense. Hoa fees can be offset, because they sometimes include things you would otherwise pay for in an sfr(structure fire insurance, exterior water, gardener, etc) sometimes the higher hoa fees cover more things, but not always. In many cases m/r is deductable and may be in lieu of higher overall taxes, once again, not always, but yes, they are soft factors, unless it is exceptionally high hoa, like a downtown highrise. Interest rate is a factor but it’s another soft one. It lends itself more to the “renter will become an owner at rent nuetral” price floor, not so much with investors who are often not borrowing money, and they compare it to the possible earnings in other investments, another wash really, cause if interest rates are lower, so are the yields. These are all factors to consider but none should be considered a fundamental, don’t confuse a factor with a fundamental. You wouldn’t ignore a 90x just because of a $200 hoa that amounts to 10x, you still total 100x, another property might be 150x with no hoa, going for the non hoa property costs you net 50x, that’s where you have to look at the totality of the situation, that’s where savvy comes in.

I can’t believe that eastlake isn’t below 150x, at least for the smaller houses and condos, many posters have been buying in less hard hit areas and mentioning it being rent nuetral. I found an 65x potential investment the other day, of course I didn’t post it cause I’m greedy that way, but 100x is so commonplace it doesn’t get my blood flowing anymore. I’ll admit that the 65x place was just a list price, which means very little these days as other investors will spot the value and bid it up a little. The thing with the investor pricing floor is they don’t care if it is a nice neighborhood or has good schools, that’s already priced into the rent, in the case of condo purchasing, you need to look at the rent even harder than with sfr, as places get larger and more expensive, they become less attractive as rentals so it becomes less of an issue as you move up the scale, the investor pricing floor kinda drops off. 3000+ sq fters are less likely to be rentals and less likely to pencil out, but the op was asking about a beach condo, very often they are rentals, so that’s the measuring stick I’d start with, plus part of the plan was to eventually convert it to a rental, might as well evaluate like a landlord now if it is part of the plan.

The op also didn’t mention it’s relationship to peak value or it’s price chronologically compared with other years, especially 2001, 2002 and 2003. We are all in different camps on what price year to shoot for, but 90% of us feel one of those three years should be targeted to compare it to pre bubble pricing.

[temeculaguy]

well, that’s why there’s a 50x spread in the number, the variables you mentioned move the number a little, but not in a pure sense. Hoa fees can be offset, because they sometimes include things you would otherwise pay for in an sfr(structure fire insurance, exterior water, gardener, etc) sometimes the higher hoa fees cover more things, but not always. In many cases m/r is deductable and may be in lieu of higher overall taxes, once again, not always, but yes, they are soft factors, unless it is exceptionally high hoa, like a downtown highrise. Interest rate is a factor but it’s another soft one. It lends itself more to the “renter will become an owner at rent nuetral” price floor, not so much with investors who are often not borrowing money, and they compare it to the possible earnings in other investments, another wash really, cause if interest rates are lower, so are the yields. These are all factors to consider but none should be considered a fundamental, don’t confuse a factor with a fundamental. You wouldn’t ignore a 90x just because of a $200 hoa that amounts to 10x, you still total 100x, another property might be 150x with no hoa, going for the non hoa property costs you net 50x, that’s where you have to look at the totality of the situation, that’s where savvy comes in.

I can’t believe that eastlake isn’t below 150x, at least for the smaller houses and condos, many posters have been buying in less hard hit areas and mentioning it being rent nuetral. I found an 65x potential investment the other day, of course I didn’t post it cause I’m greedy that way, but 100x is so commonplace it doesn’t get my blood flowing anymore. I’ll admit that the 65x place was just a list price, which means very little these days as other investors will spot the value and bid it up a little. The thing with the investor pricing floor is they don’t care if it is a nice neighborhood or has good schools, that’s already priced into the rent, in the case of condo purchasing, you need to look at the rent even harder than with sfr, as places get larger and more expensive, they become less attractive as rentals so it becomes less of an issue as you move up the scale, the investor pricing floor kinda drops off. 3000+ sq fters are less likely to be rentals and less likely to pencil out, but the op was asking about a beach condo, very often they are rentals, so that’s the measuring stick I’d start with, plus part of the plan was to eventually convert it to a rental, might as well evaluate like a landlord now if it is part of the plan.

The op also didn’t mention it’s relationship to peak value or it’s price chronologically compared with other years, especially 2001, 2002 and 2003. We are all in different camps on what price year to shoot for, but 90% of us feel one of those three years should be targeted to compare it to pre bubble pricing.

[temeculaguy]

well, that’s why there’s a 50x spread in the number, the variables you mentioned move the number a little, but not in a pure sense. Hoa fees can be offset, because they sometimes include things you would otherwise pay for in an sfr(structure fire insurance, exterior water, gardener, etc) sometimes the higher hoa fees cover more things, but not always. In many cases m/r is deductable and may be in lieu of higher overall taxes, once again, not always, but yes, they are soft factors, unless it is exceptionally high hoa, like a downtown highrise. Interest rate is a factor but it’s another soft one. It lends itself more to the “renter will become an owner at rent nuetral” price floor, not so much with investors who are often not borrowing money, and they compare it to the possible earnings in other investments, another wash really, cause if interest rates are lower, so are the yields. These are all factors to consider but none should be considered a fundamental, don’t confuse a factor with a fundamental. You wouldn’t ignore a 90x just because of a $200 hoa that amounts to 10x, you still total 100x, another property might be 150x with no hoa, going for the non hoa property costs you net 50x, that’s where you have to look at the totality of the situation, that’s where savvy comes in.

I can’t believe that eastlake isn’t below 150x, at least for the smaller houses and condos, many posters have been buying in less hard hit areas and mentioning it being rent nuetral. I found an 65x potential investment the other day, of course I didn’t post it cause I’m greedy that way, but 100x is so commonplace it doesn’t get my blood flowing anymore. I’ll admit that the 65x place was just a list price, which means very little these days as other investors will spot the value and bid it up a little. The thing with the investor pricing floor is they don’t care if it is a nice neighborhood or has good schools, that’s already priced into the rent, in the case of condo purchasing, you need to look at the rent even harder than with sfr, as places get larger and more expensive, they become less attractive as rentals so it becomes less of an issue as you move up the scale, the investor pricing floor kinda drops off. 3000+ sq fters are less likely to be rentals and less likely to pencil out, but the op was asking about a beach condo, very often they are rentals, so that’s the measuring stick I’d start with, plus part of the plan was to eventually convert it to a rental, might as well evaluate like a landlord now if it is part of the plan.

The op also didn’t mention it’s relationship to peak value or it’s price chronologically compared with other years, especially 2001, 2002 and 2003. We are all in different camps on what price year to shoot for, but 90% of us feel one of those three years should be targeted to compare it to pre bubble pricing.

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