Forum Replies Created
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AuthorPosts
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Ren
Participant[quote=paramount]My total mortgage is ~ $1600/month because I am in fact conservative, and very affordable as a % of my income. My taxes are barely over 1%.
I bought early 2003, were those bubble years? I never even knew what a RE bubble was until around 2005~2006. The $1600 = PITI.
I bought for 270k and put 30k down (of my own hard earned dollars), I have been making payments (never even one day late) for almost 8 years now. I have nothing to show for it, nothing. It’s all gone. I never expected to ‘make’ money on my house, but I never expected it to be a liability either.
I told my wife this past weekend if there is some sort of August surprise and we are not offered any relief that we should positively walk.
It was my intention to move to San Diego this summer, closer to my office. This still may happen, it’s just difficult to do particularly with kids.[/quote]
This whole time I thought you had a major problem, but it’s more regret than a current financial bind. After the tax benefit, you’re actually close to break-even, maybe slightly positive depending on the neighborhood, not counting maintenance. If you ditch it now, you’ll have nothing to show for the last 8 years. Instead, save your credit, rent the place out, and rent in SD. You’ll need to cover some maintenance out of pocket, but inflation will work in your favor and it will cash flow over time. In 22 years you’ll have a paid-for ATM spitting out roughly $1.5k every month (factoring in inflation guesstimate, tax, high maintenance costs of an older property, etc.).
Maybe you did buy at a high price – so let someone else pay it, at least until the next cycle peak. The very last thing I would do is walk away from this now.
Participant[quote=paramount]My total mortgage is ~ $1600/month because I am in fact conservative, and very affordable as a % of my income. My taxes are barely over 1%.
I bought early 2003, were those bubble years? I never even knew what a RE bubble was until around 2005~2006. The $1600 = PITI.
I bought for 270k and put 30k down (of my own hard earned dollars), I have been making payments (never even one day late) for almost 8 years now. I have nothing to show for it, nothing. It’s all gone. I never expected to ‘make’ money on my house, but I never expected it to be a liability either.
I told my wife this past weekend if there is some sort of August surprise and we are not offered any relief that we should positively walk.
It was my intention to move to San Diego this summer, closer to my office. This still may happen, it’s just difficult to do particularly with kids.[/quote]
This whole time I thought you had a major problem, but it’s more regret than a current financial bind. After the tax benefit, you’re actually close to break-even, maybe slightly positive depending on the neighborhood, not counting maintenance. If you ditch it now, you’ll have nothing to show for the last 8 years. Instead, save your credit, rent the place out, and rent in SD. You’ll need to cover some maintenance out of pocket, but inflation will work in your favor and it will cash flow over time. In 22 years you’ll have a paid-for ATM spitting out roughly $1.5k every month (factoring in inflation guesstimate, tax, high maintenance costs of an older property, etc.).
Maybe you did buy at a high price – so let someone else pay it, at least until the next cycle peak. The very last thing I would do is walk away from this now.
Participant[quote=paramount]My total mortgage is ~ $1600/month because I am in fact conservative, and very affordable as a % of my income. My taxes are barely over 1%.
I bought early 2003, were those bubble years? I never even knew what a RE bubble was until around 2005~2006. The $1600 = PITI.
I bought for 270k and put 30k down (of my own hard earned dollars), I have been making payments (never even one day late) for almost 8 years now. I have nothing to show for it, nothing. It’s all gone. I never expected to ‘make’ money on my house, but I never expected it to be a liability either.
I told my wife this past weekend if there is some sort of August surprise and we are not offered any relief that we should positively walk.
It was my intention to move to San Diego this summer, closer to my office. This still may happen, it’s just difficult to do particularly with kids.[/quote]
This whole time I thought you had a major problem, but it’s more regret than a current financial bind. After the tax benefit, you’re actually close to break-even, maybe slightly positive depending on the neighborhood, not counting maintenance. If you ditch it now, you’ll have nothing to show for the last 8 years. Instead, save your credit, rent the place out, and rent in SD. You’ll need to cover some maintenance out of pocket, but inflation will work in your favor and it will cash flow over time. In 22 years you’ll have a paid-for ATM spitting out roughly $1.5k every month (factoring in inflation guesstimate, tax, high maintenance costs of an older property, etc.).
Maybe you did buy at a high price – so let someone else pay it, at least until the next cycle peak. The very last thing I would do is walk away from this now.
Participant[quote=paramount]My total mortgage is ~ $1600/month because I am in fact conservative, and very affordable as a % of my income. My taxes are barely over 1%.
I bought early 2003, were those bubble years? I never even knew what a RE bubble was until around 2005~2006. The $1600 = PITI.
I bought for 270k and put 30k down (of my own hard earned dollars), I have been making payments (never even one day late) for almost 8 years now. I have nothing to show for it, nothing. It’s all gone. I never expected to ‘make’ money on my house, but I never expected it to be a liability either.
I told my wife this past weekend if there is some sort of August surprise and we are not offered any relief that we should positively walk.
It was my intention to move to San Diego this summer, closer to my office. This still may happen, it’s just difficult to do particularly with kids.[/quote]
This whole time I thought you had a major problem, but it’s more regret than a current financial bind. After the tax benefit, you’re actually close to break-even, maybe slightly positive depending on the neighborhood, not counting maintenance. If you ditch it now, you’ll have nothing to show for the last 8 years. Instead, save your credit, rent the place out, and rent in SD. You’ll need to cover some maintenance out of pocket, but inflation will work in your favor and it will cash flow over time. In 22 years you’ll have a paid-for ATM spitting out roughly $1.5k every month (factoring in inflation guesstimate, tax, high maintenance costs of an older property, etc.).
Maybe you did buy at a high price – so let someone else pay it, at least until the next cycle peak. The very last thing I would do is walk away from this now.
Participant[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.
Participant[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.
Participant[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.
Participant[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.
Participant[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.
Participant[quote=bearishgurl]Ren, I don’t mean to be argumentative, but do you think TV is more of a “premium” location than North Park (5-10 mins. from dtn. SD on surface sts)? How much (%) premium (if any) should be attributed to a “craftsman-built” home that is still in original condition? And, do you think “coastal” neighborhoods in SD County are the only locations which are worthy of commanding a “premium?” Should properties in Imperial Beach command a premium?[/quote]
What I meant is, I wouldn’t consider North Park to be a premium location for the price. If prices were more reasonable (not necessarily as low as Temecula), maybe I would consider it. For other areas, it really depends on your needs and taste. I wouldn’t choose to live in Imperial Beach, but many others might love it.
[quote]Ren, do you think SFR’s (purchased in the last 15 years) in CA “coastal” areas will “break-even” as rentals? If not, do you think that they’re not worth buying because of this? Do you equate “size” or “square footage” with value or rental-rate?[/quote]
You have to look at individual properties, their purchase price, and local rental rates to determine that. It’s not easy for any property anywhere in San Diego county to be a good rental if purchased in the last 6 or 7 years. When you factor in long-term maintenance, which is a huge chunk (can be 30-40% of rent), they just don’t have positive cash flow. If it’s meant as a primary residence, then positive cash flow isn’t so important, but you would want to break even in case you had to rent it in an emergency.
[quote]Ren, do you pay 2% annually in “taxes” after adding your MR bonds to your 1.5% tax rate, or does your 1.5% rate also cover your MR bonds? In other words, is your annual tax bill on a property assessed at $250K $3,750 ($313 mo.) or closer to $5,000 ($417 mo.)? When you add your taxes, MR, fire ins. prem and $46 HOA fee to your monthly P&I, could you STILL break even if you were to find a tenant tomorrow and begin collecting rent on your current TV property? Moreover, if you retire to SD County and still have rental(s) in RIV Co., will you manage them yourself?[/quote]
Our total tax is 1.52%, so around $3,750. I don’t know how that’s broken down, my wife pays attention to that.
For rental properties in TV, I’m actually even more optimistic than TG. Our total payment, including everything you mentioned, is $1,450/month. After the tax benefit, which is even better for rentals (HOA and other maintenance is deductible), it’s closer to $1,150. Based on Craigslist ads for similar homes, it would rent for $1,600 if we charge a little below market. Figuring an average of 11 months/year occupied, which I think is conservative for the location, that’s an average of just over $300/month positive if we rented it out today. We would manage the properties ourselves, at first anyway.
Pick any property in Temecula that’s $250k-ish or less, and with 20% down, you’ll most likely have positive cash flow. A $300k property will still get you positive cash flow, but the return isn’t as good for the amount down. I think the sweet spot is condos and 3/2 sfr’s from $150k-200k. Our future investment properties will be in that sweet spot with 30%+ down, and so will have more positive cash flow.[quote]Why is child care lower-priced in TV than SD? Don’t you have to leave your children for longer periods at daycare because of lengthy commutes?[/quote]
I imagine it’s lower because everything is lower – incomes, rents, etc. Child care is based on the number of days/week, and at least at our school, you can have the kids there for up to 10 hours before they charge you an extra $10/hour. We have to work it so that my wife drops them off and I pick them up. Our favorite teacher wants to quit and come be our nanny, and we’re seriously considering that, which would shave off another $500/month.
[quote]What’s your typical family gasoline bill? I live 10 mi. from dtn. SD (surface sts) and go there at least twice a week, along with numerous local errands and use about $80-$100 month or 2 – 2 1/2 tanks (if I don’t take any road trips). FWIW, I drive a luxury sedan.[/quote]
That’s hard to say – my wife is on maternity leave, and when she goes back, it will hopefully be 2-3 days/week with the rest spent at home. My gas depends on where I’m working, as I mainly do contract work either on site or at home. Assuming she’ll be a part time commuter to UTC and I’ll still be in Carlsbad, we’ll spend about $500/month on gas. We both have mid-size 4-bangers.
[quote]Ren, how much (%) lower would the “right price” be for SD County coastal zip codes? And how long do you think it will take the market to get there? Do you think the market on the “coast” will come down in price enough by the time you’re ready to buy a property to retire in?[/quote]
It’s the right price when the math works for your purposes (rental or primary residence). I’ve stopped trying to guess how much further it will drop or how long that will take. All I know is that coastal properties are overpriced today, maybe by 20%, and being artificially propped up. The reason I consider the coast a better long-term investment is because it will always be easier to rent out a property there, although I also don’t see Temecula deteriorating to the point where it would be difficult to rent out a property, either. If I was wealthy and prices were reasonable on the coast, that’s probably where I would buy. I’m not, and Temecula prices are reasonable now, so it’s currently a better investment.
Participant[quote=bearishgurl]Ren, I don’t mean to be argumentative, but do you think TV is more of a “premium” location than North Park (5-10 mins. from dtn. SD on surface sts)? How much (%) premium (if any) should be attributed to a “craftsman-built” home that is still in original condition? And, do you think “coastal” neighborhoods in SD County are the only locations which are worthy of commanding a “premium?” Should properties in Imperial Beach command a premium?[/quote]
What I meant is, I wouldn’t consider North Park to be a premium location for the price. If prices were more reasonable (not necessarily as low as Temecula), maybe I would consider it. For other areas, it really depends on your needs and taste. I wouldn’t choose to live in Imperial Beach, but many others might love it.
[quote]Ren, do you think SFR’s (purchased in the last 15 years) in CA “coastal” areas will “break-even” as rentals? If not, do you think that they’re not worth buying because of this? Do you equate “size” or “square footage” with value or rental-rate?[/quote]
You have to look at individual properties, their purchase price, and local rental rates to determine that. It’s not easy for any property anywhere in San Diego county to be a good rental if purchased in the last 6 or 7 years. When you factor in long-term maintenance, which is a huge chunk (can be 30-40% of rent), they just don’t have positive cash flow. If it’s meant as a primary residence, then positive cash flow isn’t so important, but you would want to break even in case you had to rent it in an emergency.
[quote]Ren, do you pay 2% annually in “taxes” after adding your MR bonds to your 1.5% tax rate, or does your 1.5% rate also cover your MR bonds? In other words, is your annual tax bill on a property assessed at $250K $3,750 ($313 mo.) or closer to $5,000 ($417 mo.)? When you add your taxes, MR, fire ins. prem and $46 HOA fee to your monthly P&I, could you STILL break even if you were to find a tenant tomorrow and begin collecting rent on your current TV property? Moreover, if you retire to SD County and still have rental(s) in RIV Co., will you manage them yourself?[/quote]
Our total tax is 1.52%, so around $3,750. I don’t know how that’s broken down, my wife pays attention to that.
For rental properties in TV, I’m actually even more optimistic than TG. Our total payment, including everything you mentioned, is $1,450/month. After the tax benefit, which is even better for rentals (HOA and other maintenance is deductible), it’s closer to $1,150. Based on Craigslist ads for similar homes, it would rent for $1,600 if we charge a little below market. Figuring an average of 11 months/year occupied, which I think is conservative for the location, that’s an average of just over $300/month positive if we rented it out today. We would manage the properties ourselves, at first anyway.
Pick any property in Temecula that’s $250k-ish or less, and with 20% down, you’ll most likely have positive cash flow. A $300k property will still get you positive cash flow, but the return isn’t as good for the amount down. I think the sweet spot is condos and 3/2 sfr’s from $150k-200k. Our future investment properties will be in that sweet spot with 30%+ down, and so will have more positive cash flow.[quote]Why is child care lower-priced in TV than SD? Don’t you have to leave your children for longer periods at daycare because of lengthy commutes?[/quote]
I imagine it’s lower because everything is lower – incomes, rents, etc. Child care is based on the number of days/week, and at least at our school, you can have the kids there for up to 10 hours before they charge you an extra $10/hour. We have to work it so that my wife drops them off and I pick them up. Our favorite teacher wants to quit and come be our nanny, and we’re seriously considering that, which would shave off another $500/month.
[quote]What’s your typical family gasoline bill? I live 10 mi. from dtn. SD (surface sts) and go there at least twice a week, along with numerous local errands and use about $80-$100 month or 2 – 2 1/2 tanks (if I don’t take any road trips). FWIW, I drive a luxury sedan.[/quote]
That’s hard to say – my wife is on maternity leave, and when she goes back, it will hopefully be 2-3 days/week with the rest spent at home. My gas depends on where I’m working, as I mainly do contract work either on site or at home. Assuming she’ll be a part time commuter to UTC and I’ll still be in Carlsbad, we’ll spend about $500/month on gas. We both have mid-size 4-bangers.
[quote]Ren, how much (%) lower would the “right price” be for SD County coastal zip codes? And how long do you think it will take the market to get there? Do you think the market on the “coast” will come down in price enough by the time you’re ready to buy a property to retire in?[/quote]
It’s the right price when the math works for your purposes (rental or primary residence). I’ve stopped trying to guess how much further it will drop or how long that will take. All I know is that coastal properties are overpriced today, maybe by 20%, and being artificially propped up. The reason I consider the coast a better long-term investment is because it will always be easier to rent out a property there, although I also don’t see Temecula deteriorating to the point where it would be difficult to rent out a property, either. If I was wealthy and prices were reasonable on the coast, that’s probably where I would buy. I’m not, and Temecula prices are reasonable now, so it’s currently a better investment.
Participant[quote=bearishgurl]Ren, I don’t mean to be argumentative, but do you think TV is more of a “premium” location than North Park (5-10 mins. from dtn. SD on surface sts)? How much (%) premium (if any) should be attributed to a “craftsman-built” home that is still in original condition? And, do you think “coastal” neighborhoods in SD County are the only locations which are worthy of commanding a “premium?” Should properties in Imperial Beach command a premium?[/quote]
What I meant is, I wouldn’t consider North Park to be a premium location for the price. If prices were more reasonable (not necessarily as low as Temecula), maybe I would consider it. For other areas, it really depends on your needs and taste. I wouldn’t choose to live in Imperial Beach, but many others might love it.
[quote]Ren, do you think SFR’s (purchased in the last 15 years) in CA “coastal” areas will “break-even” as rentals? If not, do you think that they’re not worth buying because of this? Do you equate “size” or “square footage” with value or rental-rate?[/quote]
You have to look at individual properties, their purchase price, and local rental rates to determine that. It’s not easy for any property anywhere in San Diego county to be a good rental if purchased in the last 6 or 7 years. When you factor in long-term maintenance, which is a huge chunk (can be 30-40% of rent), they just don’t have positive cash flow. If it’s meant as a primary residence, then positive cash flow isn’t so important, but you would want to break even in case you had to rent it in an emergency.
[quote]Ren, do you pay 2% annually in “taxes” after adding your MR bonds to your 1.5% tax rate, or does your 1.5% rate also cover your MR bonds? In other words, is your annual tax bill on a property assessed at $250K $3,750 ($313 mo.) or closer to $5,000 ($417 mo.)? When you add your taxes, MR, fire ins. prem and $46 HOA fee to your monthly P&I, could you STILL break even if you were to find a tenant tomorrow and begin collecting rent on your current TV property? Moreover, if you retire to SD County and still have rental(s) in RIV Co., will you manage them yourself?[/quote]
Our total tax is 1.52%, so around $3,750. I don’t know how that’s broken down, my wife pays attention to that.
For rental properties in TV, I’m actually even more optimistic than TG. Our total payment, including everything you mentioned, is $1,450/month. After the tax benefit, which is even better for rentals (HOA and other maintenance is deductible), it’s closer to $1,150. Based on Craigslist ads for similar homes, it would rent for $1,600 if we charge a little below market. Figuring an average of 11 months/year occupied, which I think is conservative for the location, that’s an average of just over $300/month positive if we rented it out today. We would manage the properties ourselves, at first anyway.
Pick any property in Temecula that’s $250k-ish or less, and with 20% down, you’ll most likely have positive cash flow. A $300k property will still get you positive cash flow, but the return isn’t as good for the amount down. I think the sweet spot is condos and 3/2 sfr’s from $150k-200k. Our future investment properties will be in that sweet spot with 30%+ down, and so will have more positive cash flow.[quote]Why is child care lower-priced in TV than SD? Don’t you have to leave your children for longer periods at daycare because of lengthy commutes?[/quote]
I imagine it’s lower because everything is lower – incomes, rents, etc. Child care is based on the number of days/week, and at least at our school, you can have the kids there for up to 10 hours before they charge you an extra $10/hour. We have to work it so that my wife drops them off and I pick them up. Our favorite teacher wants to quit and come be our nanny, and we’re seriously considering that, which would shave off another $500/month.
[quote]What’s your typical family gasoline bill? I live 10 mi. from dtn. SD (surface sts) and go there at least twice a week, along with numerous local errands and use about $80-$100 month or 2 – 2 1/2 tanks (if I don’t take any road trips). FWIW, I drive a luxury sedan.[/quote]
That’s hard to say – my wife is on maternity leave, and when she goes back, it will hopefully be 2-3 days/week with the rest spent at home. My gas depends on where I’m working, as I mainly do contract work either on site or at home. Assuming she’ll be a part time commuter to UTC and I’ll still be in Carlsbad, we’ll spend about $500/month on gas. We both have mid-size 4-bangers.
[quote]Ren, how much (%) lower would the “right price” be for SD County coastal zip codes? And how long do you think it will take the market to get there? Do you think the market on the “coast” will come down in price enough by the time you’re ready to buy a property to retire in?[/quote]
It’s the right price when the math works for your purposes (rental or primary residence). I’ve stopped trying to guess how much further it will drop or how long that will take. All I know is that coastal properties are overpriced today, maybe by 20%, and being artificially propped up. The reason I consider the coast a better long-term investment is because it will always be easier to rent out a property there, although I also don’t see Temecula deteriorating to the point where it would be difficult to rent out a property, either. If I was wealthy and prices were reasonable on the coast, that’s probably where I would buy. I’m not, and Temecula prices are reasonable now, so it’s currently a better investment.
Participant[quote=bearishgurl]Ren, I don’t mean to be argumentative, but do you think TV is more of a “premium” location than North Park (5-10 mins. from dtn. SD on surface sts)? How much (%) premium (if any) should be attributed to a “craftsman-built” home that is still in original condition? And, do you think “coastal” neighborhoods in SD County are the only locations which are worthy of commanding a “premium?” Should properties in Imperial Beach command a premium?[/quote]
What I meant is, I wouldn’t consider North Park to be a premium location for the price. If prices were more reasonable (not necessarily as low as Temecula), maybe I would consider it. For other areas, it really depends on your needs and taste. I wouldn’t choose to live in Imperial Beach, but many others might love it.
[quote]Ren, do you think SFR’s (purchased in the last 15 years) in CA “coastal” areas will “break-even” as rentals? If not, do you think that they’re not worth buying because of this? Do you equate “size” or “square footage” with value or rental-rate?[/quote]
You have to look at individual properties, their purchase price, and local rental rates to determine that. It’s not easy for any property anywhere in San Diego county to be a good rental if purchased in the last 6 or 7 years. When you factor in long-term maintenance, which is a huge chunk (can be 30-40% of rent), they just don’t have positive cash flow. If it’s meant as a primary residence, then positive cash flow isn’t so important, but you would want to break even in case you had to rent it in an emergency.
[quote]Ren, do you pay 2% annually in “taxes” after adding your MR bonds to your 1.5% tax rate, or does your 1.5% rate also cover your MR bonds? In other words, is your annual tax bill on a property assessed at $250K $3,750 ($313 mo.) or closer to $5,000 ($417 mo.)? When you add your taxes, MR, fire ins. prem and $46 HOA fee to your monthly P&I, could you STILL break even if you were to find a tenant tomorrow and begin collecting rent on your current TV property? Moreover, if you retire to SD County and still have rental(s) in RIV Co., will you manage them yourself?[/quote]
Our total tax is 1.52%, so around $3,750. I don’t know how that’s broken down, my wife pays attention to that.
For rental properties in TV, I’m actually even more optimistic than TG. Our total payment, including everything you mentioned, is $1,450/month. After the tax benefit, which is even better for rentals (HOA and other maintenance is deductible), it’s closer to $1,150. Based on Craigslist ads for similar homes, it would rent for $1,600 if we charge a little below market. Figuring an average of 11 months/year occupied, which I think is conservative for the location, that’s an average of just over $300/month positive if we rented it out today. We would manage the properties ourselves, at first anyway.
Pick any property in Temecula that’s $250k-ish or less, and with 20% down, you’ll most likely have positive cash flow. A $300k property will still get you positive cash flow, but the return isn’t as good for the amount down. I think the sweet spot is condos and 3/2 sfr’s from $150k-200k. Our future investment properties will be in that sweet spot with 30%+ down, and so will have more positive cash flow.[quote]Why is child care lower-priced in TV than SD? Don’t you have to leave your children for longer periods at daycare because of lengthy commutes?[/quote]
I imagine it’s lower because everything is lower – incomes, rents, etc. Child care is based on the number of days/week, and at least at our school, you can have the kids there for up to 10 hours before they charge you an extra $10/hour. We have to work it so that my wife drops them off and I pick them up. Our favorite teacher wants to quit and come be our nanny, and we’re seriously considering that, which would shave off another $500/month.
[quote]What’s your typical family gasoline bill? I live 10 mi. from dtn. SD (surface sts) and go there at least twice a week, along with numerous local errands and use about $80-$100 month or 2 – 2 1/2 tanks (if I don’t take any road trips). FWIW, I drive a luxury sedan.[/quote]
That’s hard to say – my wife is on maternity leave, and when she goes back, it will hopefully be 2-3 days/week with the rest spent at home. My gas depends on where I’m working, as I mainly do contract work either on site or at home. Assuming she’ll be a part time commuter to UTC and I’ll still be in Carlsbad, we’ll spend about $500/month on gas. We both have mid-size 4-bangers.
[quote]Ren, how much (%) lower would the “right price” be for SD County coastal zip codes? And how long do you think it will take the market to get there? Do you think the market on the “coast” will come down in price enough by the time you’re ready to buy a property to retire in?[/quote]
It’s the right price when the math works for your purposes (rental or primary residence). I’ve stopped trying to guess how much further it will drop or how long that will take. All I know is that coastal properties are overpriced today, maybe by 20%, and being artificially propped up. The reason I consider the coast a better long-term investment is because it will always be easier to rent out a property there, although I also don’t see Temecula deteriorating to the point where it would be difficult to rent out a property, either. If I was wealthy and prices were reasonable on the coast, that’s probably where I would buy. I’m not, and Temecula prices are reasonable now, so it’s currently a better investment.
Participant[quote=bearishgurl]Ren, I don’t mean to be argumentative, but do you think TV is more of a “premium” location than North Park (5-10 mins. from dtn. SD on surface sts)? How much (%) premium (if any) should be attributed to a “craftsman-built” home that is still in original condition? And, do you think “coastal” neighborhoods in SD County are the only locations which are worthy of commanding a “premium?” Should properties in Imperial Beach command a premium?[/quote]
What I meant is, I wouldn’t consider North Park to be a premium location for the price. If prices were more reasonable (not necessarily as low as Temecula), maybe I would consider it. For other areas, it really depends on your needs and taste. I wouldn’t choose to live in Imperial Beach, but many others might love it.
[quote]Ren, do you think SFR’s (purchased in the last 15 years) in CA “coastal” areas will “break-even” as rentals? If not, do you think that they’re not worth buying because of this? Do you equate “size” or “square footage” with value or rental-rate?[/quote]
You have to look at individual properties, their purchase price, and local rental rates to determine that. It’s not easy for any property anywhere in San Diego county to be a good rental if purchased in the last 6 or 7 years. When you factor in long-term maintenance, which is a huge chunk (can be 30-40% of rent), they just don’t have positive cash flow. If it’s meant as a primary residence, then positive cash flow isn’t so important, but you would want to break even in case you had to rent it in an emergency.
[quote]Ren, do you pay 2% annually in “taxes” after adding your MR bonds to your 1.5% tax rate, or does your 1.5% rate also cover your MR bonds? In other words, is your annual tax bill on a property assessed at $250K $3,750 ($313 mo.) or closer to $5,000 ($417 mo.)? When you add your taxes, MR, fire ins. prem and $46 HOA fee to your monthly P&I, could you STILL break even if you were to find a tenant tomorrow and begin collecting rent on your current TV property? Moreover, if you retire to SD County and still have rental(s) in RIV Co., will you manage them yourself?[/quote]
Our total tax is 1.52%, so around $3,750. I don’t know how that’s broken down, my wife pays attention to that.
For rental properties in TV, I’m actually even more optimistic than TG. Our total payment, including everything you mentioned, is $1,450/month. After the tax benefit, which is even better for rentals (HOA and other maintenance is deductible), it’s closer to $1,150. Based on Craigslist ads for similar homes, it would rent for $1,600 if we charge a little below market. Figuring an average of 11 months/year occupied, which I think is conservative for the location, that’s an average of just over $300/month positive if we rented it out today. We would manage the properties ourselves, at first anyway.
Pick any property in Temecula that’s $250k-ish or less, and with 20% down, you’ll most likely have positive cash flow. A $300k property will still get you positive cash flow, but the return isn’t as good for the amount down. I think the sweet spot is condos and 3/2 sfr’s from $150k-200k. Our future investment properties will be in that sweet spot with 30%+ down, and so will have more positive cash flow.[quote]Why is child care lower-priced in TV than SD? Don’t you have to leave your children for longer periods at daycare because of lengthy commutes?[/quote]
I imagine it’s lower because everything is lower – incomes, rents, etc. Child care is based on the number of days/week, and at least at our school, you can have the kids there for up to 10 hours before they charge you an extra $10/hour. We have to work it so that my wife drops them off and I pick them up. Our favorite teacher wants to quit and come be our nanny, and we’re seriously considering that, which would shave off another $500/month.
[quote]What’s your typical family gasoline bill? I live 10 mi. from dtn. SD (surface sts) and go there at least twice a week, along with numerous local errands and use about $80-$100 month or 2 – 2 1/2 tanks (if I don’t take any road trips). FWIW, I drive a luxury sedan.[/quote]
That’s hard to say – my wife is on maternity leave, and when she goes back, it will hopefully be 2-3 days/week with the rest spent at home. My gas depends on where I’m working, as I mainly do contract work either on site or at home. Assuming she’ll be a part time commuter to UTC and I’ll still be in Carlsbad, we’ll spend about $500/month on gas. We both have mid-size 4-bangers.
[quote]Ren, how much (%) lower would the “right price” be for SD County coastal zip codes? And how long do you think it will take the market to get there? Do you think the market on the “coast” will come down in price enough by the time you’re ready to buy a property to retire in?[/quote]
It’s the right price when the math works for your purposes (rental or primary residence). I’ve stopped trying to guess how much further it will drop or how long that will take. All I know is that coastal properties are overpriced today, maybe by 20%, and being artificially propped up. The reason I consider the coast a better long-term investment is because it will always be easier to rent out a property there, although I also don’t see Temecula deteriorating to the point where it would be difficult to rent out a property, either. If I was wealthy and prices were reasonable on the coast, that’s probably where I would buy. I’m not, and Temecula prices are reasonable now, so it’s currently a better investment.
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