advice re potenial beach condo purchase

[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.

[an]

Are you saying big time investors don’t leverage? I would think they’d leverage just as much as small time investors, since they can buy even more properties. Do I have a wrong assumption here? Here’s one example of a SFR in MM. In 1996 (around the bottom of the last down turn), I know someone who bought a 3/2 1500 sq-ft house in MM for $165k. Rent for such place was around $1200/month. That’s ~135x rent multiple. Mortgage was ~$970/month w/ 8% interest rate & 20% down. That means this person is paying 19% less than rent. Fast forward to earlier this year. Such place was going for around $325k and rent was around $1700/month. That’s 190x rent multiple. However, their mortgage would be ~$1350/month w/ 4.75% & 20% down. That mean this person is paying ~20% less than rent. So, if one is to leverage to to get a rental property, rates play a huge deal. 135x rent multiple @ 8% is equivalent to 190x rent multiple when rate is around 4.75%. I totally agree with you that if you go in all cash, it’s a whole different ball game. One other factor I haven’t consider in these equation is the interest rate of a liquid account. In a high interest rate/low price environment, you would also have a very high interest rate for a liquid account too.

[an]

Are you saying big time investors don’t leverage? I would think they’d leverage just as much as small time investors, since they can buy even more properties. Do I have a wrong assumption here? Here’s one example of a SFR in MM. In 1996 (around the bottom of the last down turn), I know someone who bought a 3/2 1500 sq-ft house in MM for $165k. Rent for such place was around $1200/month. That’s ~135x rent multiple. Mortgage was ~$970/month w/ 8% interest rate & 20% down. That means this person is paying 19% less than rent. Fast forward to earlier this year. Such place was going for around $325k and rent was around $1700/month. That’s 190x rent multiple. However, their mortgage would be ~$1350/month w/ 4.75% & 20% down. That mean this person is paying ~20% less than rent. So, if one is to leverage to to get a rental property, rates play a huge deal. 135x rent multiple @ 8% is equivalent to 190x rent multiple when rate is around 4.75%. I totally agree with you that if you go in all cash, it’s a whole different ball game. One other factor I haven’t consider in these equation is the interest rate of a liquid account. In a high interest rate/low price environment, you would also have a very high interest rate for a liquid account too.

[an]

Are you saying big time investors don’t leverage? I would think they’d leverage just as much as small time investors, since they can buy even more properties. Do I have a wrong assumption here? Here’s one example of a SFR in MM. In 1996 (around the bottom of the last down turn), I know someone who bought a 3/2 1500 sq-ft house in MM for $165k. Rent for such place was around $1200/month. That’s ~135x rent multiple. Mortgage was ~$970/month w/ 8% interest rate & 20% down. That means this person is paying 19% less than rent. Fast forward to earlier this year. Such place was going for around $325k and rent was around $1700/month. That’s 190x rent multiple. However, their mortgage would be ~$1350/month w/ 4.75% & 20% down. That mean this person is paying ~20% less than rent. So, if one is to leverage to to get a rental property, rates play a huge deal. 135x rent multiple @ 8% is equivalent to 190x rent multiple when rate is around 4.75%. I totally agree with you that if you go in all cash, it’s a whole different ball game. One other factor I haven’t consider in these equation is the interest rate of a liquid account. In a high interest rate/low price environment, you would also have a very high interest rate for a liquid account too.

[an]

Are you saying big time investors don’t leverage? I would think they’d leverage just as much as small time investors, since they can buy even more properties. Do I have a wrong assumption here? Here’s one example of a SFR in MM. In 1996 (around the bottom of the last down turn), I know someone who bought a 3/2 1500 sq-ft house in MM for $165k. Rent for such place was around $1200/month. That’s ~135x rent multiple. Mortgage was ~$970/month w/ 8% interest rate & 20% down. That means this person is paying 19% less than rent. Fast forward to earlier this year. Such place was going for around $325k and rent was around $1700/month. That’s 190x rent multiple. However, their mortgage would be ~$1350/month w/ 4.75% & 20% down. That mean this person is paying ~20% less than rent. So, if one is to leverage to to get a rental property, rates play a huge deal. 135x rent multiple @ 8% is equivalent to 190x rent multiple when rate is around 4.75%. I totally agree with you that if you go in all cash, it’s a whole different ball game. One other factor I haven’t consider in these equation is the interest rate of a liquid account. In a high interest rate/low price environment, you would also have a very high interest rate for a liquid account too.

[an]

Are you saying big time investors don’t leverage? I would think they’d leverage just as much as small time investors, since they can buy even more properties. Do I have a wrong assumption here? Here’s one example of a SFR in MM. In 1996 (around the bottom of the last down turn), I know someone who bought a 3/2 1500 sq-ft house in MM for $165k. Rent for such place was around $1200/month. That’s ~135x rent multiple. Mortgage was ~$970/month w/ 8% interest rate & 20% down. That means this person is paying 19% less than rent. Fast forward to earlier this year. Such place was going for around $325k and rent was around $1700/month. That’s 190x rent multiple. However, their mortgage would be ~$1350/month w/ 4.75% & 20% down. That mean this person is paying ~20% less than rent. So, if one is to leverage to to get a rental property, rates play a huge deal. 135x rent multiple @ 8% is equivalent to 190x rent multiple when rate is around 4.75%. I totally agree with you that if you go in all cash, it’s a whole different ball game. One other factor I haven’t consider in these equation is the interest rate of a liquid account. In a high interest rate/low price environment, you would also have a very high interest rate for a liquid account too.

[werewolf34]

temeculaguy,

Out of curiousity, how much money do you need (as an investor) to make tracking RE worthwhile?

It seems like you know your stuff but I am trying to get my head around how much dough / how many properties I need to be able to buy before it is worthwhile.

Thanks

[werewolf34]

temeculaguy,

Out of curiousity, how much money do you need (as an investor) to make tracking RE worthwhile?

It seems like you know your stuff but I am trying to get my head around how much dough / how many properties I need to be able to buy before it is worthwhile.

Thanks

[werewolf34]

temeculaguy,

Out of curiousity, how much money do you need (as an investor) to make tracking RE worthwhile?

It seems like you know your stuff but I am trying to get my head around how much dough / how many properties I need to be able to buy before it is worthwhile.

Thanks

[werewolf34]

temeculaguy,

Out of curiousity, how much money do you need (as an investor) to make tracking RE worthwhile?

It seems like you know your stuff but I am trying to get my head around how much dough / how many properties I need to be able to buy before it is worthwhile.

Thanks

[werewolf34]

temeculaguy,

Out of curiousity, how much money do you need (as an investor) to make tracking RE worthwhile?

It seems like you know your stuff but I am trying to get my head around how much dough / how many properties I need to be able to buy before it is worthwhile.

Thanks

[temeculaguy]

Part of it was my narrow definition of the word “investor,” I was thinking of those with money to invest as opposed to those working a strategy and leveraging, you are right, both groups exist. In your example, the 1996 investor wins because they start with 135x and could have refi’d to below 100x, the buyer at 4.75 is kinda stuck at their level. When both sell, 1996 wins again, the profit from the increased equity is more than double. Neither are stupid but an investor today should walk past the 190x opportunity because they can find better rent multipliers elsewhere with the same interest rate. Your example is still a decent investment, but in 2009, as long as you are not investing in S.D., you can find that 1996 scenario.

A few weeks ago I posted on another thread a bunch of 1k rentals for 100k, I just found a 900 rental for 60k. At todays rates, they start out cash flowing far better than the MM example, if you find a 50x example in Florida, you’d buy that before my 65x example. There are a bunch of post bubble busted places seeing intense investor activity, often times money coming from outside the area or state that the property is in. When that MM place hits 225k, investors will scoop them up by the dozens and provide a price floor, but at 325k, just locals will be there, it will still support prices but not in the same furious way that sub 150x will.

I am making this stuff up as I go along, but a few months ago, when my area began to regularly see 100x, buyers poured in, Forbes ran a story and declared Murietta and Temecula as the #1 and #3 hottest markets in the country, I tried to figure out why, and I think that when the rent multiplier gets so low, money shows up. If they ran that story today, it probably moved to whatever area that just hit that rent multiplier, perhaps florida or northern/central cal will be next. As prices fall in S.D., there will come a point that the sideliners will need to buy before the investors show up in large order, that range will vary between 100 and 150x

[temeculaguy]

Part of it was my narrow definition of the word “investor,” I was thinking of those with money to invest as opposed to those working a strategy and leveraging, you are right, both groups exist. In your example, the 1996 investor wins because they start with 135x and could have refi’d to below 100x, the buyer at 4.75 is kinda stuck at their level. When both sell, 1996 wins again, the profit from the increased equity is more than double. Neither are stupid but an investor today should walk past the 190x opportunity because they can find better rent multipliers elsewhere with the same interest rate. Your example is still a decent investment, but in 2009, as long as you are not investing in S.D., you can find that 1996 scenario.

A few weeks ago I posted on another thread a bunch of 1k rentals for 100k, I just found a 900 rental for 60k. At todays rates, they start out cash flowing far better than the MM example, if you find a 50x example in Florida, you’d buy that before my 65x example. There are a bunch of post bubble busted places seeing intense investor activity, often times money coming from outside the area or state that the property is in. When that MM place hits 225k, investors will scoop them up by the dozens and provide a price floor, but at 325k, just locals will be there, it will still support prices but not in the same furious way that sub 150x will.

I am making this stuff up as I go along, but a few months ago, when my area began to regularly see 100x, buyers poured in, Forbes ran a story and declared Murietta and Temecula as the #1 and #3 hottest markets in the country, I tried to figure out why, and I think that when the rent multiplier gets so low, money shows up. If they ran that story today, it probably moved to whatever area that just hit that rent multiplier, perhaps florida or northern/central cal will be next. As prices fall in S.D., there will come a point that the sideliners will need to buy before the investors show up in large order, that range will vary between 100 and 150x

[temeculaguy]

Part of it was my narrow definition of the word “investor,” I was thinking of those with money to invest as opposed to those working a strategy and leveraging, you are right, both groups exist. In your example, the 1996 investor wins because they start with 135x and could have refi’d to below 100x, the buyer at 4.75 is kinda stuck at their level. When both sell, 1996 wins again, the profit from the increased equity is more than double. Neither are stupid but an investor today should walk past the 190x opportunity because they can find better rent multipliers elsewhere with the same interest rate. Your example is still a decent investment, but in 2009, as long as you are not investing in S.D., you can find that 1996 scenario.

A few weeks ago I posted on another thread a bunch of 1k rentals for 100k, I just found a 900 rental for 60k. At todays rates, they start out cash flowing far better than the MM example, if you find a 50x example in Florida, you’d buy that before my 65x example. There are a bunch of post bubble busted places seeing intense investor activity, often times money coming from outside the area or state that the property is in. When that MM place hits 225k, investors will scoop them up by the dozens and provide a price floor, but at 325k, just locals will be there, it will still support prices but not in the same furious way that sub 150x will.

I am making this stuff up as I go along, but a few months ago, when my area began to regularly see 100x, buyers poured in, Forbes ran a story and declared Murietta and Temecula as the #1 and #3 hottest markets in the country, I tried to figure out why, and I think that when the rent multiplier gets so low, money shows up. If they ran that story today, it probably moved to whatever area that just hit that rent multiplier, perhaps florida or northern/central cal will be next. As prices fall in S.D., there will come a point that the sideliners will need to buy before the investors show up in large order, that range will vary between 100 and 150x

[temeculaguy]

Part of it was my narrow definition of the word “investor,” I was thinking of those with money to invest as opposed to those working a strategy and leveraging, you are right, both groups exist. In your example, the 1996 investor wins because they start with 135x and could have refi’d to below 100x, the buyer at 4.75 is kinda stuck at their level. When both sell, 1996 wins again, the profit from the increased equity is more than double. Neither are stupid but an investor today should walk past the 190x opportunity because they can find better rent multipliers elsewhere with the same interest rate. Your example is still a decent investment, but in 2009, as long as you are not investing in S.D., you can find that 1996 scenario.

A few weeks ago I posted on another thread a bunch of 1k rentals for 100k, I just found a 900 rental for 60k. At todays rates, they start out cash flowing far better than the MM example, if you find a 50x example in Florida, you’d buy that before my 65x example. There are a bunch of post bubble busted places seeing intense investor activity, often times money coming from outside the area or state that the property is in. When that MM place hits 225k, investors will scoop them up by the dozens and provide a price floor, but at 325k, just locals will be there, it will still support prices but not in the same furious way that sub 150x will.

I am making this stuff up as I go along, but a few months ago, when my area began to regularly see 100x, buyers poured in, Forbes ran a story and declared Murietta and Temecula as the #1 and #3 hottest markets in the country, I tried to figure out why, and I think that when the rent multiplier gets so low, money shows up. If they ran that story today, it probably moved to whatever area that just hit that rent multiplier, perhaps florida or northern/central cal will be next. As prices fall in S.D., there will come a point that the sideliners will need to buy before the investors show up in large order, that range will vary between 100 and 150x

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