Rental property in San Diego vs Irvine

[wannbelord]

I plan to invest in a property mainly as an investment towards to the kids college in 10 years. I am looking to go a max of 400-500K, I have around 100K and rest from as a mortgage ( part of which I expect to filled from rental income). I was thinking of a condo or town home is San Diego (carmel valley is one option I have in my mind). One of my friend was mentioning Irvine (near broadcomm like woodbridge (community)). Do you have any thoughts?

[Coronita]

Carmel Valley is not going to cash flow well right now with your parameters. If they did, many of us would have already bought several already. The time to have bought would have been between 2010-2011 and even maybe 2012….

a 2/2 condo in CarmelV will run around $420k on the low side… Then you have mello roos on top of your normal property tax total roughly 1.3%, and an HOA probably roughly around $280/month (on the low side)… Assuming you put 100k down and borrow 320k, with the prevailing rate of 4.5%/30year,
you’re looking at $2423/month in payments for something that probably rents for about that, maybe a little lower around $2300/month…

[an]

Totally agree with flu. Carmel Valley, even condo doesn’t cash flow well. If your budget is $400-500k and want to be around UCSD, I’d recommend SFR in Mira Mesa. They’re currently going for $430-500k depending on condition. Lets take the average of $460k, mortgage would be $1900/month, assuming you’re loaning it as an investment property @ 4.75%. If you’re loaning it as a 2nd home @ 4.125%, your payment would be $1780/month. Tax would be $420/month and insurance would be ~$50/month. So, your PITI would be $2250-2370/month. Those houses are renting for $2200-2300/month today.

But if you prefer condo/townhouse, I would consider UTC area instead. It’s much more convenient to commute to UCSD in UTC. there are shuttles around UTC area that will take your kid to UCSD.

[wannbelord]

Thank you flu and AN for your suggestions and insight. As an investment property what is the benefit of going with a townhouse against an SFR? Will the rental market for SFR is limited as against a townhouse?

[an]

[quote=wannbelord]Thank you flu and AN for your suggestions and insight. As an investment property what is the benefit of going with a townhouse against an SFR? Will the rental market for SFR is limited as against a townhouse?[/quote]Assuming similar location, it’s just different type of renter. Townhouse are for those who don’t want/care for a yard. A house is for those who do. I personally think SFR and townhouse attracts similar demographic (young professional couples and students who want to double/triple/quadruple up). Rental is just like primary, it all comes down to location. Location will determine your demographics.

[spdrun]

I’d go for a townhouse. The important thing is minimal yard care for you, the landlord. But I’d evaluate any shared structure carefully.

[Coronita]

[quote=wannbelord]Thank you flu and AN for your suggestions and insight. As an investment property what is the benefit of going with a townhouse against an SFR? Will the rental market for SFR is limited as against a townhouse?[/quote]

For me, it wouldn’t matter as long as which one fits my budget and pencils out.. I’m not going to live there, so I don’t care….

For a condo/townhome, you have hoa costs to deal with. And you have to see if and how much the hoa management is underfunded/if any…One of my condos was dirt cheap. But one of the caveats was there was so many foreclosures/short sales in that unit, that the HOA was underfunded. So knowingly, the HOA cost was increased from $289/month to roughly $400/month for the next 5 years as sort of a special assessment…It still pencils out, but just something you need to be aware of…

For SFH, you have much more maintenance/insurance costs to deal with, IE like everything ….

SFH historically appreciated better than condos/townhomes…

Just look at the numbers to see if either fit..or not..

There’s other pigglords here that are much more seasoned than me, so maybe they can weigh in… I’m really relatively new to this, and (knock on wood) condos have worked out for me simply because they fit my budget, and I wanted more property versus having one with most of my money in it…The only SFH I have isn’t here, and it was mainly out of luck of being my primary residence first versus being an actual rental property that I actively bought for that purpose..

Typically, though, I don’t think a SFH CarmelV or Irvine would fit your budget you mentioned above…And unless you are actually planning to live in one of those homes and first build equity a few years by living there, SFH also don’t pencil out very well either as rental income…

Places like CarmelV and Irvine probably are more of an appreciation play than an rental income generation play, and one probably ends up trying to break even on renting it out while hoping appreciation will continue into the future….

You probably need to spend some time actively looking…Some of us have never stopped looking over the years. And with that, sometimes it means waiting and waiting and waiting..(Some of us waited too long too and saw opportunity fly right by, including me)….It’s not generally something one can wake up in the morning and decide they want to buy a rental property and be done with it by the next morning….Don’t let this be discouragement, because imho you should always be looking.. But, just be realistic that it’s probably not something that is going to be quick, especially right now..

Subscribe to things like redfin and get a regular update on properties available, and that will get you tuned into what the resale market is currently doing. And if you need to figure out how much rent is to see if it will cash flow at the level you want, look on craigslist… or if you really want to be sure, do what some people do while they are in escrow and make a fake “for rent” posts in craiglist to test how much rent you can fetch for a given location..If you end up getting 5 responses over 3-4 days, then I think the rent price is pretty close to market…If you get 8+ responses in less than 24 hrs, than it means you set the rent price lower than market price…

[an]

I understand you guys’ concern about yard, but keep in mind, I’m talking about SFR in Mira Mesa with no HOA. So, you can do a number of different things to reduce the yard maintenance. You can put synthetic grass everywhere, you can fill it up w/ concrete, you can do all gravel, or you can just plainly leave it all dirt. It really depends on the type tenant you want to attract. Those are the options I can think up that eliminates your yard maintenance. You can also put it into the lease that your tenant take care of the landscape however they want. Since Mira Mesa have no HOA, it doesn’t really matter how they handle the landscape.

As for insurance, I don’t know if it’s anymore expensive than similar sq-ft townhouse. I would assume that it isn’t. Insurance is minor cost IMHO compare to the big cost like mortgage and taxes.

It really comes down to the number and which one will bring in better cash flow. One thing that might also be different between SFR vs townhouse renter is the type of renters they are. I don’t have any data to back this up, but I feel that SFR tenant are more likely to be family and long term tenant. So, it might also reduce your vacancy rate. My tenant for my SFR signed a 5 year lease. They want to stay in the same house until their oldest finish w/ HS. I think that type of tenant tend to be more attracted to SFR rental vs townhouse/condo.

[The-Shoveler]

Tenant required to have a pet goat.

Just kidding

[HLS]

Do you really believe that property at these levels is really a good ‘investment’ ?
Do you think that they will be worth more in 10 yrs ?

With realistic maintenance & vacancy factors, you are possibly looking at a zero or negative return on your $100K investment.

How long will interest rates be kept artificially low and what’s going to happen to the price of average real estate if mortgage rates go back to the 6% range

What’s going to happen to the country if there is a stock market crash and the untested 401K system
collapses

[Coronita]

[quote=HLS]Do you really believe that property at these levels is really a good ‘investment’ ?
Do you think that they will be worth more in 10 yrs ?

With realistic maintenance & vacancy factors, you are possibly looking at a zero or negative return on your $100K investment.

How long will interest rates be kept artificially low and what’s going to happen to the price of average real estate if mortgage rates go back to the 6% range

What’s going to happen to the country if there is a stock market crash and the untested 401K system
collapses[/quote]

I guess the more important question…. What do people think would be a “better” investment right now?

I’m thinking a cash advance business. But that to me is just kinda….seedy….

Maybe medical MJ…..

[spdrun]

What about just spending $100k cash and borrowing $50-100k for a slightly dumpy condo that pays 6-7% return? Less risk when you have 50-66% down.

[Coronita]

[quote=spdrun]What about just spending $100k cash and borrowing $50-100k for a slightly dumpy condo that pays 6-7% return? Less risk when you have 50-66% down.[/quote]

Where, in San Diego?

[spdrun]

No, on Mars. It’s doable even in San Diego, probably with closer to 6% return. 8%-8.5% was possible last year.

[Coronita]

[quote=spdrun]No, on Mars. It’s doable even in San Diego, probably with closer to 6% return. 8%-8.5% was possible last year.[/quote]

You keep saying it, so prove it.. 🙂

1. Name one property.

2. Why aren’t you doing it?

[Author]

Posts