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sdsurfer
Participant[quote=spdrun]For what it was worth — my friend was renting a one-bedroom in Carlsbad for $800 in mid-2009. Nice complex with pool, etc, though the window faced the railroad tracks and we’d get woken up by train horns at night.[/quote]
Spdrun – I feel like I’ve always appreciated your logic on things. Do you think rents will go down if prices fall along the coast in the next couple years? I’m looking for data, but your opinion means something to me based on what I’ve read from you over the years.
ParticipantI feel like that did not happen with the last downturn though. Did rents go down during the last one or at any point around 2009-10? Did people leave?
Do you have data showing that people left in the 90’s?
Thanks for chiming in!
ParticipantI’d have to agree with Harvey and recommend you go for it based on your “forever” comment. I think the timing will never be absolutely perfect. If prices are low then rates are higher if rates are low prices tend to be higher so there is always give and take.
As far as the condo…I really hate to disagree with Rich since he’s probably waay smarter than me, but I’d probably keep that too as an investment if it’s in coastal SD as long as it’s breaking even. I’m still curious what rents might do with this correction that seems to be coming at some point. My gut says that as long as demand stays strong if prices did start to fall then rents would get even more crazy from a demand standpoint because less people would be able to or want to buy. With more people choosing/being forced to rent it would push prices up (my opinion of course). The only curveball in my opinion is if demand starts to fall due to some circumstance. Could happen I guess, but does not seem to be happening now or anytime in the recent past.
In addition to my belief that rents might increase over the next couple years regardless of prices I’m not sure where I would put the money if I sold. Say the rents go up only 3% per year (past few years have been waay more than that as you know) then at least your keeping up with inflation. There was some talk about daycare and kids and maybe the cash flow from that condo ends up paying for one of your children’s college education someday 18-20 years from now in exchange for managing the property until then. Then when they are done with college it goes back to you each month.
Just my opinion and what I’d do…good luck to you!
July 22, 2016 at 1:02 PM in reply to: 3.4 new households for every new residential permit in SD #799824Participant[quote=bearishgurl]If newcomers can’t find housing in SD County that they can afford and is near enough to their prospective jobs, then they simply won’t come … plain and simple. [/quote]
Hey BG,
When is the last time people “stopped coming”? I feel like this is more of a theory that you are believing people will get fed up and go elsewhere, but I’d love some data or a history lesson on when it occurred in the past.
I hate to be naive, but I feel like people will just rent to live where they cannot afford or end up a bit inland with a commute….possibly working a job they do not like to live in a climate/area they do like. It’s just a theory and I have no data to support it though. I’ve actually been looking recently.
Participant[quote=gzz]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.[/quote]
I agree with the rates aspect, but classifying it as an investment does have some great tax advantages depending on ones financial profile (prop tax, depreciation, insurance, etc.)
I’m approaching it from the mindset that I might break even more or less (maybe a couple percent), but with an avg conservative rent increase of 3% per year in 5-10 years I’ll have a nice little cash flow relative to my original downpayment plus expenses over that time.
That is kinda why I’m looking for the historical data. I’d like rent data going back through a couple downturns so I can see what the rents did during those times. I already know they were not effected much during the last one, but I’m trying to go further back.
My gut says that with everything going on my 3% is extremely conservative, but I’d like for someone to disagree with me and provide some reasons or data too.
Participant[quote=The-Shoveler]The hard reality is that the Land (bringing in utilities etc..) and entitlements are about 80% of the cost (more so the closer you get to the coast).
The hard truth (the Gov does not want cheap homes despite what the politicians say now and then).
The other hard truth there are limited resources for any given region.[/quote]
I think these truths actually work in my favor as far as rents going up over time. Thanks for chiming in.
Participant[quote=joec]This thread is interesting…I agree that unless there is some subsidy, I doubt there will be much lower (< 600k) sfh construction anywhere in primer San Diego (coastal/north inland, not counting east or south SD). As mentioned in the home insurance thread, I think building costs have probably also sky rocketed from just 5 years ago as my home insurance has doubled pretty much. With so much anti-development all over SD and CA in general, I don't think supply will ever catch up to all the higher income jobs in the work centers so if I was lower income and didn't buy already, I'd seriously move. With the crash in 08-10, rents probably stayed the same more or less because people who lost homes still had to live somewhere supporting the rental market. I know a few people who were doing the massive leverage home buying during the bubble and loss all their homes. As mentioned, I think unless something drastic were to happen with people leaving SD or CA in general, prices won't do much, but probably steadily go up continuously as will rents. Good for the asset holders for sure... SF may drop a little I think since the tech IPO market seems to have slowed a bit. Rent there is insane I hear with 2bdrms going for 5k/month+.[/quote] It's interesting what you mention about the pricepoint aspect. It does seem like most of what is being built is above 600k so the builders must feel there is plenty of pent up demand in that range. I was talking to someone recently that mentioned 47% of the cost to build a home is related to the planning/permitting process. I'd think with expenses that high to go through the process it's justified that the builder ends up building a more expensive home to hit their desired return.
Participant[quote=Escoguy]Regarding SF rents:
Many rentals have 3-4 people in 1-2 bedrooms.
That’s how they pay $4K for 1BR and $5K for 2BR.I met a girl who worked at Nordstroms, just moved here from SF, all of her Millennial friends had multiple roommates to keep up with the rent in SF.
In that sense, I think the situation is more sustainable here. There is some inter-generational renting going on (parents plus adult child) but mostly it is larger families with 3-5 kids who need the bigger houses.
In a nutshell, the rents in SD can be supported by 1-2 professional incomes but perhaps not in SF.[/quote]
I think this is a solid example that it’s relative in a way. Like you mentioned above people get used to the prices in places like SF and SD over time and it becomes normal in a way.
ParticipantIt’s really interesting in a way because I feel like we get solid applications for our rentals sometimes and wonder, “why dont you buy?”, but I guess people have their reasons or do not like the price of what they can afford so they rent where they want to live.
I think that is a lot of it right there. The aspect that people always want what they cannot have so rather than sacrifice and go inland a bit to buy many of them stick it out and pay more to rent or find a smaller place to keep the beach lifestyle.
Participant[quote=La Jolla Renter]an oldie but goodie…
An American investment banker was at the pier of a small coastal Mexican village when a small boat with just one fisherman docked. Inside the small boat were several large yellow fin tuna. The American complimented the Mexican on the quality of his fish and asked how long it took to catch them.
The Mexican replied, “only a little while. The American then asked why didn’t he stay out longer and catch more fish? The Mexican said he had enough to support his family’s immediate needs. The American then asked, “but what do you do with the rest of your time?”
The Mexican fisherman said, “I sleep late, fish a little, play with my children, take siestas with my wife, Maria, stroll into the village each evening where I sip wine, and play guitar with my amigos. I have a full and busy life.” The American scoffed, “I am a Harvard MBA and could help you. You should spend more time fishing and with the proceeds, buy a bigger boat. With the proceeds from the bigger boat, you could buy several boats, eventually you would have a fleet of fishing boats. Instead of selling your catch to a middleman you would sell directly to the processor, eventually opening your own cannery. You would control the product, processing, and distribution. You would need to leave this small coastal fishing village and move to Mexico City, then LA and eventually New York City, where you will run your expanding enterprise.”
The Mexican fisherman asked, “But, how long will this all take?”
To which the American replied, “15 – 20 years.”
“But what then?” Asked the Mexican.
The American laughed and said, “That’s the best part. When the time is right you would announce an IPO and sell your company stock to the public and become very rich, you would make millions!”
“Millions – then what?”
The American said, “Then you would retire. Move to a small coastal fishing village where you would sleep late, fish a little, play with your kids, take siestas with your wife, stroll to the village in the evenings where you could sip wine and play your guitar with your amigos.”[/quote]
Love this one and quote it often to people.
Participant[quote=spdrun]Marriage has become a fucked up industry. People starting out and planning to have kids shouldn’t have social pressure to buy a piece of glassified carbon on credit.
It would be nice if more people said “fuck it all”, got married at city hall, and held a reception in their back yard.[/quote]
Funny story….the wife and I wanted to get married on the bluff in Encinitas. She went down to the city to buy a permit, but was told, “that is not a designated venue…your supposed to go to the spot just S of Moonlight beach” She mentioned that we really do not go to the beach there and would rather get married above the beach we go to about 300 yards north of there. Luckily…a nice person at city hall pulled her aside and told her, “just do it and stop telling everyone…nobody is going to break up your wedding”. I still need to get back and thank that whoever that was.
We ended up pulling it off. Got married on the bluff above the place I surf all the time before I head to the office. Her uncle got ordained to conduct the ceremony and we ended up having the reception in our backyard. I sometimes think her dad got kinda lucky, but I know I’m the one that really did.
Participant[quote=AN]In my area, rent didn’t drop during the last crash, so I’m not sure it would ever drop. Unless we see a major mass migration out of the region.[/quote]
I agree. There was a bit of a dip with certain properties with regards to price, but the rents held strong when investors picked up those opportunities and converted them to rentals.
Participant[quote=Escoguy]Most likely no
from report:
Rental demand is expected to remain robust over the next decade as the youngest members of the millennial genera- tion reach their 20s and begin to form their own households. Moreover, if homeownership rates for households in their 30s and 40s continue to slide, rental demand will be stronger still. For their part, the aging baby-boom generation will boost the number of older renters, ultimately pushing up demand for accessible units.
It is unknown whether high-income households will continue to fill the growing inventory of higher-end rentals or make the transition to homeownership.
Regardless, expanding the rental supply through new market-rate construction should provide some slack to tight markets as older units slowly filter down from higher to lower rents. Once high-end demand is sated, developers in some areas may turn their attention to middle- market rentals, although high development costs mean that building new units affordable to even moderate-income house- holds is difficult without government subsidies.[/quote]
Thanks Escoguy!
I really appreciate the link/article. Some great insight in there…I really liked this part:
Although conversion of formerly owner-occupied singlefamily
homes to rentals met much of the initial surge in
demand, construction of multifamily units is now taking
on a growing share. But even with these additions to supply,
rental vacancy rates have fallen steadily since 2010,
dropping to just 7.1 percent by the end of 2015. Rents have
climbed in response, with the Consumer Price Index for
rent on primary residences up 3.6 percent in nominal terms
last year. When adjusted for inflation, it has been
three decades since either of these measures registered such
tightness in the rental market.ParticipantThanks Rich! Wow…lots of info on that site. I’ll dig in and see what I can find. I’m kinda surprised more piggs are not interested in this topic. I appreciate you pointing me in the right direction.
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