Temecula’s falling knife :)

[ocean]

4-plex……you are one tuff negotiator…..100k???????
I’ve been a broker since 73,seen a few of these downturns,granted,this one feels like the big one,But I don’t see the properties dropping that far.History has shown that 10 times the gross on houses is about as far as it usually goes…..but hey…it might be different this time……actually I hope you are right….

[temeculaguy]

I’m with you Ocean, that is wishful thinking that someone can offer the bank 27 cents on the dollar in one years time and walk into a 30% profit producing property with nothing down, get a refund on those real estate books. It is also flawed thinking to call it a 1300 rental because of a 189 hoa, that’s part of the carry costs I calculated and even an sfr has landscaping, trash and fire insurance which must be backed out when the hoa provides all three. This complex also has a five year track record of no giant fee increases. Even if you didn’t borrow a thing you need to consider the cost of the money when calculating the feasability of an investment property and the price in which others will buy it before you. 100k at 6% fixed is $600 a month, 200 for hoa and 200 for taxes and additional interior insurance is a $1000 total carry with a rent of 1500, one third profit from day one ignoring appreciation which will kick in sometime in the next ten years. I would buy it a cost neutral and I can buy a bunch of them, plus there are more scavengers out there like me that will stock up on cost neutral rentals in this downturn. The rents will fall based on inventory theory won’t play out because rent didn’t go up much, they don’t bubble and they don’t crash in the same way as purchase price does. I also laid out a cogent argument why this particular area lacks rental stock and the 3000k sq ft repos don’t directly compete, they influence but they don’t directly compete. My family liquidated most of it’s rentals in the last two years, we are down to just a few that are paid off. I know we are not alone on the sidelines for proprties like this to get near 150k to jump back in, in fact I think we will be beaten to the punch as they approach cash neutral which is sub 200k, but I have a feeling things will overshoot a little an I can get a couple like it for near 150k. The kool aid from the permabulls was poison, but the koolaid from the doomsdayers is also just as lethal, fundamentals and math are the guiding light in a dark world and all the kool aid is tainted.

[temeculaguy]

I’m with you Ocean, that is wishful thinking that someone can offer the bank 27 cents on the dollar in one years time and walk into a 30% profit producing property with nothing down, get a refund on those real estate books. It is also flawed thinking to call it a 1300 rental because of a 189 hoa, that’s part of the carry costs I calculated and even an sfr has landscaping, trash and fire insurance which must be backed out when the hoa provides all three. This complex also has a five year track record of no giant fee increases. Even if you didn’t borrow a thing you need to consider the cost of the money when calculating the feasability of an investment property and the price in which others will buy it before you. 100k at 6% fixed is $600 a month, 200 for hoa and 200 for taxes and additional interior insurance is a $1000 total carry with a rent of 1500, one third profit from day one ignoring appreciation which will kick in sometime in the next ten years. I would buy it a cost neutral and I can buy a bunch of them, plus there are more scavengers out there like me that will stock up on cost neutral rentals in this downturn. The rents will fall based on inventory theory won’t play out because rent didn’t go up much, they don’t bubble and they don’t crash in the same way as purchase price does. I also laid out a cogent argument why this particular area lacks rental stock and the 3000k sq ft repos don’t directly compete, they influence but they don’t directly compete. My family liquidated most of it’s rentals in the last two years, we are down to just a few that are paid off. I know we are not alone on the sidelines for proprties like this to get near 150k to jump back in, in fact I think we will be beaten to the punch as they approach cash neutral which is sub 200k, but I have a feeling things will overshoot a little an I can get a couple like it for near 150k. The kool aid from the permabulls was poison, but the koolaid from the doomsdayers is also just as lethal, fundamentals and math are the guiding light in a dark world and all the kool aid is tainted.

[temeculaguy]

I’m with you Ocean, that is wishful thinking that someone can offer the bank 27 cents on the dollar in one years time and walk into a 30% profit producing property with nothing down, get a refund on those real estate books. It is also flawed thinking to call it a 1300 rental because of a 189 hoa, that’s part of the carry costs I calculated and even an sfr has landscaping, trash and fire insurance which must be backed out when the hoa provides all three. This complex also has a five year track record of no giant fee increases. Even if you didn’t borrow a thing you need to consider the cost of the money when calculating the feasability of an investment property and the price in which others will buy it before you. 100k at 6% fixed is $600 a month, 200 for hoa and 200 for taxes and additional interior insurance is a $1000 total carry with a rent of 1500, one third profit from day one ignoring appreciation which will kick in sometime in the next ten years. I would buy it a cost neutral and I can buy a bunch of them, plus there are more scavengers out there like me that will stock up on cost neutral rentals in this downturn. The rents will fall based on inventory theory won’t play out because rent didn’t go up much, they don’t bubble and they don’t crash in the same way as purchase price does. I also laid out a cogent argument why this particular area lacks rental stock and the 3000k sq ft repos don’t directly compete, they influence but they don’t directly compete. My family liquidated most of it’s rentals in the last two years, we are down to just a few that are paid off. I know we are not alone on the sidelines for proprties like this to get near 150k to jump back in, in fact I think we will be beaten to the punch as they approach cash neutral which is sub 200k, but I have a feeling things will overshoot a little an I can get a couple like it for near 150k. The kool aid from the permabulls was poison, but the koolaid from the doomsdayers is also just as lethal, fundamentals and math are the guiding light in a dark world and all the kool aid is tainted.

[temeculaguy]

I’m with you Ocean, that is wishful thinking that someone can offer the bank 27 cents on the dollar in one years time and walk into a 30% profit producing property with nothing down, get a refund on those real estate books. It is also flawed thinking to call it a 1300 rental because of a 189 hoa, that’s part of the carry costs I calculated and even an sfr has landscaping, trash and fire insurance which must be backed out when the hoa provides all three. This complex also has a five year track record of no giant fee increases. Even if you didn’t borrow a thing you need to consider the cost of the money when calculating the feasability of an investment property and the price in which others will buy it before you. 100k at 6% fixed is $600 a month, 200 for hoa and 200 for taxes and additional interior insurance is a $1000 total carry with a rent of 1500, one third profit from day one ignoring appreciation which will kick in sometime in the next ten years. I would buy it a cost neutral and I can buy a bunch of them, plus there are more scavengers out there like me that will stock up on cost neutral rentals in this downturn. The rents will fall based on inventory theory won’t play out because rent didn’t go up much, they don’t bubble and they don’t crash in the same way as purchase price does. I also laid out a cogent argument why this particular area lacks rental stock and the 3000k sq ft repos don’t directly compete, they influence but they don’t directly compete. My family liquidated most of it’s rentals in the last two years, we are down to just a few that are paid off. I know we are not alone on the sidelines for proprties like this to get near 150k to jump back in, in fact I think we will be beaten to the punch as they approach cash neutral which is sub 200k, but I have a feeling things will overshoot a little an I can get a couple like it for near 150k. The kool aid from the permabulls was poison, but the koolaid from the doomsdayers is also just as lethal, fundamentals and math are the guiding light in a dark world and all the kool aid is tainted.

[4plexowner]

Will rents be affected by:

– another 3000 to 6000 condos downtown in the next 18 months?

– 20 to 40% of the 24,000 housing units currently on the MLS being vacant and ultimately destined to become rentals?

– net out-migration of people from San Diego?

– continuing deterioration of the local job market?

I just re-read your post – you are specifically saying that rents won’t go down because of increasing supply and because they didn’t go up much – does it matter whether the rents can be supported by the local economy?

What about the idea that prices are set at the margin? If a family can rent a 3/2 condo downtown for $1450 because there is a glut of rental condos, the market rent for the same space in Temecula is not likely to be $1500.

Every investor has to make their own decisions. Perhaps you will buy more units than I this time around but I bet I can pick up enough at my prices to be happy

[4plexowner]

Will rents be affected by:

– another 3000 to 6000 condos downtown in the next 18 months?

– 20 to 40% of the 24,000 housing units currently on the MLS being vacant and ultimately destined to become rentals?

– net out-migration of people from San Diego?

– continuing deterioration of the local job market?

I just re-read your post – you are specifically saying that rents won’t go down because of increasing supply and because they didn’t go up much – does it matter whether the rents can be supported by the local economy?

What about the idea that prices are set at the margin? If a family can rent a 3/2 condo downtown for $1450 because there is a glut of rental condos, the market rent for the same space in Temecula is not likely to be $1500.

Every investor has to make their own decisions. Perhaps you will buy more units than I this time around but I bet I can pick up enough at my prices to be happy

[4plexowner]

Will rents be affected by:

– another 3000 to 6000 condos downtown in the next 18 months?

– 20 to 40% of the 24,000 housing units currently on the MLS being vacant and ultimately destined to become rentals?

– net out-migration of people from San Diego?

– continuing deterioration of the local job market?

I just re-read your post – you are specifically saying that rents won’t go down because of increasing supply and because they didn’t go up much – does it matter whether the rents can be supported by the local economy?

What about the idea that prices are set at the margin? If a family can rent a 3/2 condo downtown for $1450 because there is a glut of rental condos, the market rent for the same space in Temecula is not likely to be $1500.

Every investor has to make their own decisions. Perhaps you will buy more units than I this time around but I bet I can pick up enough at my prices to be happy

[4plexowner]

Will rents be affected by:

– another 3000 to 6000 condos downtown in the next 18 months?

– 20 to 40% of the 24,000 housing units currently on the MLS being vacant and ultimately destined to become rentals?

– net out-migration of people from San Diego?

– continuing deterioration of the local job market?

I just re-read your post – you are specifically saying that rents won’t go down because of increasing supply and because they didn’t go up much – does it matter whether the rents can be supported by the local economy?

What about the idea that prices are set at the margin? If a family can rent a 3/2 condo downtown for $1450 because there is a glut of rental condos, the market rent for the same space in Temecula is not likely to be $1500.

Every investor has to make their own decisions. Perhaps you will buy more units than I this time around but I bet I can pick up enough at my prices to be happy

[temeculaguy]

Point taken 4plex but when determining rental rates for condos in this zip code comparing them to the prices in downtown S.D. is irrelevent. The Pechanga casino employs 7,500 people and almost all of them commute to Temecula because of the limited rentals. There is a whopping one apartment building (condo reverse conversion to rentals) the condo complex the thread was about and two more condo complexes under construction but all are individually owned so it’s mom and pop landlords and finding one for rent is actually rare. The rest require freeway commuting and there aren’t that many within the valley. Many of those employees make a decent living with tips but they aren’t going to be able to buy because they are the stated income type and it’s not enough to buy something but it is enough to rent. I know it may seem hard to believe but when I went looking at rentals I visited the new apartments on 79S and found the 3 br 1,200 sq ft that you climb stairs and get a carport spot was going for 1800. a 1br was about 1400 and a 2br was 1600, they knock a hundred a month off with a 1 yr lease or something like that. I asked how they could ask so much and they told me they are the only apartment building in the zip code (over 40k people), that you have to drive to Rancho California Road to find the next one. I looked at it and realized that people with careers commute, people with jobs try to rent close to work. It is a different mentality and those 30k to 50k earners can’t buy and would rather not drive. The condo’s referred to in this thread are 1400-1675 sq ft tri plexes, all with attached two car garages and 2 of the three plans have backyards. I consider them to be more valuable to a renter than stacked apartments with a carport. Ignore the prices because the sellers are nuts but here are examples of the two places. The second one that is for sale is the complex that chaged gears and became apartments for the second phase but it is a few blocks and in a different gated area from the ones they sold, however they are pretty much the same and going for those ridiculous rental rates. If you are able to find one of the first complex for under 130k in the next five years, you will have my undying admiration and the beer is on me, I just don’t see it happening.

http://www.redfin.com/stingray/do/printable-listing?listing-id=717384

http://www.redfin.com/stingray/do/printable-listing?listing-id=1262510

[temeculaguy]

Point taken 4plex but when determining rental rates for condos in this zip code comparing them to the prices in downtown S.D. is irrelevent. The Pechanga casino employs 7,500 people and almost all of them commute to Temecula because of the limited rentals. There is a whopping one apartment building (condo reverse conversion to rentals) the condo complex the thread was about and two more condo complexes under construction but all are individually owned so it’s mom and pop landlords and finding one for rent is actually rare. The rest require freeway commuting and there aren’t that many within the valley. Many of those employees make a decent living with tips but they aren’t going to be able to buy because they are the stated income type and it’s not enough to buy something but it is enough to rent. I know it may seem hard to believe but when I went looking at rentals I visited the new apartments on 79S and found the 3 br 1,200 sq ft that you climb stairs and get a carport spot was going for 1800. a 1br was about 1400 and a 2br was 1600, they knock a hundred a month off with a 1 yr lease or something like that. I asked how they could ask so much and they told me they are the only apartment building in the zip code (over 40k people), that you have to drive to Rancho California Road to find the next one. I looked at it and realized that people with careers commute, people with jobs try to rent close to work. It is a different mentality and those 30k to 50k earners can’t buy and would rather not drive. The condo’s referred to in this thread are 1400-1675 sq ft tri plexes, all with attached two car garages and 2 of the three plans have backyards. I consider them to be more valuable to a renter than stacked apartments with a carport. Ignore the prices because the sellers are nuts but here are examples of the two places. The second one that is for sale is the complex that chaged gears and became apartments for the second phase but it is a few blocks and in a different gated area from the ones they sold, however they are pretty much the same and going for those ridiculous rental rates. If you are able to find one of the first complex for under 130k in the next five years, you will have my undying admiration and the beer is on me, I just don’t see it happening.

http://www.redfin.com/stingray/do/printable-listing?listing-id=717384

http://www.redfin.com/stingray/do/printable-listing?listing-id=1262510

[temeculaguy]

Point taken 4plex but when determining rental rates for condos in this zip code comparing them to the prices in downtown S.D. is irrelevent. The Pechanga casino employs 7,500 people and almost all of them commute to Temecula because of the limited rentals. There is a whopping one apartment building (condo reverse conversion to rentals) the condo complex the thread was about and two more condo complexes under construction but all are individually owned so it’s mom and pop landlords and finding one for rent is actually rare. The rest require freeway commuting and there aren’t that many within the valley. Many of those employees make a decent living with tips but they aren’t going to be able to buy because they are the stated income type and it’s not enough to buy something but it is enough to rent. I know it may seem hard to believe but when I went looking at rentals I visited the new apartments on 79S and found the 3 br 1,200 sq ft that you climb stairs and get a carport spot was going for 1800. a 1br was about 1400 and a 2br was 1600, they knock a hundred a month off with a 1 yr lease or something like that. I asked how they could ask so much and they told me they are the only apartment building in the zip code (over 40k people), that you have to drive to Rancho California Road to find the next one. I looked at it and realized that people with careers commute, people with jobs try to rent close to work. It is a different mentality and those 30k to 50k earners can’t buy and would rather not drive. The condo’s referred to in this thread are 1400-1675 sq ft tri plexes, all with attached two car garages and 2 of the three plans have backyards. I consider them to be more valuable to a renter than stacked apartments with a carport. Ignore the prices because the sellers are nuts but here are examples of the two places. The second one that is for sale is the complex that chaged gears and became apartments for the second phase but it is a few blocks and in a different gated area from the ones they sold, however they are pretty much the same and going for those ridiculous rental rates. If you are able to find one of the first complex for under 130k in the next five years, you will have my undying admiration and the beer is on me, I just don’t see it happening.

http://www.redfin.com/stingray/do/printable-listing?listing-id=717384

http://www.redfin.com/stingray/do/printable-listing?listing-id=1262510

[temeculaguy]

Point taken 4plex but when determining rental rates for condos in this zip code comparing them to the prices in downtown S.D. is irrelevent. The Pechanga casino employs 7,500 people and almost all of them commute to Temecula because of the limited rentals. There is a whopping one apartment building (condo reverse conversion to rentals) the condo complex the thread was about and two more condo complexes under construction but all are individually owned so it’s mom and pop landlords and finding one for rent is actually rare. The rest require freeway commuting and there aren’t that many within the valley. Many of those employees make a decent living with tips but they aren’t going to be able to buy because they are the stated income type and it’s not enough to buy something but it is enough to rent. I know it may seem hard to believe but when I went looking at rentals I visited the new apartments on 79S and found the 3 br 1,200 sq ft that you climb stairs and get a carport spot was going for 1800. a 1br was about 1400 and a 2br was 1600, they knock a hundred a month off with a 1 yr lease or something like that. I asked how they could ask so much and they told me they are the only apartment building in the zip code (over 40k people), that you have to drive to Rancho California Road to find the next one. I looked at it and realized that people with careers commute, people with jobs try to rent close to work. It is a different mentality and those 30k to 50k earners can’t buy and would rather not drive. The condo’s referred to in this thread are 1400-1675 sq ft tri plexes, all with attached two car garages and 2 of the three plans have backyards. I consider them to be more valuable to a renter than stacked apartments with a carport. Ignore the prices because the sellers are nuts but here are examples of the two places. The second one that is for sale is the complex that chaged gears and became apartments for the second phase but it is a few blocks and in a different gated area from the ones they sold, however they are pretty much the same and going for those ridiculous rental rates. If you are able to find one of the first complex for under 130k in the next five years, you will have my undying admiration and the beer is on me, I just don’t see it happening.

http://www.redfin.com/stingray/do/printable-listing?listing-id=717384

http://www.redfin.com/stingray/do/printable-listing?listing-id=1262510

[4plexowner]

I picked a bad example – downtown and Temecula are too far apart for comparison

A better example in this case would be the apartments down the freeway

Let’s say I can rent a 2 bdrm close to work for $1600 and the apartment down the freeway is only $1425 – it is a personal decision whether the drive is worth $175/month

But then the economy takes a turn and the apartment down the freeway lowers rents to $1300 and offers first month’s rent for free with a 1 year lease

Now the equation has changed – there will be some people who are willing to drive for $300/mo savings but wouldn’t do the drive for $175 – the demand for the $1600 apartment has been reduced by factors OUTSIDE of the area of interest

And that is my main point (although I haven’t stated it explicitly) – there are numerous changes happening right now in San Diego that are likely to significantly change rental rates and purchase prices – making a buy decision based on current rental rates is not the most prudent course of action IMO – if you really have to buy right now it should be an absolute steal (like $100K for a $200K condo)

[4plexowner]

I picked a bad example – downtown and Temecula are too far apart for comparison

A better example in this case would be the apartments down the freeway

Let’s say I can rent a 2 bdrm close to work for $1600 and the apartment down the freeway is only $1425 – it is a personal decision whether the drive is worth $175/month

But then the economy takes a turn and the apartment down the freeway lowers rents to $1300 and offers first month’s rent for free with a 1 year lease

Now the equation has changed – there will be some people who are willing to drive for $300/mo savings but wouldn’t do the drive for $175 – the demand for the $1600 apartment has been reduced by factors OUTSIDE of the area of interest

And that is my main point (although I haven’t stated it explicitly) – there are numerous changes happening right now in San Diego that are likely to significantly change rental rates and purchase prices – making a buy decision based on current rental rates is not the most prudent course of action IMO – if you really have to buy right now it should be an absolute steal (like $100K for a $200K condo)

[Author]

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