Fundamentals in Fashion Valley

[citydweller]

6780 Friars Rd (zip code 92108) currently has a 1 bedroom unit listed on the MLS at $169,900. At the peak for this complex in October 2004, a 1 bedroom unit at this complex sold for $300K, so this current listing represents a 43% decline.
Based on fundamentals, if someone bought this unit with 20% down ($34,000) their monthly payments would be $810 PI, $170 property tax, $290 HOA for a total of $1270 per month. Figure that the opportunity cost of the downpayment would offset the tax deduction, and that they could rent this unit for approx. $1100, doesn’t it almost make sense for someone who is looking for a place to live without having to worry about rent increases, to buy at this price?

[temeculaguy]

Those are fairly good numbers. 1 br units are the least marketable and easiest to outgrow, what does a comparable 2br go for? The rent multiplier top price is 165k (1100×150) and the low number is 137.5k (1100×125), so I would say that the price is getting close to the fundamental range. Is that unit the worst one in the worst condition? When the units are selling between 137.5 and 165, it is a sound investment provided that rent is an accurate one, not just what one is advertised for but what the average rent would be and a price that would make it last no more than two weeks when advertised. If there are units advertised for 900 that get snapped up and an 1100 that sits there, you need to re-evaluate the rent number used.

All in all, the numbers sound good without knowing the specifics or the complex I’d say it’s close. Factor in the overcorrection that the media is fueling and I’d guess that the 125x multiplier may also be a reality.

The last part of your question is the hardest to answer. There will not be any appreciation for the next two years and doubtful there would be any rent increases either. It is not common for someone to find a 1br acceptable long term housing, so that person that you think would buy for th long haul rarely buys a 1br. They buy one to benefit from appreciation while living in a transitional property for them, they may become a landlord when their lifestyle changes or they may sell for a profit. Right now, people are looking at this kind of property as a noose or an anchor rather than a springboard, so it will overcorrect more than sfr’s, it always does.

[temeculaguy]

Those are fairly good numbers. 1 br units are the least marketable and easiest to outgrow, what does a comparable 2br go for? The rent multiplier top price is 165k (1100×150) and the low number is 137.5k (1100×125), so I would say that the price is getting close to the fundamental range. Is that unit the worst one in the worst condition? When the units are selling between 137.5 and 165, it is a sound investment provided that rent is an accurate one, not just what one is advertised for but what the average rent would be and a price that would make it last no more than two weeks when advertised. If there are units advertised for 900 that get snapped up and an 1100 that sits there, you need to re-evaluate the rent number used.

All in all, the numbers sound good without knowing the specifics or the complex I’d say it’s close. Factor in the overcorrection that the media is fueling and I’d guess that the 125x multiplier may also be a reality.

The last part of your question is the hardest to answer. There will not be any appreciation for the next two years and doubtful there would be any rent increases either. It is not common for someone to find a 1br acceptable long term housing, so that person that you think would buy for th long haul rarely buys a 1br. They buy one to benefit from appreciation while living in a transitional property for them, they may become a landlord when their lifestyle changes or they may sell for a profit. Right now, people are looking at this kind of property as a noose or an anchor rather than a springboard, so it will overcorrect more than sfr’s, it always does.

[temeculaguy]

Those are fairly good numbers. 1 br units are the least marketable and easiest to outgrow, what does a comparable 2br go for? The rent multiplier top price is 165k (1100×150) and the low number is 137.5k (1100×125), so I would say that the price is getting close to the fundamental range. Is that unit the worst one in the worst condition? When the units are selling between 137.5 and 165, it is a sound investment provided that rent is an accurate one, not just what one is advertised for but what the average rent would be and a price that would make it last no more than two weeks when advertised. If there are units advertised for 900 that get snapped up and an 1100 that sits there, you need to re-evaluate the rent number used.

All in all, the numbers sound good without knowing the specifics or the complex I’d say it’s close. Factor in the overcorrection that the media is fueling and I’d guess that the 125x multiplier may also be a reality.

The last part of your question is the hardest to answer. There will not be any appreciation for the next two years and doubtful there would be any rent increases either. It is not common for someone to find a 1br acceptable long term housing, so that person that you think would buy for th long haul rarely buys a 1br. They buy one to benefit from appreciation while living in a transitional property for them, they may become a landlord when their lifestyle changes or they may sell for a profit. Right now, people are looking at this kind of property as a noose or an anchor rather than a springboard, so it will overcorrect more than sfr’s, it always does.

[temeculaguy]

Those are fairly good numbers. 1 br units are the least marketable and easiest to outgrow, what does a comparable 2br go for? The rent multiplier top price is 165k (1100×150) and the low number is 137.5k (1100×125), so I would say that the price is getting close to the fundamental range. Is that unit the worst one in the worst condition? When the units are selling between 137.5 and 165, it is a sound investment provided that rent is an accurate one, not just what one is advertised for but what the average rent would be and a price that would make it last no more than two weeks when advertised. If there are units advertised for 900 that get snapped up and an 1100 that sits there, you need to re-evaluate the rent number used.

All in all, the numbers sound good without knowing the specifics or the complex I’d say it’s close. Factor in the overcorrection that the media is fueling and I’d guess that the 125x multiplier may also be a reality.

The last part of your question is the hardest to answer. There will not be any appreciation for the next two years and doubtful there would be any rent increases either. It is not common for someone to find a 1br acceptable long term housing, so that person that you think would buy for th long haul rarely buys a 1br. They buy one to benefit from appreciation while living in a transitional property for them, they may become a landlord when their lifestyle changes or they may sell for a profit. Right now, people are looking at this kind of property as a noose or an anchor rather than a springboard, so it will overcorrect more than sfr’s, it always does.

[temeculaguy]

Those are fairly good numbers. 1 br units are the least marketable and easiest to outgrow, what does a comparable 2br go for? The rent multiplier top price is 165k (1100×150) and the low number is 137.5k (1100×125), so I would say that the price is getting close to the fundamental range. Is that unit the worst one in the worst condition? When the units are selling between 137.5 and 165, it is a sound investment provided that rent is an accurate one, not just what one is advertised for but what the average rent would be and a price that would make it last no more than two weeks when advertised. If there are units advertised for 900 that get snapped up and an 1100 that sits there, you need to re-evaluate the rent number used.

All in all, the numbers sound good without knowing the specifics or the complex I’d say it’s close. Factor in the overcorrection that the media is fueling and I’d guess that the 125x multiplier may also be a reality.

The last part of your question is the hardest to answer. There will not be any appreciation for the next two years and doubtful there would be any rent increases either. It is not common for someone to find a 1br acceptable long term housing, so that person that you think would buy for th long haul rarely buys a 1br. They buy one to benefit from appreciation while living in a transitional property for them, they may become a landlord when their lifestyle changes or they may sell for a profit. Right now, people are looking at this kind of property as a noose or an anchor rather than a springboard, so it will overcorrect more than sfr’s, it always does.

[citydweller]

The most recent sale of a 2 bedroom at this complex was in December 2007 for $257,800. At the peak, in June 2004 a 2 bedroom unit sold for $365,000. There are currently no 2 bedrooms listed at this complex.
I was fortunate to purchase a 1 bedroom unit at this complex in 1998, before prices went crazy. I am an older, single, professional female and bought the unit as part of my “retirement plan”, locking in my housing costs at a reasonable, affordable amount.
Based on the current listing price vs rent, I could see that someone who is in the position I was in 10 years ago seeing this as a reasonable price.
Having been a faithful reader of this site for several months I am also fairly certain that $169K will not be the bottom price for this complex, but I can imagine someone who is not a faithful Piggington thinking that this would be a good price to jump in at.

[citydweller]

The most recent sale of a 2 bedroom at this complex was in December 2007 for $257,800. At the peak, in June 2004 a 2 bedroom unit sold for $365,000. There are currently no 2 bedrooms listed at this complex.
I was fortunate to purchase a 1 bedroom unit at this complex in 1998, before prices went crazy. I am an older, single, professional female and bought the unit as part of my “retirement plan”, locking in my housing costs at a reasonable, affordable amount.
Based on the current listing price vs rent, I could see that someone who is in the position I was in 10 years ago seeing this as a reasonable price.
Having been a faithful reader of this site for several months I am also fairly certain that $169K will not be the bottom price for this complex, but I can imagine someone who is not a faithful Piggington thinking that this would be a good price to jump in at.

[citydweller]

The most recent sale of a 2 bedroom at this complex was in December 2007 for $257,800. At the peak, in June 2004 a 2 bedroom unit sold for $365,000. There are currently no 2 bedrooms listed at this complex.
I was fortunate to purchase a 1 bedroom unit at this complex in 1998, before prices went crazy. I am an older, single, professional female and bought the unit as part of my “retirement plan”, locking in my housing costs at a reasonable, affordable amount.
Based on the current listing price vs rent, I could see that someone who is in the position I was in 10 years ago seeing this as a reasonable price.
Having been a faithful reader of this site for several months I am also fairly certain that $169K will not be the bottom price for this complex, but I can imagine someone who is not a faithful Piggington thinking that this would be a good price to jump in at.

[citydweller]

The most recent sale of a 2 bedroom at this complex was in December 2007 for $257,800. At the peak, in June 2004 a 2 bedroom unit sold for $365,000. There are currently no 2 bedrooms listed at this complex.
I was fortunate to purchase a 1 bedroom unit at this complex in 1998, before prices went crazy. I am an older, single, professional female and bought the unit as part of my “retirement plan”, locking in my housing costs at a reasonable, affordable amount.
Based on the current listing price vs rent, I could see that someone who is in the position I was in 10 years ago seeing this as a reasonable price.
Having been a faithful reader of this site for several months I am also fairly certain that $169K will not be the bottom price for this complex, but I can imagine someone who is not a faithful Piggington thinking that this would be a good price to jump in at.

[citydweller]

The most recent sale of a 2 bedroom at this complex was in December 2007 for $257,800. At the peak, in June 2004 a 2 bedroom unit sold for $365,000. There are currently no 2 bedrooms listed at this complex.
I was fortunate to purchase a 1 bedroom unit at this complex in 1998, before prices went crazy. I am an older, single, professional female and bought the unit as part of my “retirement plan”, locking in my housing costs at a reasonable, affordable amount.
Based on the current listing price vs rent, I could see that someone who is in the position I was in 10 years ago seeing this as a reasonable price.
Having been a faithful reader of this site for several months I am also fairly certain that $169K will not be the bottom price for this complex, but I can imagine someone who is not a faithful Piggington thinking that this would be a good price to jump in at.

[temeculaguy]

All of your assumptions are reasonable and as a 1998 buyer you are safe provided you avoided taking too much equity out. There will always be buyers for different reasons at different prices, even at 300k some units found buyers who thought that was reasonable. Your question was about the fundamentals so I laid them out using the rent multiplier and I think Fasion Valley is a safe play for a rental within the multiplier range. The mystery is how low will it go in the near term, what will the overcorrection be like? Are there investors chomping at the bit to buy rentals or is the shine off R/E for the fair weather fans? I can’t answer that but I can tell you that when nice units in centrally located above average areas start coming into the multiplier range, I give it a second look and I’m not alone. When they hit 100x rent I’ll probably buy more than I need, thinking it won’t stay that low for long and cash nuetral rentals from day one are a rare treat, not one to ignore. Now if you are trying to apply logic to the market to determine the floor price, i advise against it, there was no logic in the peak price so it is unlikely to be logic in the trough. If during the next 24 months the price falls below what you paid in 1998 or below let’s say 125k, buy a second one and become a landlord.

[temeculaguy]

All of your assumptions are reasonable and as a 1998 buyer you are safe provided you avoided taking too much equity out. There will always be buyers for different reasons at different prices, even at 300k some units found buyers who thought that was reasonable. Your question was about the fundamentals so I laid them out using the rent multiplier and I think Fasion Valley is a safe play for a rental within the multiplier range. The mystery is how low will it go in the near term, what will the overcorrection be like? Are there investors chomping at the bit to buy rentals or is the shine off R/E for the fair weather fans? I can’t answer that but I can tell you that when nice units in centrally located above average areas start coming into the multiplier range, I give it a second look and I’m not alone. When they hit 100x rent I’ll probably buy more than I need, thinking it won’t stay that low for long and cash nuetral rentals from day one are a rare treat, not one to ignore. Now if you are trying to apply logic to the market to determine the floor price, i advise against it, there was no logic in the peak price so it is unlikely to be logic in the trough. If during the next 24 months the price falls below what you paid in 1998 or below let’s say 125k, buy a second one and become a landlord.

[temeculaguy]

All of your assumptions are reasonable and as a 1998 buyer you are safe provided you avoided taking too much equity out. There will always be buyers for different reasons at different prices, even at 300k some units found buyers who thought that was reasonable. Your question was about the fundamentals so I laid them out using the rent multiplier and I think Fasion Valley is a safe play for a rental within the multiplier range. The mystery is how low will it go in the near term, what will the overcorrection be like? Are there investors chomping at the bit to buy rentals or is the shine off R/E for the fair weather fans? I can’t answer that but I can tell you that when nice units in centrally located above average areas start coming into the multiplier range, I give it a second look and I’m not alone. When they hit 100x rent I’ll probably buy more than I need, thinking it won’t stay that low for long and cash nuetral rentals from day one are a rare treat, not one to ignore. Now if you are trying to apply logic to the market to determine the floor price, i advise against it, there was no logic in the peak price so it is unlikely to be logic in the trough. If during the next 24 months the price falls below what you paid in 1998 or below let’s say 125k, buy a second one and become a landlord.

[temeculaguy]

All of your assumptions are reasonable and as a 1998 buyer you are safe provided you avoided taking too much equity out. There will always be buyers for different reasons at different prices, even at 300k some units found buyers who thought that was reasonable. Your question was about the fundamentals so I laid them out using the rent multiplier and I think Fasion Valley is a safe play for a rental within the multiplier range. The mystery is how low will it go in the near term, what will the overcorrection be like? Are there investors chomping at the bit to buy rentals or is the shine off R/E for the fair weather fans? I can’t answer that but I can tell you that when nice units in centrally located above average areas start coming into the multiplier range, I give it a second look and I’m not alone. When they hit 100x rent I’ll probably buy more than I need, thinking it won’t stay that low for long and cash nuetral rentals from day one are a rare treat, not one to ignore. Now if you are trying to apply logic to the market to determine the floor price, i advise against it, there was no logic in the peak price so it is unlikely to be logic in the trough. If during the next 24 months the price falls below what you paid in 1998 or below let’s say 125k, buy a second one and become a landlord.

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