should I buy in temecula

[carlsbadworker]

[quote=bearishgurl]Just offering another perspective re: not putting all your eggs in one basket :=}[/quote]

I agree with this kind of thinking.

But I am wondering if the real estate experts on this site could tell us what is the best reliable indicator of the future home price appreciation?

I mean, anyone knows that cheaper is better, buying at 100x rent is better than 125x rent, but that’s from the perspective of investment safety (helped by the rental yield). If we don’t rely on the fuzzy term such as “location”, what is the best indicator for price appreciation? Job growth? Active/Sale ratio? Depressed seller ratio?

Has no one digged up the data and did any research on this?

[bearishgurl]

[quote=carlsbadworker] . . . I am wondering if the real estate experts on this site could tell us what is the best reliable indicator of the future home price appreciation?

I mean, anyone knows that cheaper is better, buying at 100x rent is better than 125x rent, but that’s from the perspective of investment safety (helped by the rental yield). If we don’t rely on the fuzzy term such as “location”, what is the best indicator for price appreciation? Job growth? Active/Sale ratio? Depressed seller ratio?[/quote]

carlsbadworker, I have an opinion on this for “coastal SFRs” (within two miles of the coast and NOT on the US/MX border). I think appreciation there is fueled by THOSE THAT CAN PAY for properties there and what THOSE THAT CAN are WILLING to pay. It has NOTHING to do with availability of jobs or rental yields. Under a normal lending environment, when interest rates are favorable and THOSE THAT COULD NOT pay are flushed out of their (former) coastal properties they should have never purchased in the first place (there really weren’t very many of these people to begin with), THOSE THAT CAN PAY set the comps. Things like relocation and divorce happen to them but do not affect them as much as those in other areas. For instance, in the case of divorce, each party just lives in a separate property and each quit-claims a property to the other as many in this category own two or more properties.

In addition, coastal view, location and how that view is maximized through remodeling play a large part in appreciation, not particularly “size” or “square footage” as some Piggs might think.

For instance, foreign investors and/or prominent new residents from out-of-county aren’t likely to purchase residences in Allied Gardens but they might do so in LJ or DM, driving the comps only in their desired areas.

In short, wherever is desireable to the folks with the resources (read: infinite choices) are the areas that will appreciate most over the long haul. This segment is not dependent upon the job market, commuting time or quality of schools. They can send their kids to school AND COLLEGE wherever they wish.

Piggs are free to attack me for “fuzzy logic.” Based upon my own experience, that’s how I see it.

What drives the appreciation of rental property? I’d have to think a little more on that one. Perhaps there is a REIT investor Pigg that could comment here?

[bearishgurl]

[quote=carlsbadworker] . . . I am wondering if the real estate experts on this site could tell us what is the best reliable indicator of the future home price appreciation?

I mean, anyone knows that cheaper is better, buying at 100x rent is better than 125x rent, but that’s from the perspective of investment safety (helped by the rental yield). If we don’t rely on the fuzzy term such as “location”, what is the best indicator for price appreciation? Job growth? Active/Sale ratio? Depressed seller ratio?[/quote]

carlsbadworker, I have an opinion on this for “coastal SFRs” (within two miles of the coast and NOT on the US/MX border). I think appreciation there is fueled by THOSE THAT CAN PAY for properties there and what THOSE THAT CAN are WILLING to pay. It has NOTHING to do with availability of jobs or rental yields. Under a normal lending environment, when interest rates are favorable and THOSE THAT COULD NOT pay are flushed out of their (former) coastal properties they should have never purchased in the first place (there really weren’t very many of these people to begin with), THOSE THAT CAN PAY set the comps. Things like relocation and divorce happen to them but do not affect them as much as those in other areas. For instance, in the case of divorce, each party just lives in a separate property and each quit-claims a property to the other as many in this category own two or more properties.

In addition, coastal view, location and how that view is maximized through remodeling play a large part in appreciation, not particularly “size” or “square footage” as some Piggs might think.

For instance, foreign investors and/or prominent new residents from out-of-county aren’t likely to purchase residences in Allied Gardens but they might do so in LJ or DM, driving the comps only in their desired areas.

In short, wherever is desireable to the folks with the resources (read: infinite choices) are the areas that will appreciate most over the long haul. This segment is not dependent upon the job market, commuting time or quality of schools. They can send their kids to school AND COLLEGE wherever they wish.

Piggs are free to attack me for “fuzzy logic.” Based upon my own experience, that’s how I see it.

What drives the appreciation of rental property? I’d have to think a little more on that one. Perhaps there is a REIT investor Pigg that could comment here?

[bearishgurl]

[quote=carlsbadworker] . . . I am wondering if the real estate experts on this site could tell us what is the best reliable indicator of the future home price appreciation?

I mean, anyone knows that cheaper is better, buying at 100x rent is better than 125x rent, but that’s from the perspective of investment safety (helped by the rental yield). If we don’t rely on the fuzzy term such as “location”, what is the best indicator for price appreciation? Job growth? Active/Sale ratio? Depressed seller ratio?[/quote]

carlsbadworker, I have an opinion on this for “coastal SFRs” (within two miles of the coast and NOT on the US/MX border). I think appreciation there is fueled by THOSE THAT CAN PAY for properties there and what THOSE THAT CAN are WILLING to pay. It has NOTHING to do with availability of jobs or rental yields. Under a normal lending environment, when interest rates are favorable and THOSE THAT COULD NOT pay are flushed out of their (former) coastal properties they should have never purchased in the first place (there really weren’t very many of these people to begin with), THOSE THAT CAN PAY set the comps. Things like relocation and divorce happen to them but do not affect them as much as those in other areas. For instance, in the case of divorce, each party just lives in a separate property and each quit-claims a property to the other as many in this category own two or more properties.

In addition, coastal view, location and how that view is maximized through remodeling play a large part in appreciation, not particularly “size” or “square footage” as some Piggs might think.

For instance, foreign investors and/or prominent new residents from out-of-county aren’t likely to purchase residences in Allied Gardens but they might do so in LJ or DM, driving the comps only in their desired areas.

In short, wherever is desireable to the folks with the resources (read: infinite choices) are the areas that will appreciate most over the long haul. This segment is not dependent upon the job market, commuting time or quality of schools. They can send their kids to school AND COLLEGE wherever they wish.

Piggs are free to attack me for “fuzzy logic.” Based upon my own experience, that’s how I see it.

What drives the appreciation of rental property? I’d have to think a little more on that one. Perhaps there is a REIT investor Pigg that could comment here?

[bearishgurl]

[quote=carlsbadworker] . . . I am wondering if the real estate experts on this site could tell us what is the best reliable indicator of the future home price appreciation?

I mean, anyone knows that cheaper is better, buying at 100x rent is better than 125x rent, but that’s from the perspective of investment safety (helped by the rental yield). If we don’t rely on the fuzzy term such as “location”, what is the best indicator for price appreciation? Job growth? Active/Sale ratio? Depressed seller ratio?[/quote]

carlsbadworker, I have an opinion on this for “coastal SFRs” (within two miles of the coast and NOT on the US/MX border). I think appreciation there is fueled by THOSE THAT CAN PAY for properties there and what THOSE THAT CAN are WILLING to pay. It has NOTHING to do with availability of jobs or rental yields. Under a normal lending environment, when interest rates are favorable and THOSE THAT COULD NOT pay are flushed out of their (former) coastal properties they should have never purchased in the first place (there really weren’t very many of these people to begin with), THOSE THAT CAN PAY set the comps. Things like relocation and divorce happen to them but do not affect them as much as those in other areas. For instance, in the case of divorce, each party just lives in a separate property and each quit-claims a property to the other as many in this category own two or more properties.

In addition, coastal view, location and how that view is maximized through remodeling play a large part in appreciation, not particularly “size” or “square footage” as some Piggs might think.

For instance, foreign investors and/or prominent new residents from out-of-county aren’t likely to purchase residences in Allied Gardens but they might do so in LJ or DM, driving the comps only in their desired areas.

In short, wherever is desireable to the folks with the resources (read: infinite choices) are the areas that will appreciate most over the long haul. This segment is not dependent upon the job market, commuting time or quality of schools. They can send their kids to school AND COLLEGE wherever they wish.

Piggs are free to attack me for “fuzzy logic.” Based upon my own experience, that’s how I see it.

What drives the appreciation of rental property? I’d have to think a little more on that one. Perhaps there is a REIT investor Pigg that could comment here?

[bearishgurl]

[quote=carlsbadworker] . . . I am wondering if the real estate experts on this site could tell us what is the best reliable indicator of the future home price appreciation?

I mean, anyone knows that cheaper is better, buying at 100x rent is better than 125x rent, but that’s from the perspective of investment safety (helped by the rental yield). If we don’t rely on the fuzzy term such as “location”, what is the best indicator for price appreciation? Job growth? Active/Sale ratio? Depressed seller ratio?[/quote]

carlsbadworker, I have an opinion on this for “coastal SFRs” (within two miles of the coast and NOT on the US/MX border). I think appreciation there is fueled by THOSE THAT CAN PAY for properties there and what THOSE THAT CAN are WILLING to pay. It has NOTHING to do with availability of jobs or rental yields. Under a normal lending environment, when interest rates are favorable and THOSE THAT COULD NOT pay are flushed out of their (former) coastal properties they should have never purchased in the first place (there really weren’t very many of these people to begin with), THOSE THAT CAN PAY set the comps. Things like relocation and divorce happen to them but do not affect them as much as those in other areas. For instance, in the case of divorce, each party just lives in a separate property and each quit-claims a property to the other as many in this category own two or more properties.

In addition, coastal view, location and how that view is maximized through remodeling play a large part in appreciation, not particularly “size” or “square footage” as some Piggs might think.

For instance, foreign investors and/or prominent new residents from out-of-county aren’t likely to purchase residences in Allied Gardens but they might do so in LJ or DM, driving the comps only in their desired areas.

In short, wherever is desireable to the folks with the resources (read: infinite choices) are the areas that will appreciate most over the long haul. This segment is not dependent upon the job market, commuting time or quality of schools. They can send their kids to school AND COLLEGE wherever they wish.

Piggs are free to attack me for “fuzzy logic.” Based upon my own experience, that’s how I see it.

What drives the appreciation of rental property? I’d have to think a little more on that one. Perhaps there is a REIT investor Pigg that could comment here?

[Bob Lobbla]

Hello everyone, Ive been a moderate follower of this site for the last 4 years or so and this is my first post.

We moved to South Temecula almost 3 years ago from Carmel Valley. We moved here for most of the pros mentioned earlier in this thread and I have to say I dont see us ever leaving. We are exremely happy here and the negatives are a blip on the radar compared to the positives. In fact I dont have anything negative to say about the area.

BTW, I am also a liberal leaning, free thinking agnostic and have never felt uncomfortable but the area is defanitely conservative and religous. But so are nearly all of the people I do business with in coastal north county and OC.

[Bob Lobbla]

Hello everyone, Ive been a moderate follower of this site for the last 4 years or so and this is my first post.

We moved to South Temecula almost 3 years ago from Carmel Valley. We moved here for most of the pros mentioned earlier in this thread and I have to say I dont see us ever leaving. We are exremely happy here and the negatives are a blip on the radar compared to the positives. In fact I dont have anything negative to say about the area.

BTW, I am also a liberal leaning, free thinking agnostic and have never felt uncomfortable but the area is defanitely conservative and religous. But so are nearly all of the people I do business with in coastal north county and OC.

[Bob Lobbla]

Hello everyone, Ive been a moderate follower of this site for the last 4 years or so and this is my first post.

We moved to South Temecula almost 3 years ago from Carmel Valley. We moved here for most of the pros mentioned earlier in this thread and I have to say I dont see us ever leaving. We are exremely happy here and the negatives are a blip on the radar compared to the positives. In fact I dont have anything negative to say about the area.

BTW, I am also a liberal leaning, free thinking agnostic and have never felt uncomfortable but the area is defanitely conservative and religous. But so are nearly all of the people I do business with in coastal north county and OC.

[Bob Lobbla]

Hello everyone, Ive been a moderate follower of this site for the last 4 years or so and this is my first post.

We moved to South Temecula almost 3 years ago from Carmel Valley. We moved here for most of the pros mentioned earlier in this thread and I have to say I dont see us ever leaving. We are exremely happy here and the negatives are a blip on the radar compared to the positives. In fact I dont have anything negative to say about the area.

BTW, I am also a liberal leaning, free thinking agnostic and have never felt uncomfortable but the area is defanitely conservative and religous. But so are nearly all of the people I do business with in coastal north county and OC.

[Bob Lobbla]

Hello everyone, Ive been a moderate follower of this site for the last 4 years or so and this is my first post.

We moved to South Temecula almost 3 years ago from Carmel Valley. We moved here for most of the pros mentioned earlier in this thread and I have to say I dont see us ever leaving. We are exremely happy here and the negatives are a blip on the radar compared to the positives. In fact I dont have anything negative to say about the area.

BTW, I am also a liberal leaning, free thinking agnostic and have never felt uncomfortable but the area is defanitely conservative and religous. But so are nearly all of the people I do business with in coastal north county and OC.

[Ren]

[quote=bearishgurl]Ren, I don’t know how old you are but since the “coast” is where you want to retire, why don’t you consider purchasing a fixer (w/no MR or HOA) to rehab and then place into rental service there, using today’s low fixed interest rates, instead of investing in low-priced rentals in TV that may never appreciate and may even go down further. When scoping one out, do not get so caught up in “square footage” as long as it’s over 1000 sf with at least a one-car (attached or detached) garage and on a decent-sized lot. Remember, it will be a rental home and your retirement home.[/quote]

I won’t buy a fixer on the coast because even fixers are overpriced and I’d be lucky to break even. I’m among those who believe that buying at a lower price is usually better than buying at a low interest rate (depending on the numbers, of course), and appreciation shouldn’t be the goal, since real estate closely follows inflation in the long term (i.e., it doesn’t really appreciate, unless you buy at a low point in a cycle and sell at a high point). However, buying at a low point is extremely important for cash flow and in case you do decide to sell later on. Positive cash flow is really just icing on the cake when it comes to leveraged property. A bigger benefit is that someone else is paying the principal and interest. The real rewards come decades later. We will probably never be wealthy, but we will feel secure in retirement and our kids will have it relatively easy.

Of course there’s a limit to how much you can leverage, and you shouldn’t borrow on every property, but it’s not difficult to carry 4 or 5 mortgages. You couldn’t qualify for all of them at once, unless you had a huge income and/or the cash to back them up, in which case you might be better off with another strategy anyway (like flipping, if you really know what you’re doing).

[quote]I consider myself a bear in general but believe desireable “coastal” properties (west of the 5 in SD County) will NOT further deteriorate 20% like you think they will.[/quote]

Now there’s a discussion that has been done to death on this forum 😉 Suffice it to say that my opinion is based on careful examination of historical data, not wishful thinking. Just keep in mind that the last downturn lasted 6 years, we’re coming from a MUCH higher peak, we’re only 4 years into this one, the government has been doing it’s best to keep prices inflated, and price-to-income ratios are still out of whack (I’m not talking about SD on average, just the most desirable coastal areas).

[quote]With the scenario you painted, I see you over-invested in TV by the time you want to retire and not being able to easily unload your rental properties or successfully retrieve your full downpayments from sale. You’re banking here that all these newer +/- $100K condos in TV will still be looking good and crisp, fetch good rents and their HOA’s will be managed perfectly for the long term. How do you know the bulk of entire complexes won’t become 100% rentals, bought up by REITS (blocks of investors) and turned over to the Section 8 program? This has HAPPENED in PQ and a few other areas which were considered “upscale” at the time of buildout and for a few years afterwards. When this happens, the REIT’s pay about .50 on the dollar (or less) for these units and THAT IS THE *NEW* COMP.[/quote]

You just provided another good reason for buying near the bottom of an area’s market, which I have good reason to believe we are close to in Temecula. No, properties bought today won’t look stellar in 30 years, but I will have put 30-35% down at a GOOD price, and someone else will have paid the balance of the principal and interest and all maintenance. If that place should sell for 50 cents on the dollar in 30 years, I’ll still make a nice profit. But then you’re assuming we want to unload them when we retire, which isn’t necessarily the case. One or two might be sold during the college years, but the rest will go into a trust at some point, and when the kids reach a certain age, they can sell them if they desire, depending on condition of the unit/neighborhood.

You’re also assuming that we plan to buy everything in the same complex, when in fact we’ll be spread out all over, both condos and SFR’s (no apartment conversions, nothing without an attached garage – it’s important to think like prospective tenants), in areas that I believe will hold up well. There are many such areas in Temecula that are still nice after 15-20 years, like any city.

[quote]More than a few times, I’ve seen retirees who end up regretting they invested so heavily in low-income rentals they can’t easily unload. If you choose to leave TV when your kids go away to college, you may then find yourself running back up there several times a week to cope with endless tenant issues since you state you will manage your units yourself.[/quote]

Then your experience has been different than mine. I know more people who have done well with rentals than have lost, and those who lost are those who bought at the wrong time. Now is the wrong time to buy on the coast. As for tenant issues, I stated that we would manage them ourselves at first. That will change later. Also these are not “low income” properties – they are on the lower end of middle class for Temecula, but certainly not the poor house. $150k gets you a very nice condo here.

I’m guessing that next you’ll start telling me tenant horror stories, but you should know I’ve thought of that, too. There are ways to ensure you get quality tenants, and that’s by pricing below market and checking references. If you get greedy and sacrifice quality for money, you’ll always get burned.

[quote]Also, with your “investment strategy,” keep in mind a couple of things. HOA dues always go UP, never down. Even though you can write HOA dues off on your taxes for a rental unit, you STILL have to PAY the dues first and they (as well as unexpected “special assessments”) can be VERY detrimental to your monthly cash flow.[/quote]

I can’t imagine a $46 HOA going up much, so that doesn’t concern me. Of course zero HOA would be better, but that’s difficult to find in newer areas, and buying newer properties is important for keeping maintenance costs down, which can make an HOA special assesment look like a parking ticket. The $200 HOA’s for condos carry more risk, as they cover much more than an SFR’s does. However, this again goes back to diversifying in different areas and paying a good price for all your properties in the first place. If something bad happens, you can absorb the loss. If not, you made mistakes along the way.

[quote]And when you go to purchase more property and already own rental unit(s), a lender typically only gives you credit for 9 mos. year rental income, NOT 11 months, as you previously stated. And you may have to prove to the lender the steady receipt of rental income over a period of time, when seeking another mortgage loan.[/quote]

Please read my posts carefully before getting confrontational. The “11 months” was my own estimate on actual occupancy, not what the lender would give me credit for. I’m well aware that they will not count all of the rental income, and I’m also well aware that they require a track record of occupancy. I’ve been saying that on this forum for years.

[quote]Just offering another perspective re: not putting all your eggs in one basket :=}[/quote]

All of our eggs are not in one basket. We have other sources of income and investments.

[Ren]

[quote=bearishgurl]Ren, I don’t know how old you are but since the “coast” is where you want to retire, why don’t you consider purchasing a fixer (w/no MR or HOA) to rehab and then place into rental service there, using today’s low fixed interest rates, instead of investing in low-priced rentals in TV that may never appreciate and may even go down further. When scoping one out, do not get so caught up in “square footage” as long as it’s over 1000 sf with at least a one-car (attached or detached) garage and on a decent-sized lot. Remember, it will be a rental home and your retirement home.[/quote]

I won’t buy a fixer on the coast because even fixers are overpriced and I’d be lucky to break even. I’m among those who believe that buying at a lower price is usually better than buying at a low interest rate (depending on the numbers, of course), and appreciation shouldn’t be the goal, since real estate closely follows inflation in the long term (i.e., it doesn’t really appreciate, unless you buy at a low point in a cycle and sell at a high point). However, buying at a low point is extremely important for cash flow and in case you do decide to sell later on. Positive cash flow is really just icing on the cake when it comes to leveraged property. A bigger benefit is that someone else is paying the principal and interest. The real rewards come decades later. We will probably never be wealthy, but we will feel secure in retirement and our kids will have it relatively easy.

Of course there’s a limit to how much you can leverage, and you shouldn’t borrow on every property, but it’s not difficult to carry 4 or 5 mortgages. You couldn’t qualify for all of them at once, unless you had a huge income and/or the cash to back them up, in which case you might be better off with another strategy anyway (like flipping, if you really know what you’re doing).

[quote]I consider myself a bear in general but believe desireable “coastal” properties (west of the 5 in SD County) will NOT further deteriorate 20% like you think they will.[/quote]

Now there’s a discussion that has been done to death on this forum 😉 Suffice it to say that my opinion is based on careful examination of historical data, not wishful thinking. Just keep in mind that the last downturn lasted 6 years, we’re coming from a MUCH higher peak, we’re only 4 years into this one, the government has been doing it’s best to keep prices inflated, and price-to-income ratios are still out of whack (I’m not talking about SD on average, just the most desirable coastal areas).

[quote]With the scenario you painted, I see you over-invested in TV by the time you want to retire and not being able to easily unload your rental properties or successfully retrieve your full downpayments from sale. You’re banking here that all these newer +/- $100K condos in TV will still be looking good and crisp, fetch good rents and their HOA’s will be managed perfectly for the long term. How do you know the bulk of entire complexes won’t become 100% rentals, bought up by REITS (blocks of investors) and turned over to the Section 8 program? This has HAPPENED in PQ and a few other areas which were considered “upscale” at the time of buildout and for a few years afterwards. When this happens, the REIT’s pay about .50 on the dollar (or less) for these units and THAT IS THE *NEW* COMP.[/quote]

You just provided another good reason for buying near the bottom of an area’s market, which I have good reason to believe we are close to in Temecula. No, properties bought today won’t look stellar in 30 years, but I will have put 30-35% down at a GOOD price, and someone else will have paid the balance of the principal and interest and all maintenance. If that place should sell for 50 cents on the dollar in 30 years, I’ll still make a nice profit. But then you’re assuming we want to unload them when we retire, which isn’t necessarily the case. One or two might be sold during the college years, but the rest will go into a trust at some point, and when the kids reach a certain age, they can sell them if they desire, depending on condition of the unit/neighborhood.

You’re also assuming that we plan to buy everything in the same complex, when in fact we’ll be spread out all over, both condos and SFR’s (no apartment conversions, nothing without an attached garage – it’s important to think like prospective tenants), in areas that I believe will hold up well. There are many such areas in Temecula that are still nice after 15-20 years, like any city.

[quote]More than a few times, I’ve seen retirees who end up regretting they invested so heavily in low-income rentals they can’t easily unload. If you choose to leave TV when your kids go away to college, you may then find yourself running back up there several times a week to cope with endless tenant issues since you state you will manage your units yourself.[/quote]

Then your experience has been different than mine. I know more people who have done well with rentals than have lost, and those who lost are those who bought at the wrong time. Now is the wrong time to buy on the coast. As for tenant issues, I stated that we would manage them ourselves at first. That will change later. Also these are not “low income” properties – they are on the lower end of middle class for Temecula, but certainly not the poor house. $150k gets you a very nice condo here.

I’m guessing that next you’ll start telling me tenant horror stories, but you should know I’ve thought of that, too. There are ways to ensure you get quality tenants, and that’s by pricing below market and checking references. If you get greedy and sacrifice quality for money, you’ll always get burned.

[quote]Also, with your “investment strategy,” keep in mind a couple of things. HOA dues always go UP, never down. Even though you can write HOA dues off on your taxes for a rental unit, you STILL have to PAY the dues first and they (as well as unexpected “special assessments”) can be VERY detrimental to your monthly cash flow.[/quote]

I can’t imagine a $46 HOA going up much, so that doesn’t concern me. Of course zero HOA would be better, but that’s difficult to find in newer areas, and buying newer properties is important for keeping maintenance costs down, which can make an HOA special assesment look like a parking ticket. The $200 HOA’s for condos carry more risk, as they cover much more than an SFR’s does. However, this again goes back to diversifying in different areas and paying a good price for all your properties in the first place. If something bad happens, you can absorb the loss. If not, you made mistakes along the way.

[quote]And when you go to purchase more property and already own rental unit(s), a lender typically only gives you credit for 9 mos. year rental income, NOT 11 months, as you previously stated. And you may have to prove to the lender the steady receipt of rental income over a period of time, when seeking another mortgage loan.[/quote]

Please read my posts carefully before getting confrontational. The “11 months” was my own estimate on actual occupancy, not what the lender would give me credit for. I’m well aware that they will not count all of the rental income, and I’m also well aware that they require a track record of occupancy. I’ve been saying that on this forum for years.

[quote]Just offering another perspective re: not putting all your eggs in one basket :=}[/quote]

All of our eggs are not in one basket. We have other sources of income and investments.

[Ren]

[quote=bearishgurl]Ren, I don’t know how old you are but since the “coast” is where you want to retire, why don’t you consider purchasing a fixer (w/no MR or HOA) to rehab and then place into rental service there, using today’s low fixed interest rates, instead of investing in low-priced rentals in TV that may never appreciate and may even go down further. When scoping one out, do not get so caught up in “square footage” as long as it’s over 1000 sf with at least a one-car (attached or detached) garage and on a decent-sized lot. Remember, it will be a rental home and your retirement home.[/quote]

I won’t buy a fixer on the coast because even fixers are overpriced and I’d be lucky to break even. I’m among those who believe that buying at a lower price is usually better than buying at a low interest rate (depending on the numbers, of course), and appreciation shouldn’t be the goal, since real estate closely follows inflation in the long term (i.e., it doesn’t really appreciate, unless you buy at a low point in a cycle and sell at a high point). However, buying at a low point is extremely important for cash flow and in case you do decide to sell later on. Positive cash flow is really just icing on the cake when it comes to leveraged property. A bigger benefit is that someone else is paying the principal and interest. The real rewards come decades later. We will probably never be wealthy, but we will feel secure in retirement and our kids will have it relatively easy.

Of course there’s a limit to how much you can leverage, and you shouldn’t borrow on every property, but it’s not difficult to carry 4 or 5 mortgages. You couldn’t qualify for all of them at once, unless you had a huge income and/or the cash to back them up, in which case you might be better off with another strategy anyway (like flipping, if you really know what you’re doing).

[quote]I consider myself a bear in general but believe desireable “coastal” properties (west of the 5 in SD County) will NOT further deteriorate 20% like you think they will.[/quote]

Now there’s a discussion that has been done to death on this forum 😉 Suffice it to say that my opinion is based on careful examination of historical data, not wishful thinking. Just keep in mind that the last downturn lasted 6 years, we’re coming from a MUCH higher peak, we’re only 4 years into this one, the government has been doing it’s best to keep prices inflated, and price-to-income ratios are still out of whack (I’m not talking about SD on average, just the most desirable coastal areas).

[quote]With the scenario you painted, I see you over-invested in TV by the time you want to retire and not being able to easily unload your rental properties or successfully retrieve your full downpayments from sale. You’re banking here that all these newer +/- $100K condos in TV will still be looking good and crisp, fetch good rents and their HOA’s will be managed perfectly for the long term. How do you know the bulk of entire complexes won’t become 100% rentals, bought up by REITS (blocks of investors) and turned over to the Section 8 program? This has HAPPENED in PQ and a few other areas which were considered “upscale” at the time of buildout and for a few years afterwards. When this happens, the REIT’s pay about .50 on the dollar (or less) for these units and THAT IS THE *NEW* COMP.[/quote]

You just provided another good reason for buying near the bottom of an area’s market, which I have good reason to believe we are close to in Temecula. No, properties bought today won’t look stellar in 30 years, but I will have put 30-35% down at a GOOD price, and someone else will have paid the balance of the principal and interest and all maintenance. If that place should sell for 50 cents on the dollar in 30 years, I’ll still make a nice profit. But then you’re assuming we want to unload them when we retire, which isn’t necessarily the case. One or two might be sold during the college years, but the rest will go into a trust at some point, and when the kids reach a certain age, they can sell them if they desire, depending on condition of the unit/neighborhood.

You’re also assuming that we plan to buy everything in the same complex, when in fact we’ll be spread out all over, both condos and SFR’s (no apartment conversions, nothing without an attached garage – it’s important to think like prospective tenants), in areas that I believe will hold up well. There are many such areas in Temecula that are still nice after 15-20 years, like any city.

[quote]More than a few times, I’ve seen retirees who end up regretting they invested so heavily in low-income rentals they can’t easily unload. If you choose to leave TV when your kids go away to college, you may then find yourself running back up there several times a week to cope with endless tenant issues since you state you will manage your units yourself.[/quote]

Then your experience has been different than mine. I know more people who have done well with rentals than have lost, and those who lost are those who bought at the wrong time. Now is the wrong time to buy on the coast. As for tenant issues, I stated that we would manage them ourselves at first. That will change later. Also these are not “low income” properties – they are on the lower end of middle class for Temecula, but certainly not the poor house. $150k gets you a very nice condo here.

I’m guessing that next you’ll start telling me tenant horror stories, but you should know I’ve thought of that, too. There are ways to ensure you get quality tenants, and that’s by pricing below market and checking references. If you get greedy and sacrifice quality for money, you’ll always get burned.

[quote]Also, with your “investment strategy,” keep in mind a couple of things. HOA dues always go UP, never down. Even though you can write HOA dues off on your taxes for a rental unit, you STILL have to PAY the dues first and they (as well as unexpected “special assessments”) can be VERY detrimental to your monthly cash flow.[/quote]

I can’t imagine a $46 HOA going up much, so that doesn’t concern me. Of course zero HOA would be better, but that’s difficult to find in newer areas, and buying newer properties is important for keeping maintenance costs down, which can make an HOA special assesment look like a parking ticket. The $200 HOA’s for condos carry more risk, as they cover much more than an SFR’s does. However, this again goes back to diversifying in different areas and paying a good price for all your properties in the first place. If something bad happens, you can absorb the loss. If not, you made mistakes along the way.

[quote]And when you go to purchase more property and already own rental unit(s), a lender typically only gives you credit for 9 mos. year rental income, NOT 11 months, as you previously stated. And you may have to prove to the lender the steady receipt of rental income over a period of time, when seeking another mortgage loan.[/quote]

Please read my posts carefully before getting confrontational. The “11 months” was my own estimate on actual occupancy, not what the lender would give me credit for. I’m well aware that they will not count all of the rental income, and I’m also well aware that they require a track record of occupancy. I’ve been saying that on this forum for years.

[quote]Just offering another perspective re: not putting all your eggs in one basket :=}[/quote]

All of our eggs are not in one basket. We have other sources of income and investments.

[Ren]

[quote=bearishgurl]Ren, I don’t know how old you are but since the “coast” is where you want to retire, why don’t you consider purchasing a fixer (w/no MR or HOA) to rehab and then place into rental service there, using today’s low fixed interest rates, instead of investing in low-priced rentals in TV that may never appreciate and may even go down further. When scoping one out, do not get so caught up in “square footage” as long as it’s over 1000 sf with at least a one-car (attached or detached) garage and on a decent-sized lot. Remember, it will be a rental home and your retirement home.[/quote]

I won’t buy a fixer on the coast because even fixers are overpriced and I’d be lucky to break even. I’m among those who believe that buying at a lower price is usually better than buying at a low interest rate (depending on the numbers, of course), and appreciation shouldn’t be the goal, since real estate closely follows inflation in the long term (i.e., it doesn’t really appreciate, unless you buy at a low point in a cycle and sell at a high point). However, buying at a low point is extremely important for cash flow and in case you do decide to sell later on. Positive cash flow is really just icing on the cake when it comes to leveraged property. A bigger benefit is that someone else is paying the principal and interest. The real rewards come decades later. We will probably never be wealthy, but we will feel secure in retirement and our kids will have it relatively easy.

Of course there’s a limit to how much you can leverage, and you shouldn’t borrow on every property, but it’s not difficult to carry 4 or 5 mortgages. You couldn’t qualify for all of them at once, unless you had a huge income and/or the cash to back them up, in which case you might be better off with another strategy anyway (like flipping, if you really know what you’re doing).

[quote]I consider myself a bear in general but believe desireable “coastal” properties (west of the 5 in SD County) will NOT further deteriorate 20% like you think they will.[/quote]

Now there’s a discussion that has been done to death on this forum 😉 Suffice it to say that my opinion is based on careful examination of historical data, not wishful thinking. Just keep in mind that the last downturn lasted 6 years, we’re coming from a MUCH higher peak, we’re only 4 years into this one, the government has been doing it’s best to keep prices inflated, and price-to-income ratios are still out of whack (I’m not talking about SD on average, just the most desirable coastal areas).

[quote]With the scenario you painted, I see you over-invested in TV by the time you want to retire and not being able to easily unload your rental properties or successfully retrieve your full downpayments from sale. You’re banking here that all these newer +/- $100K condos in TV will still be looking good and crisp, fetch good rents and their HOA’s will be managed perfectly for the long term. How do you know the bulk of entire complexes won’t become 100% rentals, bought up by REITS (blocks of investors) and turned over to the Section 8 program? This has HAPPENED in PQ and a few other areas which were considered “upscale” at the time of buildout and for a few years afterwards. When this happens, the REIT’s pay about .50 on the dollar (or less) for these units and THAT IS THE *NEW* COMP.[/quote]

You just provided another good reason for buying near the bottom of an area’s market, which I have good reason to believe we are close to in Temecula. No, properties bought today won’t look stellar in 30 years, but I will have put 30-35% down at a GOOD price, and someone else will have paid the balance of the principal and interest and all maintenance. If that place should sell for 50 cents on the dollar in 30 years, I’ll still make a nice profit. But then you’re assuming we want to unload them when we retire, which isn’t necessarily the case. One or two might be sold during the college years, but the rest will go into a trust at some point, and when the kids reach a certain age, they can sell them if they desire, depending on condition of the unit/neighborhood.

You’re also assuming that we plan to buy everything in the same complex, when in fact we’ll be spread out all over, both condos and SFR’s (no apartment conversions, nothing without an attached garage – it’s important to think like prospective tenants), in areas that I believe will hold up well. There are many such areas in Temecula that are still nice after 15-20 years, like any city.

[quote]More than a few times, I’ve seen retirees who end up regretting they invested so heavily in low-income rentals they can’t easily unload. If you choose to leave TV when your kids go away to college, you may then find yourself running back up there several times a week to cope with endless tenant issues since you state you will manage your units yourself.[/quote]

Then your experience has been different than mine. I know more people who have done well with rentals than have lost, and those who lost are those who bought at the wrong time. Now is the wrong time to buy on the coast. As for tenant issues, I stated that we would manage them ourselves at first. That will change later. Also these are not “low income” properties – they are on the lower end of middle class for Temecula, but certainly not the poor house. $150k gets you a very nice condo here.

I’m guessing that next you’ll start telling me tenant horror stories, but you should know I’ve thought of that, too. There are ways to ensure you get quality tenants, and that’s by pricing below market and checking references. If you get greedy and sacrifice quality for money, you’ll always get burned.

[quote]Also, with your “investment strategy,” keep in mind a couple of things. HOA dues always go UP, never down. Even though you can write HOA dues off on your taxes for a rental unit, you STILL have to PAY the dues first and they (as well as unexpected “special assessments”) can be VERY detrimental to your monthly cash flow.[/quote]

I can’t imagine a $46 HOA going up much, so that doesn’t concern me. Of course zero HOA would be better, but that’s difficult to find in newer areas, and buying newer properties is important for keeping maintenance costs down, which can make an HOA special assesment look like a parking ticket. The $200 HOA’s for condos carry more risk, as they cover much more than an SFR’s does. However, this again goes back to diversifying in different areas and paying a good price for all your properties in the first place. If something bad happens, you can absorb the loss. If not, you made mistakes along the way.

[quote]And when you go to purchase more property and already own rental unit(s), a lender typically only gives you credit for 9 mos. year rental income, NOT 11 months, as you previously stated. And you may have to prove to the lender the steady receipt of rental income over a period of time, when seeking another mortgage loan.[/quote]

Please read my posts carefully before getting confrontational. The “11 months” was my own estimate on actual occupancy, not what the lender would give me credit for. I’m well aware that they will not count all of the rental income, and I’m also well aware that they require a track record of occupancy. I’ve been saying that on this forum for years.

[quote]Just offering another perspective re: not putting all your eggs in one basket :=}[/quote]

All of our eggs are not in one basket. We have other sources of income and investments.

[Author]

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