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Archive for April, 2009

Union Tribune Article Making Gross Generalizations About Rental Market

Thursday, April 23rd, 2009

Check out this article:

http://www3.signonsandiego.com/stories/2009/apr/23/1n23rent004611-apartment-rents-fall-vacancies-are-/?uniontrib

It’s yet another real estate article out of thousands that speaks of market averages for a huge area like they apply to every market everywhere. A good example of what to take with a very large grain of salt.

Real estate is local, like the weather. When we get the weather report, we look at the one for our area, not some average for the whole county. Same thing for real estate submarkets.

This article mainly mentions Escondido, not coastal or metro area properties. The weather is certainly different in the city of San Diego vs. Escondido, and so are the local rental markets.

Not to mention, this article only surveyed large apartment buildings of 25 + units. Not the “boutique” rentals tenants actually want to live in like 2-4 unit properties that this website specializes in.

Escondido :

-is not in the city of San Diego

-has large amount of rental inventory due to zoning

-is far away from everything, and due to gas prices and the economy, people don’t (or prefer not to commute as much)

San Diego:

-is where the action is, and has diverse neighborhoods close to each other

-low amount of rental inventory due to condo conversions and zoning

-has walkable “hip” communities with shops and restaurants that people want to live in

Let me know what you think-the best part is that the article, still talking about how bad the rental market is for owners in Escondido, quotes vacancy rates of 94%-97%. Still really good numbers for any owner. Just talk to any apartment owner in the midwest, where vacancy rates are always in the 70 to 80 percentile range.

Ted

Posted in Uncategorized | No Comments »

Are You Kidding Me!? Cashflow Analysis of 3355 Beech St. Read Immediately.

Wednesday, April 22nd, 2009

This property is turning out to be one of the best bank-owned investment opportunities I have seen. Keep in mind that this is a “quick and dirty, back of the napkin” cashflow analysis.

The numbers could go up or down from here, mainly based on what this thing sells for. But it doesn’t take much to see that buying a duplex with four bedrooms for $232,750 is an AWESOME investment and these numbers establish a baseline to work off of.

Check this out: Purchase price of $232,750. 25% down (required by most lenders for these properties) gives you a loan amount of $174,562.50. At 5% interest, your principal and interest payment amortized over 30 years is $937.08. Add tax at $213.35 per month and throw in another $100 for insurance. Total payment is $1250.43.

Rents: $700 per room for $2,800 gross rents per month. Apply these rents to the PITI and you get cashflow ESTIMATED at $1,549.57 per month. To you, in your pocket. Or pay the loan off faster. Or you could use it to pay the rent at where ever you’re living now (maybe at the beach!?) and have a sound investment at the same time.

If you live in one of the houses as an owner occupant, and don’t even bother to rent out the other room, just take over the whole house, your cashflow will be $149.57. You will be PAID to live in your own house.

Keep in mind this place was remodeled some time ago and just needs a couple appliances in one of the units and some paint. The other unit is ready to be rented immediately. Right now, today. So you don’t have to shell out tons of cash upon closing to fix it up, not to mention your time.

You would be hard pressed to find a better deal than this one.

Posted in South Park | No Comments »

3355 Beech St South Park CA, 92102. Really Cheap & Really Good

Monday, April 20th, 2009

This duplex popped up this morning, and given the price and location, I drove over as soon as I could.

First of all, the price: $232,750 for two units with two bedrooms and one bath each. Great little neighborhood, nice and quiet. Condition of the units totally fine: wood floors, crown molding, no holes in the walls or other apparent damage. Looks like it was remodeled in the last five years or so. Missing a couple appliances, but a trip to craigslist will take care of that. Yard needs a bit work, been awhile since it’s been watered.

It’s a duplex (two units attached to each other), but each with their own separate yards and parking. Nice large corner lot in a quiet area of South Park. You can walk to Fern St (downtown South Park) in about ten minutes, it’s about six blocks away. So you’re away from the hustle and bustle of commercial traffic, but close enough to walk over there anytime you want.

The street dead ends into a canyon, so it’s pretty calm as well. I originally thought it might be a little too close to the highways judging from the map, but it’s situated on a bluff dropping down large canyons, a huge natural barrier.

I figure this would rent for about $700-$750 per room, so you’re looking at about $2,800-$3,000 gross. I don’t have my calculator on me, but it’s obvious that this thing will cashflow very nicely.

This is bank-owned, not a short sale, just hit the market. This is definitely worth an offer.

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4388-90 Texas Street University Heights Ca, 92104

Friday, April 17th, 2009

I didn’t even get a chance to preview this one, it went into escrow in seven days. Here’s some comments from the listing agent: “SELLER HAS RECEIVED MULTIPLE OFFERS! HIGHEST AND BEST DUE FRIDAY 3RD AT 5PM! Seller is in the process of finishing the work.”

It’s a triplex, with two two bedrooms and one studio. Projected rents are $1,500 for the two bedroom units and $625 for the studio for a gross of $3,625. They seem rather high for this property being so close to El Cajon Blvd.

So far, so good, and then I looked at the tax record. Owner of record is “Budget Handyman Inc”, a corporation that appears to be owned by the listing agent for the property. Tax record shows only two units, not three as advertised on the mls, so you have potential permitting issues.

The owner bought it 02/05/09 for $261,000 and is now trying to sell it after a “quick and dirty” remodel for $420,000-$450,000.

Interesting.

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5043 Saratoga Ocean Beach Ca, 92107

Thursday, April 16th, 2009

I know this is mostly about the metro area, and for good reason: the value is right there in the purchase price/ gross rents ratio.

Once in awhile I see something in PB or OB that warrants a closer look just because of the price, this is one of them. Location: one block from the beach. Unit makeup: a two on one with two bedrooms each and two off street parking areas. Price: $339,000. Bank-owned. The person that previously owned this paid in the low to mid $800,000’s for this, over a 50% drop. For beach property, this is as good as it gets.

It’s bit of wreck, but not as bad as many that I’ve seen. Conservatively, you could rent out each unit for $1,500 for a total of $3,000 gross rents per month. Let’s say you put 20% down ($67,800) and your loan amount is $271,200. Let’s run it at 4.5%, your payment is $1,374.13 per month taxes about $310 per month, insurance another $100 or so for total of $1,784,10. So, pre management fee (usually 7% of the gross), you’re cashflowing roughly $1,216 per month. If you live in one of the units, your payment is $284 per month.

I mean come on. This does not take into account appreciation, where you could be looking at several hundred thousand in seven to ten years.

Let’s see either reduce your “rent” to less than $300 bucks per month, or be paid to own beach real estate and get a huge appreciation bump in the years to come. Awesome.

Catch is, this will sell for more than it’s listed. Multiple offers for sure, and it’s only been on the market for three days. And this does not take into account fixing up. Both units could be made very nicely rentable for $5,000 total for both. I think this one could shake out around $400,000 or so, tough to say.

You will never have a problem renting these out, just because of the location. Pretty sweet, condition notwithstanding.

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2133-2135 31st St South Park Ca, 92104. And You Thought Flipping Was Dead…

Wednesday, April 15th, 2009

Something seemed a little off besides the price when I checked this one out on the mls. It had that “bank owned” feeling, but the price was definitely not.

So I checked the tax record and lo and behold, the owner is trying to flip it. Amazingly, it was not a bank owned. It the owner purchased it from someone that has owned it since 1983 for $310,000 in 02/06/08. Now the list price is $549,000.

Units are shown as currently rented, the 1/1 for $995 and the 2/1 for $1,495. The market for that area supports the rents. Nice to have these comps in hand when evaluating other properties.

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Posted in South Park | No Comments »

4324-4330 Cherokee Ave North Park, Ca 92104 Has Dropped The Price A Little

Tuesday, April 14th, 2009

This four unit property with eight bedrooms went from $349,000 to $339,000. This would be one heck of a project, the bold only need apply.

Posted in North Park | No Comments »

4505-4509 Illinois St Normal Heights 92116

Sunday, April 12th, 2009

Here’s the triplex we were involved with some months ago, it finally sold. It is three attached units of two bedrooms and one bath each, with two large garage spaces and plenty of outdoor parking. The list price was $494,900 and the final sales price was $481,000.

The condition was terrible: holes in the floor where the toilets were ripped out, ancient cabinets, wiring ripped out of the walls, extensive mold damage in one of the units, etc. Every unit needed basically a “studs out remodel” and new kitchens, baths, etc.

Traffic noise wasn’t too bad, but it was there. Final sales price per unit was $160,000-right in that “sweet spot” where these things seem to sell. If these were rehabbed, I think they’re right around the $700 per room mark, making for gross rents of about $4,200, the same as A St.

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2780 A St Golden Hill Ca, 92102

Saturday, April 11th, 2009

This is two on one (duplex) property that has been totally rehabbed by the lender owner. Both units are three bedroom, one bath units just over 900 sq ft. I estimate about $700 per room, so you’re looking at about $4,200 gross rents. The asking price is $542,000, just went on the market today. I see on the tax record the city took it back for $309,200. Tough to say what they spent on the rehab, as it includes new windows, bathrooms, kitchens, walls, ceilings carpet, side walks, fencing, everything except landscaping.

Quite a difference in prices though; $243,800. They certainly didn’t spend that much on the remodel. At $271,000 per unit I feel it’s overpriced. A good deal for a two on one is in the $150,000-$200,000 range per unit, depending. Just my two cents, maybe I’m missing something. It does back right up to Balboa Park, which is awesome and does stand for a lot.

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1527 32nd St South Park Ca, 92102

Friday, April 3rd, 2009

Once in awhile I throw a house into the mix to preview if they look pretty good. This one appears to be owned by the same lender as 34th St, the other house that was remodeled extensively. There must have been a sale on travertine that day, because this one has loads of the exact same stuff…

For an owner-occupant, this is not a bad deal. Granted, it does cost the same or more than a duplex that produces more income, so I always recommend to my owner-occ type buyers to consider a duplex or two on one for the long-term financial and wealth building benefits. But not everybody wants to manage tenants. And for them we have opportunities like this one.

Location was good, very residential area with no commercial around. Fairly private for the metro area, not much to walk to. But that’s the point for many people. You could be in the heart of South Park in minutes by bike or car, downtown San Diego, a little longer. Three bedroom three bath.

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