Mira Mesa prices

[cv2]

[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.

At the bottom of last cycle, ~1996, a 2 bed/2 bath apartment goes for $900/month and a 3bed/2bath house were selling for around $150k. Interest rate I think were around 9% back then. PI should be around $1000/month and PITI – tax deduction was about $800/month.

My point is that at the bottom of the last cycle, buying a home with 20% down will cost you 10% above the rent of a 2bed/2bath apartment. @ 10% above today’s rent with today’s interest rate, you’re looking at price of around $325k.[/quote]

Great analysis!

I totally agree with your analysis except that I am in the camp to believe that rent will decrease in the near future. Rent is closely related to income. When people can’t afford the rent, they have to pick up and move. Once vacancy creep up, landlords have to lower rent.

For MM, what’s the typical or median household income? per this http://www.melissadata.com/lookups/TaxZip.asp?Zip=92126&Submit=Submit
the average income is a little less than $50K/year. The median usually is less than average. So the pre-tax take home pay is about $4000/month. It is extremely hard for them to afford a rent of $1,700/month because that’s over 40% of their income.

[DWCAP]

Average income is alittle skewed due to the high numbers of college and just out of college aged residents. These renters do not rely on 1-2 incomes to maintain the household. If it is a 4/2, they will attempt to cram 4-5 people into the house. Think a 4/2, 2200/month. 2200/4 is only $550 each. Since one bath will be attached to the master (bigger) bedroom, they will put a couple in there are raise the rent on that room alittle. Suddenly 3 people get their own room at $500/month, and a couple shares the ‘master’ for $350 each. If you cant afford that, you cant afford to live in SoCal.

[DWCAP]

Average income is alittle skewed due to the high numbers of college and just out of college aged residents. These renters do not rely on 1-2 incomes to maintain the household. If it is a 4/2, they will attempt to cram 4-5 people into the house. Think a 4/2, 2200/month. 2200/4 is only $550 each. Since one bath will be attached to the master (bigger) bedroom, they will put a couple in there are raise the rent on that room alittle. Suddenly 3 people get their own room at $500/month, and a couple shares the ‘master’ for $350 each. If you cant afford that, you cant afford to live in SoCal.

[DWCAP]

Average income is alittle skewed due to the high numbers of college and just out of college aged residents. These renters do not rely on 1-2 incomes to maintain the household. If it is a 4/2, they will attempt to cram 4-5 people into the house. Think a 4/2, 2200/month. 2200/4 is only $550 each. Since one bath will be attached to the master (bigger) bedroom, they will put a couple in there are raise the rent on that room alittle. Suddenly 3 people get their own room at $500/month, and a couple shares the ‘master’ for $350 each. If you cant afford that, you cant afford to live in SoCal.

[DWCAP]

Average income is alittle skewed due to the high numbers of college and just out of college aged residents. These renters do not rely on 1-2 incomes to maintain the household. If it is a 4/2, they will attempt to cram 4-5 people into the house. Think a 4/2, 2200/month. 2200/4 is only $550 each. Since one bath will be attached to the master (bigger) bedroom, they will put a couple in there are raise the rent on that room alittle. Suddenly 3 people get their own room at $500/month, and a couple shares the ‘master’ for $350 each. If you cant afford that, you cant afford to live in SoCal.

[DWCAP]

Average income is alittle skewed due to the high numbers of college and just out of college aged residents. These renters do not rely on 1-2 incomes to maintain the household. If it is a 4/2, they will attempt to cram 4-5 people into the house. Think a 4/2, 2200/month. 2200/4 is only $550 each. Since one bath will be attached to the master (bigger) bedroom, they will put a couple in there are raise the rent on that room alittle. Suddenly 3 people get their own room at $500/month, and a couple shares the ‘master’ for $350 each. If you cant afford that, you cant afford to live in SoCal.

[Bugs]

I do a lot of income/expense analysis of income properties. Right now, property taxes (alone) are eating up 10% or more of the rents right off the bat. Add insurance, administrative (banking, accounting, tax prep, etc) expenses, maintenance costs, etc, and the real expense load starts at 30% and goes up from there. If you add in a total of two months vacancy or collection loss over an average 7-year holding period that adds up, too.

The ratios are actually higher for single family residences because of the economy of scale thing.

Check it out: MM home rents for $2000/month and is assessed at $300,000:

Annual rents = $24,000

$3,300 for taxes
$1,100 for insurance
$ 800 for administrative
$ 800 for annual repairs/maintenance
$1,000 for annual budget for painting, flooring, etc.
———
$7,000 in expenses
$20,368 for the mortgage payment ($270k Mtg @ 6.5%)
———
$27,368 in outlays
-24,000 in rents
———
-$3,368 in negative cash flow, not counting tax benefits if there are any. This is a best case scenario. That’s if the house never sits vacant for a single month and never has any big repair items. It assumes that you will do new paint and carpet every five years, which is stretching it if your tenants move every year.

At 7.5% for the mortgage the combined annual negative would run about $5,500/year.

[Bugs]

I do a lot of income/expense analysis of income properties. Right now, property taxes (alone) are eating up 10% or more of the rents right off the bat. Add insurance, administrative (banking, accounting, tax prep, etc) expenses, maintenance costs, etc, and the real expense load starts at 30% and goes up from there. If you add in a total of two months vacancy or collection loss over an average 7-year holding period that adds up, too.

The ratios are actually higher for single family residences because of the economy of scale thing.

Check it out: MM home rents for $2000/month and is assessed at $300,000:

Annual rents = $24,000

$3,300 for taxes
$1,100 for insurance
$ 800 for administrative
$ 800 for annual repairs/maintenance
$1,000 for annual budget for painting, flooring, etc.
———
$7,000 in expenses
$20,368 for the mortgage payment ($270k Mtg @ 6.5%)
———
$27,368 in outlays
-24,000 in rents
———
-$3,368 in negative cash flow, not counting tax benefits if there are any. This is a best case scenario. That’s if the house never sits vacant for a single month and never has any big repair items. It assumes that you will do new paint and carpet every five years, which is stretching it if your tenants move every year.

At 7.5% for the mortgage the combined annual negative would run about $5,500/year.

[Bugs]

I do a lot of income/expense analysis of income properties. Right now, property taxes (alone) are eating up 10% or more of the rents right off the bat. Add insurance, administrative (banking, accounting, tax prep, etc) expenses, maintenance costs, etc, and the real expense load starts at 30% and goes up from there. If you add in a total of two months vacancy or collection loss over an average 7-year holding period that adds up, too.

The ratios are actually higher for single family residences because of the economy of scale thing.

Check it out: MM home rents for $2000/month and is assessed at $300,000:

Annual rents = $24,000

$3,300 for taxes
$1,100 for insurance
$ 800 for administrative
$ 800 for annual repairs/maintenance
$1,000 for annual budget for painting, flooring, etc.
———
$7,000 in expenses
$20,368 for the mortgage payment ($270k Mtg @ 6.5%)
———
$27,368 in outlays
-24,000 in rents
———
-$3,368 in negative cash flow, not counting tax benefits if there are any. This is a best case scenario. That’s if the house never sits vacant for a single month and never has any big repair items. It assumes that you will do new paint and carpet every five years, which is stretching it if your tenants move every year.

At 7.5% for the mortgage the combined annual negative would run about $5,500/year.

[Bugs]

I do a lot of income/expense analysis of income properties. Right now, property taxes (alone) are eating up 10% or more of the rents right off the bat. Add insurance, administrative (banking, accounting, tax prep, etc) expenses, maintenance costs, etc, and the real expense load starts at 30% and goes up from there. If you add in a total of two months vacancy or collection loss over an average 7-year holding period that adds up, too.

The ratios are actually higher for single family residences because of the economy of scale thing.

Check it out: MM home rents for $2000/month and is assessed at $300,000:

Annual rents = $24,000

$3,300 for taxes
$1,100 for insurance
$ 800 for administrative
$ 800 for annual repairs/maintenance
$1,000 for annual budget for painting, flooring, etc.
———
$7,000 in expenses
$20,368 for the mortgage payment ($270k Mtg @ 6.5%)
———
$27,368 in outlays
-24,000 in rents
———
-$3,368 in negative cash flow, not counting tax benefits if there are any. This is a best case scenario. That’s if the house never sits vacant for a single month and never has any big repair items. It assumes that you will do new paint and carpet every five years, which is stretching it if your tenants move every year.

At 7.5% for the mortgage the combined annual negative would run about $5,500/year.

[Bugs]

I do a lot of income/expense analysis of income properties. Right now, property taxes (alone) are eating up 10% or more of the rents right off the bat. Add insurance, administrative (banking, accounting, tax prep, etc) expenses, maintenance costs, etc, and the real expense load starts at 30% and goes up from there. If you add in a total of two months vacancy or collection loss over an average 7-year holding period that adds up, too.

The ratios are actually higher for single family residences because of the economy of scale thing.

Check it out: MM home rents for $2000/month and is assessed at $300,000:

Annual rents = $24,000

$3,300 for taxes
$1,100 for insurance
$ 800 for administrative
$ 800 for annual repairs/maintenance
$1,000 for annual budget for painting, flooring, etc.
———
$7,000 in expenses
$20,368 for the mortgage payment ($270k Mtg @ 6.5%)
———
$27,368 in outlays
-24,000 in rents
———
-$3,368 in negative cash flow, not counting tax benefits if there are any. This is a best case scenario. That’s if the house never sits vacant for a single month and never has any big repair items. It assumes that you will do new paint and carpet every five years, which is stretching it if your tenants move every year.

At 7.5% for the mortgage the combined annual negative would run about $5,500/year.

[an]

EconProf, I think you misunderstood why some of us compare cost of ownership with rent. It’s not to buy and rent it out right away. If that’s your intention, I agree, $225k would be a much more intriguing price. The reason why I use mortgage vs rent is to determine whether it’s cheaper for me to continue renting or buy. You’re throwing money way with rent, but you’re also throwing money away with interest and tax. The question comes down to, which one is less.

esmith, $200/month more makes a big difference. feraina also did a fine job explaining why UCSD students would prefer MM vs PQ/RB/etc. You can also rent a older (built in the 70s-80s) 2000+ sq-ft house with a decent size yard in MM for around $2100-2200 as well, if size and yard means more to you. You also have to be realistic about the commute time. I live on the west end of MM for many years and went to UCSD, worked in SV and CV. My commute to UCSD/CV usually take no more than 10 minutes anytime since there no traffic and commuting to SV should take no more than 5 minutes. How long will it take during peak traffic time to get across 56 or MM Blvd from PQ? I suspect it to be 30+ minutes.

cv2, Bugs, etc… I agree that when the parameters change, the price would also have to change. So if rent drops and/or rates rise, we have to see lower prices. The only problem is, these are unknown parameters and there’s no real good scientific way to predict them either.

[an]

EconProf, I think you misunderstood why some of us compare cost of ownership with rent. It’s not to buy and rent it out right away. If that’s your intention, I agree, $225k would be a much more intriguing price. The reason why I use mortgage vs rent is to determine whether it’s cheaper for me to continue renting or buy. You’re throwing money way with rent, but you’re also throwing money away with interest and tax. The question comes down to, which one is less.

esmith, $200/month more makes a big difference. feraina also did a fine job explaining why UCSD students would prefer MM vs PQ/RB/etc. You can also rent a older (built in the 70s-80s) 2000+ sq-ft house with a decent size yard in MM for around $2100-2200 as well, if size and yard means more to you. You also have to be realistic about the commute time. I live on the west end of MM for many years and went to UCSD, worked in SV and CV. My commute to UCSD/CV usually take no more than 10 minutes anytime since there no traffic and commuting to SV should take no more than 5 minutes. How long will it take during peak traffic time to get across 56 or MM Blvd from PQ? I suspect it to be 30+ minutes.

cv2, Bugs, etc… I agree that when the parameters change, the price would also have to change. So if rent drops and/or rates rise, we have to see lower prices. The only problem is, these are unknown parameters and there’s no real good scientific way to predict them either.

[an]

EconProf, I think you misunderstood why some of us compare cost of ownership with rent. It’s not to buy and rent it out right away. If that’s your intention, I agree, $225k would be a much more intriguing price. The reason why I use mortgage vs rent is to determine whether it’s cheaper for me to continue renting or buy. You’re throwing money way with rent, but you’re also throwing money away with interest and tax. The question comes down to, which one is less.

esmith, $200/month more makes a big difference. feraina also did a fine job explaining why UCSD students would prefer MM vs PQ/RB/etc. You can also rent a older (built in the 70s-80s) 2000+ sq-ft house with a decent size yard in MM for around $2100-2200 as well, if size and yard means more to you. You also have to be realistic about the commute time. I live on the west end of MM for many years and went to UCSD, worked in SV and CV. My commute to UCSD/CV usually take no more than 10 minutes anytime since there no traffic and commuting to SV should take no more than 5 minutes. How long will it take during peak traffic time to get across 56 or MM Blvd from PQ? I suspect it to be 30+ minutes.

cv2, Bugs, etc… I agree that when the parameters change, the price would also have to change. So if rent drops and/or rates rise, we have to see lower prices. The only problem is, these are unknown parameters and there’s no real good scientific way to predict them either.

[an]

EconProf, I think you misunderstood why some of us compare cost of ownership with rent. It’s not to buy and rent it out right away. If that’s your intention, I agree, $225k would be a much more intriguing price. The reason why I use mortgage vs rent is to determine whether it’s cheaper for me to continue renting or buy. You’re throwing money way with rent, but you’re also throwing money away with interest and tax. The question comes down to, which one is less.

esmith, $200/month more makes a big difference. feraina also did a fine job explaining why UCSD students would prefer MM vs PQ/RB/etc. You can also rent a older (built in the 70s-80s) 2000+ sq-ft house with a decent size yard in MM for around $2100-2200 as well, if size and yard means more to you. You also have to be realistic about the commute time. I live on the west end of MM for many years and went to UCSD, worked in SV and CV. My commute to UCSD/CV usually take no more than 10 minutes anytime since there no traffic and commuting to SV should take no more than 5 minutes. How long will it take during peak traffic time to get across 56 or MM Blvd from PQ? I suspect it to be 30+ minutes.

cv2, Bugs, etc… I agree that when the parameters change, the price would also have to change. So if rent drops and/or rates rise, we have to see lower prices. The only problem is, these are unknown parameters and there’s no real good scientific way to predict them either.

[Author]

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