Forum Replies Created
-
AuthorPosts
-
an
Participant[quote=spdrun]$1100 – $15 – $140 – $260 = $685/mo
$685/mo * 12 months = $8220/yr$8220/$140000 = 5.87% cap rate.
If someone put down $100k cash and got a mortgage for the remainder ($200-250/mo), they’d be cash-flowing decently without much risk of being underwater. If they couldn’t get a small mortgage, a $100k loan would still allow for cash flow.
Try getting 5% or more return from a bank right now.[/quote]Very optimistic calculation. What about management cost (if you don’t want to manage it yourself), vacancy, maintenance? Then there’s are those who don’t want to put all $140k in 1 property or if they don’t have all $140k and they have to get a mortgage. All of those will eat away the 5.87% cap rate very quickly.
The OP only have $100k to invest, so you have to subtract $200/month due to 30 years mortgage on the remaining $40k. That alone will bring the cap rate down to 4.1%. If you add in vacancy & maintenance @ ~$100/month (I think this might be on the low side), your cap rate goes down to 3.3%. Add in $100/month for property management and you’re looking @ cap rate of 2.4%. @ that kind of return, you can get 5-7 years CD that pays you about that much without any of the potential headache that might arise being a landlord. Too much risk for too little return IMHO.
Participant[quote=spdrun]I’m in the process of looking at properties in NJ, definitely buying this summer.
As far as locally to you, here’s one that went into contract recently:
http://www.sdlookup.com/MLS-140018287-202_Woodland_Pkwy_113_San_Marcos_CA_92069
Say they got full price of $140k.
Rent: $1100/mo
Insurance: $15/mo
Taxes: $140/mo
HOA: $260/mo= 5.87% cap assuming you can keep it rented. Very close to 6%.[/quote]How did you come up with 5.87%? I thought cap rate is calculated as NOI/value of the place. Based on your number, NOI is ~$1200/year at best. $1200/140000=~0.857%. That’s assuming 100% occupancy and no maintenance. How did you come up with 5.87% cap rate?
Even when you’re talking about cash on cash ROI, $1200/28k down payment and you have 4.28% with the best assumptions. Something is not adding up.
Participant[quote=scaredyclassic]the rich plumber is kind of a cliche, but goshdarn, we were talking to this plumber who did some work in our house the other day, had a couple helpers, and his combined take home (he couldve been exagerrating but i doubt it) was greater than my househole income.
the bigger question is not which rental to buy, but why college?
maybe the money shoudl be put into starting a small business not for the poster, but the kids…
a real plan involves making kids selfsufficient.[/quote]There’s a lot of risk and hard work to start your own business. It’s not easy and not many succeed in making your rich. I know many small biz owners. Many had many failed businesses before they found their successful ones. Some do find it on their first try but many don’t. It also require a lot more work than your standard 9-5 jobs. But of course, the ceiling is much higher for a small biz owners than a W-2 worker. There’s really no right or wrong answers. You can become wealthy as well being a W-2 earners. Just look at all the original Facebook employees or Instagram employees or Google employees or even Qualcomm’s employees. Bottom line is, just do what you love. Money is not everything.
ParticipantOuch, that sucks flu. I’ve been in your shoe many times. Every time I did what you’re doing (sell most of my portfolio and wait) I always end up missing a rally. That’s just me. I’m actually fully long on all 4 US indexes now. After the ECB announcement yesterday, I can’t help but go long. They’re forcing liquidity. Where else would the $?
You’re right, people risk aversion tend to go down as you age. It’s perfectly understandable and perfectly logical. You don’t have time to make up the loss with more risky investments like you did when you’re younger. So, it’s wise to be more risk averse when you age.
We’re definitely in uncharted territory right now in the US indexes. I wonder how high this thing will go.
Participant[quote=afx114][quote=CA renter]You can’t force Americans out of their cars, for the most part, and any attempts to do so will result in forceful opposition. While I applaud attempts to make mass transit more convenient (and biking safer), it’s unreasonable to expect everyone to dump their cars in favor or buses, trains, and bikes.[/quote]
Population will grow, so what’s the other solution then? 60-lane highways to accommodate all the cars? Maybe triple-decker 40-lane highways? That thinking is no longer sustainable. The era of adding more lanes is over.
No one is asking “everyone” to dump their cars, but clearly there need to be other options.[/quote]Agree, population will grow. SD is lucky in that we don’t have to learn the hard way. Just look at LA and other major metro areas with similar size to LA. I would HATE living in LA, so I hope SD doesn’t become LA. We need to start growing more smartly now. Decide where the major job centers are, then build public transit to get to those areas. Luckily, it seems like SD’s city planning is already doing just that with the trolley system.
ParticipantI 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.
Participant[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.
ParticipantTotally 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.
Participant[quote=afx114][quote=AN]Mira Mesa is planning for exactly that when the trolly extend from UTC through Mira Mesa on Carroll Canyon. That area will be mix use and dense.[/quote]
Interesting, I hadn’t heard of that. Where can I find some more info? Best I found was this: http://www.sandiego.gov/planning/community/profiles/miramesa/pdf/carrollcanyon.pdf[/quote]
http://en.wikipedia.org/wiki/San_Diego_Trolley then search for Mira Mesa. The project is plan for completion in 2030. They’re planning to start development of Stonecreek soon and that master plan will take 20 years till completion. The Carroll Canyon master plan is underway. Phase I seems to be underway or near completion. Here’s a more detailed documentation of the Carroll Canyon master plan: http://www.sandiego.gov/planning/community/profiles/miramesa/pdf/carroll_canyon_master_plan_1994.pdf. It seems like the Carroll Canyon and Stonecreek master plans are adjacent to each other.Participant[quote=spdrun]The problem with trolleys in SD is that they’re great for getting to downtown or to the border, but jobs are sufficiently spread out that they sort of suck for commuting.
Will the trolley system ever be extended to:
(a) the airport
(b) the beach cities?[/quote]
I disagree about jobs. The major job centers are UTC/Sorrento Valley/Carmel Valley and Rancho Bernardo. Just look at the traffic pattern. If you have a trolley to go east/west, that would greatly reduced the current traffic on Mira Mesa, Miramar, and 56. If you have the trolley to go from Oceanside to downtown, you’d also greatly reduce the traffic on the I-5. You don’t need to satisfied everyone. You just need to satisfy the majority purely by observing the traffic pattern.Participant[quote=afx114]No one is talking about high-rises. This is simply about raising the height limit to 60 feet (instead of 30 where it is now). And it’s only for a single vacant lot right next to the station.
http://voiceofsandiego.org/2014/04/21/the-height-of-trolley-tensions/
Mountain, meet molehill.[/quote]Understood. I was just making about about the OP’s desire for more affordable housing. If he/she really want affordable housing, then he/she should be pushing for a lot more density and a lot more supply. What we have here will not make a dent on price/supply. I actually support more density housing around these trolly stops. Mira Mesa is planning for exactly that when the trolly extend from UTC through Mira Mesa on Carroll Canyon. That area will be mix use and dense.
60′ will mean about 4-5 story condos. That doesn’t sound sound too crazy.
Participant[quote=livinincali][quote=AN][quote=spdrun]Why wait for another bubble before things crash down?[/quote]
So I can sell all of my houses at insane prices and rent, while waiting for the crash.[/quote]Do you think you’ll know where the top of the bubble is and when it’s going to crash? What if the top of this current bubble is in the next 3-6 months?[/quote]
If you noticed, I never said anything about top. What I said is insane prices. If it never get to insane price, then I have no problem keeping what I have and buying more when it crash. What we have today IMHO is not insane prices. I wouldn’t sell at today’s price. I also never said I would know when it would crash. But I know when a price is insane when I see them. Today, in some areas, we’re still 30-40% below peak 2005 nominal price (not even talking about inflation adjusted).Between 1926 and 1996, the annual average rate of return on Real Estate was 11.1%. So, insane to me would be 2005 price + 3-11% annual increase. I’d even take 2004 price + 3-11% annual increase. For example, that would put those McMansions in Eastlake at $1.2M-$2.3M. Today, they’re going for $650-700k.
Participant[quote=spdrun]Why wait for another bubble before things crash down?[/quote]
So I can sell all of my houses at insane prices and rent, while waiting for the crash.Participant[quote=spdrun]Knocking down thousands of buildings to “convert” them to high-rises is easier said than done, I’d imagine.[/quote]I’m not saying that it would happen. I”m just saying if we really want affordable housing for all, all we need to do is drastically increase supply to the scale that I just described. If you increase supply by 100-500%, I’m pretty sure price will crash and most can buy a place for themselves.
-
AuthorPosts
