Mira Mesa prices

[Bugs]

If mortgage interest rates increase over the next couple years I could see the smaller/older 3/2 MM homes dropping into the mid-$200s. I wouldn’t think they’d get down to $225k though.

Mira Mesa has a very central location for a lot of workers. The home prices there really should be higher than for some of the North County communities. I’d say the same thing for the South Bay communities – they’re a lot closer to decent employment.

I think there’s some room for rents to drop, too. The extra money people are spending on gas and groceries has to come from somewhere, and looking for the cheaper rental is the easiest way to do that. There’s also the employment situation. All those refugees from the RE-related businesses will replace their jobs with lower paying jobs, thus reducing the amount they have for rents.

It’s just going to take some time. Rents down by 10% + mortgage interest rates up by 2.5% or 3% and a $250k MM 3/2 is a possibility.

[EconProf]

Purchasing in Mira Mesa vs. Rancho Penasquitos should depend heavily on expected appreciation. On that score, MM ranks low for a number of reasons. The houses are old and need a lot of updating. The streets are crowded and full of parked cars and big trucks. The one and only poorly designed main drag, Mira Mesa Bl. is jam-packed and destined to get worse. Add now the possibility of mini-dorms as discussed here, and you have a neighborhood in decline.
Pay more for a RP neighborhood and you get a decent future. Hwy. 56 changed everything. Though it can get busy in a rush hour, it is generally 65 MPH. It is physically designed to take a third lane in each direction, so that will eventually happen, as is happening to 52.

[EconProf]

Purchasing in Mira Mesa vs. Rancho Penasquitos should depend heavily on expected appreciation. On that score, MM ranks low for a number of reasons. The houses are old and need a lot of updating. The streets are crowded and full of parked cars and big trucks. The one and only poorly designed main drag, Mira Mesa Bl. is jam-packed and destined to get worse. Add now the possibility of mini-dorms as discussed here, and you have a neighborhood in decline.
Pay more for a RP neighborhood and you get a decent future. Hwy. 56 changed everything. Though it can get busy in a rush hour, it is generally 65 MPH. It is physically designed to take a third lane in each direction, so that will eventually happen, as is happening to 52.

[EconProf]

Purchasing in Mira Mesa vs. Rancho Penasquitos should depend heavily on expected appreciation. On that score, MM ranks low for a number of reasons. The houses are old and need a lot of updating. The streets are crowded and full of parked cars and big trucks. The one and only poorly designed main drag, Mira Mesa Bl. is jam-packed and destined to get worse. Add now the possibility of mini-dorms as discussed here, and you have a neighborhood in decline.
Pay more for a RP neighborhood and you get a decent future. Hwy. 56 changed everything. Though it can get busy in a rush hour, it is generally 65 MPH. It is physically designed to take a third lane in each direction, so that will eventually happen, as is happening to 52.

[EconProf]

Purchasing in Mira Mesa vs. Rancho Penasquitos should depend heavily on expected appreciation. On that score, MM ranks low for a number of reasons. The houses are old and need a lot of updating. The streets are crowded and full of parked cars and big trucks. The one and only poorly designed main drag, Mira Mesa Bl. is jam-packed and destined to get worse. Add now the possibility of mini-dorms as discussed here, and you have a neighborhood in decline.
Pay more for a RP neighborhood and you get a decent future. Hwy. 56 changed everything. Though it can get busy in a rush hour, it is generally 65 MPH. It is physically designed to take a third lane in each direction, so that will eventually happen, as is happening to 52.

[EconProf]

Purchasing in Mira Mesa vs. Rancho Penasquitos should depend heavily on expected appreciation. On that score, MM ranks low for a number of reasons. The houses are old and need a lot of updating. The streets are crowded and full of parked cars and big trucks. The one and only poorly designed main drag, Mira Mesa Bl. is jam-packed and destined to get worse. Add now the possibility of mini-dorms as discussed here, and you have a neighborhood in decline.
Pay more for a RP neighborhood and you get a decent future. Hwy. 56 changed everything. Though it can get busy in a rush hour, it is generally 65 MPH. It is physically designed to take a third lane in each direction, so that will eventually happen, as is happening to 52.

[Fearful]

EconProf wrote You guys are way underestimating the true costs of being a landlord, and are thus overestimating potential profits.

Aren’t there standard metrics that professional real estate investors use? Don’t they typically look for cap rates in the 8-10% range? Merely covering the costs, as many of these posters have alluded to, is nowhere near sufficient; investors need to earn a profit as well to compensate them for the cash flow risk and the asset price risk. Given the risks involved, and the illiquidity of the investment, I would demand at least 20% profit.

The current crop of investors buying rental houses are “dumb” investors; they are assuming that eventually the asset prices will appreciate enough to overcome any rental losses. The owner of the house I am renting, for example, is losing money at a steady rate (8% to the realtor managing the property!); I wonder whether they have thought through the finances. I doubt it.

It will take a long time to purge the system. People still have faith that San Diego house prices go up.

[Fearful]

EconProf wrote You guys are way underestimating the true costs of being a landlord, and are thus overestimating potential profits.

Aren’t there standard metrics that professional real estate investors use? Don’t they typically look for cap rates in the 8-10% range? Merely covering the costs, as many of these posters have alluded to, is nowhere near sufficient; investors need to earn a profit as well to compensate them for the cash flow risk and the asset price risk. Given the risks involved, and the illiquidity of the investment, I would demand at least 20% profit.

The current crop of investors buying rental houses are “dumb” investors; they are assuming that eventually the asset prices will appreciate enough to overcome any rental losses. The owner of the house I am renting, for example, is losing money at a steady rate (8% to the realtor managing the property!); I wonder whether they have thought through the finances. I doubt it.

It will take a long time to purge the system. People still have faith that San Diego house prices go up.

[Fearful]

EconProf wrote You guys are way underestimating the true costs of being a landlord, and are thus overestimating potential profits.

Aren’t there standard metrics that professional real estate investors use? Don’t they typically look for cap rates in the 8-10% range? Merely covering the costs, as many of these posters have alluded to, is nowhere near sufficient; investors need to earn a profit as well to compensate them for the cash flow risk and the asset price risk. Given the risks involved, and the illiquidity of the investment, I would demand at least 20% profit.

The current crop of investors buying rental houses are “dumb” investors; they are assuming that eventually the asset prices will appreciate enough to overcome any rental losses. The owner of the house I am renting, for example, is losing money at a steady rate (8% to the realtor managing the property!); I wonder whether they have thought through the finances. I doubt it.

It will take a long time to purge the system. People still have faith that San Diego house prices go up.

[Fearful]

EconProf wrote You guys are way underestimating the true costs of being a landlord, and are thus overestimating potential profits.

Aren’t there standard metrics that professional real estate investors use? Don’t they typically look for cap rates in the 8-10% range? Merely covering the costs, as many of these posters have alluded to, is nowhere near sufficient; investors need to earn a profit as well to compensate them for the cash flow risk and the asset price risk. Given the risks involved, and the illiquidity of the investment, I would demand at least 20% profit.

The current crop of investors buying rental houses are “dumb” investors; they are assuming that eventually the asset prices will appreciate enough to overcome any rental losses. The owner of the house I am renting, for example, is losing money at a steady rate (8% to the realtor managing the property!); I wonder whether they have thought through the finances. I doubt it.

It will take a long time to purge the system. People still have faith that San Diego house prices go up.

[Fearful]

EconProf wrote You guys are way underestimating the true costs of being a landlord, and are thus overestimating potential profits.

Aren’t there standard metrics that professional real estate investors use? Don’t they typically look for cap rates in the 8-10% range? Merely covering the costs, as many of these posters have alluded to, is nowhere near sufficient; investors need to earn a profit as well to compensate them for the cash flow risk and the asset price risk. Given the risks involved, and the illiquidity of the investment, I would demand at least 20% profit.

The current crop of investors buying rental houses are “dumb” investors; they are assuming that eventually the asset prices will appreciate enough to overcome any rental losses. The owner of the house I am renting, for example, is losing money at a steady rate (8% to the realtor managing the property!); I wonder whether they have thought through the finances. I doubt it.

It will take a long time to purge the system. People still have faith that San Diego house prices go up.

[(former)FormerSanDiegan]

[quote=noone][quote=asianautica]$225k at 6% interest rate will cost ~$1350/month with 0% down. Those houses can easily rent for $1700-1900/month depending on condition. PITI – Tax deduction will bring you to about $1200/month. If you put down 20%, you’re looking @ PI of ~$1100/month and PITI – tax deduction of about $1000/month. That seems too good to be true for a 3bed/2bath house when 2 bed/2 bath apartment rents for around $1400-1500/month. If rates goes to 8-9%, then I can see that happening, but not at today’s rate.
[/quote]

I think your math is a bit off. I think you are forgetting that you have to pay the property taxes first. Then the deduction lowers the annual income that you have to pay taxes on. It’s not a tax credit.

You are correct that $225k at 6% with 0% down P&I will be about $1,350 (can you even get 6% with 0% down these days?). Adding taxes an insurance gets you up to about $1,600 a month. If you’re paying 1% in property taxes on $225k that’s $2,250 a year. Assuming the 30% tax bracket, you will be reducing your taxes by about $675 a year or $56 a month. So even including the tax deduction you’re monthly cost is over $1,500 not $1,200. For an older & smaller 3/2 in Mira Mesa that is probably the going rent.[/quote]

Noone – Are you suggesting that the total tax benefit is only $56 per month ? Or did I misinterpret your statement. The $675 would be the tax benefit in a 30% bracket for the property taxes alone. Interest is also tax deductible and constitutes a much larger amount (13,500 in the first year).

[(former)FormerSanDiegan]

[quote=noone][quote=asianautica]$225k at 6% interest rate will cost ~$1350/month with 0% down. Those houses can easily rent for $1700-1900/month depending on condition. PITI – Tax deduction will bring you to about $1200/month. If you put down 20%, you’re looking @ PI of ~$1100/month and PITI – tax deduction of about $1000/month. That seems too good to be true for a 3bed/2bath house when 2 bed/2 bath apartment rents for around $1400-1500/month. If rates goes to 8-9%, then I can see that happening, but not at today’s rate.
[/quote]

I think your math is a bit off. I think you are forgetting that you have to pay the property taxes first. Then the deduction lowers the annual income that you have to pay taxes on. It’s not a tax credit.

You are correct that $225k at 6% with 0% down P&I will be about $1,350 (can you even get 6% with 0% down these days?). Adding taxes an insurance gets you up to about $1,600 a month. If you’re paying 1% in property taxes on $225k that’s $2,250 a year. Assuming the 30% tax bracket, you will be reducing your taxes by about $675 a year or $56 a month. So even including the tax deduction you’re monthly cost is over $1,500 not $1,200. For an older & smaller 3/2 in Mira Mesa that is probably the going rent.[/quote]

Noone – Are you suggesting that the total tax benefit is only $56 per month ? Or did I misinterpret your statement. The $675 would be the tax benefit in a 30% bracket for the property taxes alone. Interest is also tax deductible and constitutes a much larger amount (13,500 in the first year).

[(former)FormerSanDiegan]

[quote=noone][quote=asianautica]$225k at 6% interest rate will cost ~$1350/month with 0% down. Those houses can easily rent for $1700-1900/month depending on condition. PITI – Tax deduction will bring you to about $1200/month. If you put down 20%, you’re looking @ PI of ~$1100/month and PITI – tax deduction of about $1000/month. That seems too good to be true for a 3bed/2bath house when 2 bed/2 bath apartment rents for around $1400-1500/month. If rates goes to 8-9%, then I can see that happening, but not at today’s rate.
[/quote]

I think your math is a bit off. I think you are forgetting that you have to pay the property taxes first. Then the deduction lowers the annual income that you have to pay taxes on. It’s not a tax credit.

You are correct that $225k at 6% with 0% down P&I will be about $1,350 (can you even get 6% with 0% down these days?). Adding taxes an insurance gets you up to about $1,600 a month. If you’re paying 1% in property taxes on $225k that’s $2,250 a year. Assuming the 30% tax bracket, you will be reducing your taxes by about $675 a year or $56 a month. So even including the tax deduction you’re monthly cost is over $1,500 not $1,200. For an older & smaller 3/2 in Mira Mesa that is probably the going rent.[/quote]

Noone – Are you suggesting that the total tax benefit is only $56 per month ? Or did I misinterpret your statement. The $675 would be the tax benefit in a 30% bracket for the property taxes alone. Interest is also tax deductible and constitutes a much larger amount (13,500 in the first year).

[(former)FormerSanDiegan]

[quote=noone][quote=asianautica]$225k at 6% interest rate will cost ~$1350/month with 0% down. Those houses can easily rent for $1700-1900/month depending on condition. PITI – Tax deduction will bring you to about $1200/month. If you put down 20%, you’re looking @ PI of ~$1100/month and PITI – tax deduction of about $1000/month. That seems too good to be true for a 3bed/2bath house when 2 bed/2 bath apartment rents for around $1400-1500/month. If rates goes to 8-9%, then I can see that happening, but not at today’s rate.
[/quote]

I think your math is a bit off. I think you are forgetting that you have to pay the property taxes first. Then the deduction lowers the annual income that you have to pay taxes on. It’s not a tax credit.

You are correct that $225k at 6% with 0% down P&I will be about $1,350 (can you even get 6% with 0% down these days?). Adding taxes an insurance gets you up to about $1,600 a month. If you’re paying 1% in property taxes on $225k that’s $2,250 a year. Assuming the 30% tax bracket, you will be reducing your taxes by about $675 a year or $56 a month. So even including the tax deduction you’re monthly cost is over $1,500 not $1,200. For an older & smaller 3/2 in Mira Mesa that is probably the going rent.[/quote]

Noone – Are you suggesting that the total tax benefit is only $56 per month ? Or did I misinterpret your statement. The $675 would be the tax benefit in a 30% bracket for the property taxes alone. Interest is also tax deductible and constitutes a much larger amount (13,500 in the first year).

[Author]

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