[SDEngineer]

[quote=ybitz]Even in Mira Mesa (definitely not high end), the ratio seems to be over 200.

Ratio: 217
$1860 rent [craigslist]
http://sandiego.craigslist.org/csd/ap/1177483541.html
$404,500 price[zillow]
http://www.zillow.com/homedetails/11559-Polaris-Dr-San-Diego-CA-92126/16819385_zpid/

Ratio: 211
$1900 rent [craigslist]
http://sandiego.craigslist.org/csd/apa/1177473494.html
price[zillow]
$401,500 price [zillow]
http://www.zillow.com/homedetails/7462-Dancy-Rd-San-Diego-CA-92126/16834149_zpid/

And I thought the real estate bubble had burst in the non-high-end areas such as mira mesa. How come we’re not seeing ratios in the more reasonable 150 range?[/quote]

Zestimate is garbage. They’re pretty consistently well higher than what the market price is these days, and have been since the crash started – their model appears to be quite laggy.

If you’ll look on the MLS, you’ll find comparable area/size 4/2’s going in the 320-350ish range. The highest a 4/2 of that size has closed in the past couple of months is at 375K.

Here’s a close from 3/30 of this year – similar size, area (north of Mira Mesa Blvd), lot, and configuration. Sold for 325K.

http://www.sdlookup.com/MLS-090004996-8293_Calle_Calzada_San_Diego_Ca_92126

That takes it down to about 160-180x. Not investment territory, but not terrible.

But I don’t think MM’s SFR’s have bottomed quite yet. However, they’re pretty clearly a lot closer to the bottom than the ritzier areas. The areas furthest from the city core have come down farther (San Marcos, East County, etc).

[SDEngineer]

[quote=SandraL]Excellent! Thank you.

Last question, average rent is figured by average rent on a HOUSE of the similar bed/bad configuration or APARTMENT?

I assume house, but you know what they say about assuming…. [/quote]

You are correct – compare apples to apples. If you have a 3/2 condo with a carport and a patio, it will command less rent than a 3/2 house with a 2 car garage and a yard. Location also plays into it, of course.

The idea situation is to compare a model match (same floorplan, same area), but, of course, especially on houses, that will be difficult to do a lot of the time.

[SDEngineer]

[quote=SandraL]Excellent! Thank you.

Last question, average rent is figured by average rent on a HOUSE of the similar bed/bad configuration or APARTMENT?

I assume house, but you know what they say about assuming…. [/quote]

You are correct – compare apples to apples. If you have a 3/2 condo with a carport and a patio, it will command less rent than a 3/2 house with a 2 car garage and a yard. Location also plays into it, of course.

The idea situation is to compare a model match (same floorplan, same area), but, of course, especially on houses, that will be difficult to do a lot of the time.

[SDEngineer]

[quote=SandraL]Excellent! Thank you.

Last question, average rent is figured by average rent on a HOUSE of the similar bed/bad configuration or APARTMENT?

I assume house, but you know what they say about assuming…. [/quote]

You are correct – compare apples to apples. If you have a 3/2 condo with a carport and a patio, it will command less rent than a 3/2 house with a 2 car garage and a yard. Location also plays into it, of course.

The idea situation is to compare a model match (same floorplan, same area), but, of course, especially on houses, that will be difficult to do a lot of the time.

[SDEngineer]

[quote=SandraL]Excellent! Thank you.

Last question, average rent is figured by average rent on a HOUSE of the similar bed/bad configuration or APARTMENT?

I assume house, but you know what they say about assuming…. [/quote]

You are correct – compare apples to apples. If you have a 3/2 condo with a carport and a patio, it will command less rent than a 3/2 house with a 2 car garage and a yard. Location also plays into it, of course.

The idea situation is to compare a model match (same floorplan, same area), but, of course, especially on houses, that will be difficult to do a lot of the time.

[SDEngineer]

[quote=SandraL]Excellent! Thank you.

Last question, average rent is figured by average rent on a HOUSE of the similar bed/bad configuration or APARTMENT?

I assume house, but you know what they say about assuming…. [/quote]

You are correct – compare apples to apples. If you have a 3/2 condo with a carport and a patio, it will command less rent than a 3/2 house with a 2 car garage and a yard. Location also plays into it, of course.

The idea situation is to compare a model match (same floorplan, same area), but, of course, especially on houses, that will be difficult to do a lot of the time.

[SDEngineer]

[quote=SandraL]So, in theory….a $200,000 purchase price in an area where average rent is $1200 monthly results in ratio of 166?

What would you define the ranges of ratios

1) Fantasyland ____ to _____
2) Ideal _____ to _____
3) Profitable but less than ideal ___ to ___
4) Breaking even ____ to ____
5) Hello foreclosure ____ to _____[/quote]

Yes, your math is correct. As another poster pointed out, sub 100 is when you get into very profitable investment territory (especially now with rates as low as they are). Rates do throw off this calculation some, as a lower rate means an investor can realize cash flow at a higher price than with a higher interest rate.

I think the historical average for San Diego is somewhere around 150-160.

My breakdown would be (using current rates)

1) Fantasy investors dream – < 80 2) Ideal (cash flow investment) - 80-120 3) Break even investment - 120-140 4) Rent neutral - 140-180 5) Overpriced - 180-220 6) WTF Bubble territory 220+ The difference between break even and rent neutral is the difference between an investor and a homeowner. A homeowner would be rent neutral at a higher price than the investor, since the homeowner has to pay rent every month. An investor has to allow a certain percentage of "downtime" for the unit, and cannot count on rent every month on a unit.

[SDEngineer]

[quote=SandraL]So, in theory….a $200,000 purchase price in an area where average rent is $1200 monthly results in ratio of 166?

What would you define the ranges of ratios

1) Fantasyland ____ to _____
2) Ideal _____ to _____
3) Profitable but less than ideal ___ to ___
4) Breaking even ____ to ____
5) Hello foreclosure ____ to _____[/quote]

Yes, your math is correct. As another poster pointed out, sub 100 is when you get into very profitable investment territory (especially now with rates as low as they are). Rates do throw off this calculation some, as a lower rate means an investor can realize cash flow at a higher price than with a higher interest rate.

I think the historical average for San Diego is somewhere around 150-160.

My breakdown would be (using current rates)

1) Fantasy investors dream – < 80 2) Ideal (cash flow investment) - 80-120 3) Break even investment - 120-140 4) Rent neutral - 140-180 5) Overpriced - 180-220 6) WTF Bubble territory 220+ The difference between break even and rent neutral is the difference between an investor and a homeowner. A homeowner would be rent neutral at a higher price than the investor, since the homeowner has to pay rent every month. An investor has to allow a certain percentage of "downtime" for the unit, and cannot count on rent every month on a unit.

[SDEngineer]

[quote=SandraL]So, in theory….a $200,000 purchase price in an area where average rent is $1200 monthly results in ratio of 166?

What would you define the ranges of ratios

1) Fantasyland ____ to _____
2) Ideal _____ to _____
3) Profitable but less than ideal ___ to ___
4) Breaking even ____ to ____
5) Hello foreclosure ____ to _____[/quote]

Yes, your math is correct. As another poster pointed out, sub 100 is when you get into very profitable investment territory (especially now with rates as low as they are). Rates do throw off this calculation some, as a lower rate means an investor can realize cash flow at a higher price than with a higher interest rate.

I think the historical average for San Diego is somewhere around 150-160.

My breakdown would be (using current rates)

1) Fantasy investors dream – < 80 2) Ideal (cash flow investment) - 80-120 3) Break even investment - 120-140 4) Rent neutral - 140-180 5) Overpriced - 180-220 6) WTF Bubble territory 220+ The difference between break even and rent neutral is the difference between an investor and a homeowner. A homeowner would be rent neutral at a higher price than the investor, since the homeowner has to pay rent every month. An investor has to allow a certain percentage of "downtime" for the unit, and cannot count on rent every month on a unit.

[SDEngineer]

[quote=SandraL]So, in theory….a $200,000 purchase price in an area where average rent is $1200 monthly results in ratio of 166?

What would you define the ranges of ratios

1) Fantasyland ____ to _____
2) Ideal _____ to _____
3) Profitable but less than ideal ___ to ___
4) Breaking even ____ to ____
5) Hello foreclosure ____ to _____[/quote]

Yes, your math is correct. As another poster pointed out, sub 100 is when you get into very profitable investment territory (especially now with rates as low as they are). Rates do throw off this calculation some, as a lower rate means an investor can realize cash flow at a higher price than with a higher interest rate.

I think the historical average for San Diego is somewhere around 150-160.

My breakdown would be (using current rates)

1) Fantasy investors dream – < 80 2) Ideal (cash flow investment) - 80-120 3) Break even investment - 120-140 4) Rent neutral - 140-180 5) Overpriced - 180-220 6) WTF Bubble territory 220+ The difference between break even and rent neutral is the difference between an investor and a homeowner. A homeowner would be rent neutral at a higher price than the investor, since the homeowner has to pay rent every month. An investor has to allow a certain percentage of "downtime" for the unit, and cannot count on rent every month on a unit.

[SDEngineer]

[quote=SandraL]So, in theory….a $200,000 purchase price in an area where average rent is $1200 monthly results in ratio of 166?

What would you define the ranges of ratios

1) Fantasyland ____ to _____
2) Ideal _____ to _____
3) Profitable but less than ideal ___ to ___
4) Breaking even ____ to ____
5) Hello foreclosure ____ to _____[/quote]

Yes, your math is correct. As another poster pointed out, sub 100 is when you get into very profitable investment territory (especially now with rates as low as they are). Rates do throw off this calculation some, as a lower rate means an investor can realize cash flow at a higher price than with a higher interest rate.

I think the historical average for San Diego is somewhere around 150-160.

My breakdown would be (using current rates)

1) Fantasy investors dream – < 80 2) Ideal (cash flow investment) - 80-120 3) Break even investment - 120-140 4) Rent neutral - 140-180 5) Overpriced - 180-220 6) WTF Bubble territory 220+ The difference between break even and rent neutral is the difference between an investor and a homeowner. A homeowner would be rent neutral at a higher price than the investor, since the homeowner has to pay rent every month. An investor has to allow a certain percentage of "downtime" for the unit, and cannot count on rent every month on a unit.

[SDEngineer]

[quote=knumb]

Real estate investing only makes good sense in an appreciating market, IMO. Otherwise the rent you get is not going to cover the cost of capital, the maintenance, and taxes. It’s sure not going to cover the hassle of dealing with renters.

[/quote]

This hasn’t been true in the past, and I don’t see any reason why it is true now.

When bubbles burst, they overshoot to the downside – there’s a window during this period when it is generally possible to find a property – especially at the low end – which will cash flow immediately as a rental.

Interestingly, in the ’96-’98 timeframe we saw lots of real estate investor activity (the buy-and-hold re investors, not the flippers of the bubble peak). This activity started well before it was apparent the bottom was in and appreciation had started up again.

[SDEngineer]

[quote=knumb]

Real estate investing only makes good sense in an appreciating market, IMO. Otherwise the rent you get is not going to cover the cost of capital, the maintenance, and taxes. It’s sure not going to cover the hassle of dealing with renters.

[/quote]

This hasn’t been true in the past, and I don’t see any reason why it is true now.

When bubbles burst, they overshoot to the downside – there’s a window during this period when it is generally possible to find a property – especially at the low end – which will cash flow immediately as a rental.

Interestingly, in the ’96-’98 timeframe we saw lots of real estate investor activity (the buy-and-hold re investors, not the flippers of the bubble peak). This activity started well before it was apparent the bottom was in and appreciation had started up again.

[SDEngineer]

[quote=knumb]

Real estate investing only makes good sense in an appreciating market, IMO. Otherwise the rent you get is not going to cover the cost of capital, the maintenance, and taxes. It’s sure not going to cover the hassle of dealing with renters.

[/quote]

This hasn’t been true in the past, and I don’t see any reason why it is true now.

When bubbles burst, they overshoot to the downside – there’s a window during this period when it is generally possible to find a property – especially at the low end – which will cash flow immediately as a rental.

Interestingly, in the ’96-’98 timeframe we saw lots of real estate investor activity (the buy-and-hold re investors, not the flippers of the bubble peak). This activity started well before it was apparent the bottom was in and appreciation had started up again.

[SDEngineer]

[quote=knumb]

Real estate investing only makes good sense in an appreciating market, IMO. Otherwise the rent you get is not going to cover the cost of capital, the maintenance, and taxes. It’s sure not going to cover the hassle of dealing with renters.

[/quote]

This hasn’t been true in the past, and I don’t see any reason why it is true now.

When bubbles burst, they overshoot to the downside – there’s a window during this period when it is generally possible to find a property – especially at the low end – which will cash flow immediately as a rental.

Interestingly, in the ’96-’98 timeframe we saw lots of real estate investor activity (the buy-and-hold re investors, not the flippers of the bubble peak). This activity started well before it was apparent the bottom was in and appreciation had started up again.

[Author]

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