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Situations involving very old deed restrictions have gone to litigation. The ones that end up in court are usually some huge rural lot that the current owner wants to suburbanize, and the heir of the former owner being very aware of the issue, and the current owner suing the prior owner for declaratory relief on the issue. The cases like this I’ve seen the current owner usually wins. I’ve never seen something like this for just a regular residential lot.

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Ultra options like DXD are bundles of options, which means gambles with a house advantage. You might as well just go to a casino.

If you think the market is high, sell some of your long positions and buy bonds.

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The strongest rental growth will be where there is limited supply and growing demand.

The supply of single family homes with nice sized back yards for kids/dogs in central San Diego is going down each year as more and more are infilled with apartments or second units.

The fastest demand growth IMO will be from retiring upper-middle class boomers. The features that may be most popular for them may be 3 or fewer bedrooms, space for gardening/dogs/grandchildren, walk-able/bikeable neighborhood, single story house and a lot without deep canyons or drops.

For older couples, single retirees, and those without the budget to have guests stay over, condos with a lot of amenities should also do well. Within Central SD and mature North County areas, this is also the fastest growing supply as new lux complexes get built and old dumpy apartment complexes get converted to lux condos.

I think working couples with kids are probably averse to having less than 2 full baths. But retired people with only the occasional guest will probably be more willing to have 1 or 1.5 baths.

I think the coastal areas with plenty of smaller SFH on their own lots, from OB to Carlsbad, is likely the sweet spot for long-term appreciation of both rents and prices. IB and OC seem a tad too remote and downscale to attract boomers with pensions and equity from bigger paid-off residences.

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Best thing to do is buy a new house to live in and rent out the old residence. That way you get a very low primary residence interest rate.

I think SD rentals make sense if you can get 3.25-ish purchase rates or you are investing cash that otherwise would get getting 2% or less as a safe long term rate.

A mostly-financed rental at 4% seems a bit aggressive. Probably it would work out including appreciation, but you’d likely be cash flow negative at first.

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Worrying about price to rent ratios three years ago in the bay area would lead someone to rent rather than buy and miss big appreciation. It is simply one factor.

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I think tax-free bond funds are mostly for people in the highest tax bracket, and if you are not paying taxes on AGI $250,000+ plus year after year, you should consider taxable bond funds.

I have been holding BBN for many years now, it is a fund of taxable municipal bonds with moderate leverage. I’ve been very happy with it, it pays 6.4% currently (taxable!) and has gone up 24%. Looking at its holdings, I just can’t see there being much default risk and I think it will rise further. I feel safe having a pretty large position in it.

The other bond fund I like is EMD, a lower quality/emerging market bond fund that pays 11.5% and has gone up 15% since I purchased it October 2015.

So this does not look like me bragging about winning with these bond funds, let me also say I have taken a bath on my largest individual position, VGK, the Vanguard Euro stock ETF. I am down 7% in it, and it would be higher if I had not averaged down. That’s even worse considering during the same period VOO (S&P 500) has done great. I also lost 90% of small position this year in in SunEdison, now bankrupt.

I don’t care about the loss in VGK, I think Western Europe large caps are crazy cheap and long overdue for a bull run, and pay decent dividends while I wait.

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if record low rates figure into your one year forecast, that implies that rates still have to be here next year

I’ve been thinking rates would drop all year, and will probably stay low or fall further.

This is mostly because they are so crazy low in Europe and Japan right now. Why not here? Why can the 10-year rate in Japan, Germany, France, Holland, UK, Switzerland and Denmark all go to 0 or even -0.5, but our rate stay above 1%?

I know the “official reasons” why US rates are higher: higher expected inflation, economic growth, and currency depreciation. The problem is that other US asset prices should also be lower if people are expecting a weak dollar, but they are not. US stocks are doing great and loved by foreigners, but our Treasuries simply are not loved as much. I also do not think there is much reason to think the dollar will weaken over the long term v. yen and euro.

Anyway, seems like a reasonable overview… I just had to bite on the one bearish factor… 😉

OK, here’s one more bearish factor: student debt is exploding and reducing the the ability of younger buyers to get credit or save down payments.

This is bearish, but I think looking at total private household debt shows that it is partly offset by other categories of debt going down compared to prior years. Mortgage and revolving household debt went down a lot in the recession and have not recovered. And if you go another step further, and consider low rates over the past five years, the monthly cost to service existing mortgage debt may be on the low side historically, and mortgage debt is by far the largest U.S. household debt.

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Hi jfel, I think if your husband works in Lakeside, you should buy a house there, and do so ASAP.

Right now rates are very low, and in my view prices will soon rise.

There seem to be plenty of nice houses in Lakeside in the 350-450 range.

Low crime seems to be very important, so I suggest looking for higher prices (try to go up to 450) and big lot sizes of both the house and the neighborhood.

Having a short commute will allow your husband to have more time for his family and hobbies, reduce the risk of traffic accident, reduce car insurance, and reduce gas expense and vehicle wear.

You are also in luck that the Lakeside market is not super-tight as other parts of San Diego. You’ll have a decent selection in your range.

When budgeting don’t forget to include the value of the mortgage interest deduction. A four-member family with 65k in income and a 150k mortgage is not going to get a very big tax break when they buy, but your federal and state taxes will probably go down about $2,500 per year.

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OK I can think of one semi-bearish factor. Lending standards are still much tighter than during The Great Bubble of 00’s.

Really though, that isn’t saying much. That was a single crazy episode in US history. Overall, by any other historical period, lending standings are moderately loose.

Also, China is having a crazy housing bubble right now in all of its major cities, but lending standards there are extremely tight compared to ours. The standard down payment is 50%.

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I agree that hold and wait will probably work well. I have about 870k in low interest mortgage debt on them, and if the value of the property grows 4% a year with the leverage the 870k in equity grows about $70,000 a year for an 8% annual return plus the small profit from renting themselves over the mortgage/maintenance brings that up to almost 10%.

I’ve been giving some thought of moving to SF since about half of my work is there, that’s the main reason I might sell, otherwise I could not afford to buy there. Hard to really say for sure, but the return on real estate might end up being higher there too. The problem is there already has been much more appreciation there than here. SD and SF both had rapid appreciation 2011 to 2013, but we slowed down after that and SF did not.

If I moved there I’d probably get something like these:

http://www.zillow.com/homedetails/77-Blake-St-San-Francisco-CA-94118/15083534_zpid/

http://www.zillow.com/homedetails/4122-4124-17TH-St-San-Francisco-CA-94114/15127474_zpid/

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Appreciate the advice everyone. The houses are in good condition and well sized, about 1500 and 1800sf, so not really tear-downs.

The main problem with them is they are set back about 25 feet from the sidewalk and about 12 feet from the permitted building line, creating a lot of “wasted space.”

Right now, despite the fact that everyone does it, the front of a property is not allowed to be devoted entirely to parking. The city might allow a variance to permit this if it meant two 100+ year old beach cottages could be preserved, letting the wasted space in front go to parking.

The 1.7m “low estimate” of the houses value is based on their cash flow of about ~$7000/mo as long term rentals (20x annual rent) or alternatively their conservative market value if they were sold separately.

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“$12000 over 30 years. The extra $125 will reduce in ‘real’ value over the years. Plus, the average length of stay in a house is 6 years.”

I agree, that’s the worst case scenario. The extra interest may be tax deductible depending on AMT status as well. But it does happen. The banks offering to pay you for taking a higher rate are not stupid and think it is risk worth taking.

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I’ve just had a golden touch with investments the past year. Up 20% in my brokerage, and picked up a lot of silver in the 14.7-16 range.

I take back what I said about not buying 100oz silver bars. The fraud risk turns out to be extremely small, there is actually only one documented case of people doing it. They are really fun to hold and have lower premiums than other sized silver.

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Well you are actually gambling that rates will stay low or keep going down.

If you lose, you pay more for the life of the loan. If rates go back to the 4% range and you intend on keeping the house for a long time, the extra .125 will be about $125 a year in interest payments per $100,000, gradually decreasing as the balance gets paid down. But on a typical San Diego house, about $12,000 over the life of the loan.

So it is not free money, rather you won a number of bets with banks. That’s great.

The process of doing the refi also results in a credit inquiry and a lot of time and hassle, though that depends on how complicated your finances are and whether you are self employed or not. I am, and it makes the mortgage process more complicated.

I’d need at least $1000 gain before I’d deal with all that, maybe $2000. Personally, if I want to bet rates will go down, there are easier ways of doing so with bond funds and ETFs.

In summary, the cash you picked up from banks doing serial refinances are no more free money than the money I made this year with some good stock investments. In both cases we made money with correct predictions about markets. It wasn’t free because we took on risk to do so.

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If it is a legit listing, it is likely a family lives there and rents it when they are out of town.

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