Archive for May, 2009

3504 Florida North Park Ca, 92104

Thursday, May 28th, 2009

3504 Florida

Great location:


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This one just hit the market this morning, and you rarely see any deals in the Morley Field area of North Park. This is a bank-owned reo, very underpriced. It had only been on the market for hours and already groups of people were crawling all over it.

Stats:

-one two bedroom, one bath and one one bedroom, one bath

-no work needed, bank is doing the remodel for you

-tons of parking + a little garage

-list price of $321,900

-walk to Balboa Park

-I estimate gross monthly rents at $2,500-$2,750

Check out the video. I couldn’t go inside because the bank was doing some remodeling (and yes, I’ll get better at this over time):

Here’s some of the remodel progress in the back one bedroom unit;

It also has ample parking, a huge plus:

Last, but not least, make sure you take a look at the numbers, click here: 3504 Florida St-the numbers I ran them at the list price, but I figure it will shake out around $375,000 or so.

This is basically as good as it gets; if you have any interest at all make an offer as soon as you can. Don’t worry about the other buyers, you do have a shot. Trust me.

Posted in North Park | No Comments »

2120 Monroe, University Heights 92116. Case Study

Monday, May 25th, 2009

This is a duplex with no parking, one two bedroom unit with two baths and one one bedroom unit with one bath and an extra room, both attached to each other. Condition inside the units was excellent, the past owner had done a total remodel recently.

The previous owner had purchased this place for $585,000 in 2006. This came onto the market as a reo for $368,900. I previewed it asap, within one day, there were already multiple offers over list price.

I estimated the gross rents on this one to be $27,000 per year/ $2,250 per month or $700 per room on the two bedroom and $850 for the one bedroom. Even though the condition of the units was excellent, no parking does impact the rents, although not severely.

I submitted an offer on this one for one of my clients (hi T.M.!), but after days of silence from the listing agent side, we discovered that this bank just took one of the other initial offers with no counteroffer to any of the buyers One round only, the initial round.

Every bank is different, but I’m seeing this more and more now. This one was an Indymac, something to take note of for future offers.

If you’re into numbers check out this chart that lays out all the cashflow, percentage returns, etc. I just started using this program, and it’s pretty nice to have visual representations of what’s going on with the property.

One caveat: I was pretty conservative on this one with the expenses and such, so the cashflow is quite low compared to what we’re used to. Still, you could own this property for zero money out of pocket on a monthly basis.

Check it out:

You Know You Want To Read This…

Google Maps:


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And of course I have a few pictures:

Posted in University Heights | No Comments »

How do you tell when we hit the bottom?

Thursday, May 21st, 2009

I’m going to explore this further in my next newsletter, but I honestly think we are at or near the bottom of the real estate market. I assume you are going to take this with a grain of salt (as I encourage you to) because I’m “in the industry”, but look at the facts:

-first time buyers are flooding the market in record numbers

-investors are snapping up these investment properties as soon as they come onto the market

-prices are the lowest they’ve been in 15 years, even lower in some cases

-rates are historically low and the only way for them to go is up

-multiple offers on pretty much any short sale, bank-owned or similarly discounted property

Look, investors and first time buyers are the most skittish and sensitive to market fluctuations. They are (you are!) the “canaries in the coal mine”-our early warning indicators of something big coming up-like the bottom of the market.

When these types of people commit to one of the biggest purchases of their lives and vote in favor of the market with huge chunks of their savings and equity, it carries more weight than any article or media opinion.

By the time the general public picks up on this, your shot at big profits and cashflow will be greatly reduced, maybe even gone.

This stream of discounted inventory will not last. Take advantage of this while you can. We have a perfect storm of massively discounted properties, historically low rates, and the general public’s and media’s perception that the sky is falling, don’t buy, etc, etc. Act now before it’s too late.

P.S.-I have not posted a property lately, as both ones I was going to post this past week, I ended up writing offers on for a client of mine. They will be posted as “case studies” for you to learn from soon.

Posted in Uncategorized | No Comments »

Yes They’re Real

Tuesday, May 12th, 2009

There is a building with two current condo units for sale that just popped up: a one bedroom for $64,000 and a two bedroom for $94,000. And it’s not way out east-it’s right in North Park two blocks from University Ave.

Their Loss Is Your Gain

The whole building is a failed condo conversion. A small group of investors bought the apartment building late in the game, did a condo conversion, parceled the units out and remodeled most of them. Well, they were never able to sell more than just a few of them in the high $200,000’s and low $300,000’s.

All Of The “Comps” Are Now Trashed

100% of the building is now in some stage of foreclosure either short sale, bank-owned or about to be. I got involved in this building last year, but the banks at the time would not pull their heads out of the sand and sell the units for what they’re selling for now. They kept sticking to their high prices even as the inventory kept piling up.

Cashflow Is King

Now, they’ve finally slashed the prices and are just unloading the inventory around a 70% discount. If you ever wanted cashflow at an easy to get into price, check out the numbers below. One other thing: two of the one bedrooms sold for $51,900 and $59,000 and two of the two bedrooms sold for $79,000 and $89,000, but I’ll use the higher current list prices for a “quick and dirty” ESTIMATED cash flow…o.k., two other things: because of current lending rules, you have to pay cash here, and then put a loan on it after the fact (there are private money lenders that will lend you money to buy one of these, but it’s not cheap-call me if you have questions). But I will do it with an assumed loan with 20% down.

1 Bedroom

One bedroom, purchase price of $64,000 with 20% down loan at 5%. Your payment on principal and interest is $275. Wow. Tax, $59 bucks a month. HOA, $214 per month. Total: $548 per month. This would rent out for about $950, so you’re cashflowing $402 bucks a month. Heck, with no loan you’re getting $677 dollars back every month while you wait to put a mortgage on it.

2 bedroom

Let’s say you pick up the two bedroom for $95,000. 20% down, loan at 5%. Principal and interest payment is $408 dollars a month. $87 bucks a month tax, $214 per month HOA. Total is $709 fungolas per month to own this thing. This would rent for about $1,400 gross. So you’re cashflowing it $691 per month with a loan or $1099 with no loan.

Some people’s numbers would go up or down from here depending if they self-managed, how they rent it out for, etc. These are just baseline estimates to work off of and get your investment juices flowing.

These are so low priced, the market could go down another 20%, and you would still be fine. For this building, this is the bottom.

What other investment could you get into that would begin paying you right away on a monthly basis, and also give you a huge appreciation bump in the years to come?

Pretty cool.


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Posted in North Park | No Comments »

Lower Offers On Short Sales vs Bank-Owned

Sunday, May 10th, 2009

One of my clients asked me this question, and I figured it would be a good idea to share it with you:

Low offers with a short sale are more doable than with a bank-owned. The banks used to list stuff at too high of a price, but about six months ago, they just slashed the prices and threw it all out on the market. So it’s almost impossible to go below the list price.

Shortsales many times will be priced too high, either because of the bank’s incompetency or the current “owner’s” opinion of value. If they don’t have any other offers, you can sometimes make progress with a lower offer, i.e., get it submitted and get them started processing it-and maybe close.

The catch is that the approval process can take months, and at any time they can accept a higher offer from another buyer. You have to be prepared to go through the process several times before actually getting into one.

Posted in Uncategorized | No Comments »

Pentuckett Update-Multiple Offers

Friday, May 8th, 2009

This one ended up having three offers in about that many days; the seller accepted the first offer with no counteroffer as the initial offer was high enough for them to take right away.

I am seeing multiple offers on every property I look at now. This is one of those niche markets with a very responsive investor pool, so you just have to be prepared to know your numbers, evaluate and make a decision quick. That doesn’t mean you have to buy quick, but be prepared to think quick.

It’s much more common now than even a few months ago for the first round of offers to be good enough for the seller to take one right away with no counteroffer to anyone, so knowing those numbers is critical.

Ted

Posted in South Park | No Comments »

1805 Pentuckett South Park Ca, 92104. Foreclosure Price Without The Hassle?

Wednesday, May 6th, 2009

This was kind of an interesting one, as I’ve never been to this specific neighborhood. I bet a lot of locals have never even been there, unless they knew somebody. It’s a quick little drive or bike ride to downtown South Park, you pop out right at Rebecca’s Coffee on Juniper and Fern Streets. Check it out:


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This is a duplex property with two two bedroom, one bathroom units. Listing agent states actual rents of $1,200 and $900 and projected rents of $1,350 and $1,100, respectively. I guess there’s a family member renting the front unit and a long-time tenant in the back one so the rents are not up to market.

I couldn’t go inside as both are tenant occupied, but I walked the outside of the property and checked out the neighborhood. It’s really nice. All houses, no townhomes or apartment buildings-most of the houses in the area were really well maintained, and added onto. A lot of pride of ownership in this little forgotten nook.

One of the main things to pop out at me on this thing is that it’s priced like a foreclosure property, but is not a foreclosure. So I checked the tax record and saw that besides moving the title around in various trusts, the last thing this transferred hands for money was in 1984 for $1,000 bucks.

Probably a family member deal, but hard to say. The owner took out a loan for $100,000 in 2002, and that’s it for notes on the property. If you payed only $1,000 for this back in the ’80’s and only have one note for (now less than) $100,000, you can price it with the foreclosure market in mind, like this guy did.

The street dead ends at kind of a cool little park that points south and overlooks the 15, 94 and the rest of South Park.

Here it is:

Posted in South Park | No Comments »

2431 Front St Bankers Hill, Ca 92101

Wednesday, May 6th, 2009

I took a look at this property yesterday after it had been on the market five days. I should have looked sooner considering a friend of mine mentioned the property before it hit the market.

The condition was good-the pictures I have are from one of the older units, I couldn’t get into the top floor two bedroom unit that looks like it had a recent remodel-condition was excellent.

This four unit building sold back in December of 2004 for $1.1 million. The bank took it back at the auction for $920,593, then turned around and listed it for $581,130.

A chance to own a building as nice as this in Bankers hill for under $600,000-$700,000 is awesome. As per the listing agent, previous rents were $1,500 for the two bedroom, $1,000 each for the one bedrooms, and $850 for the studio, for a gross of $4,350. Seems about right for the area. The interesting thing is, these rents are only about $100-$150 more than rents up the hill in neighborhoods like Normal Heights, but the purchase prices there are generally a lot lower than this area.

If you do 25% down with a 6% loan at $581,000, your principal and interest payment is -$2,612.54. You still have to add taxes (about $530 per month), 5% vacancy rate, insurance, etc, etc. At the price it’s listed now, what a killer deal.

Apparently the rest of the San Diego investor community thought this as well-I finally got a call back this morning regarding the status of the property from the listing agent’s assistant: ten offers, many of them cash, most over list price. All of them in four days.

Like most people on the listing side, she had the whole “smoke and mirrors” thing about the price and wouldn’t disclose it. If I break out my ouija board, I think this one will shake out in the low to mid $700,000’s or high $600,000’s. I’m interested to see. A lot of people will pay a premium to live/ own in Banker’s Hill.


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The outside street pictures: the first one is looking towards downtown, and the second one is looking towards Hillcrest, both taken right in front of the building.

Posted in Banker's Hill | No Comments »

Multifamily Vacancy Rate Outlook-Real Numbers

Wednesday, May 6th, 2009

This article does talk about national trends, but specifically mentions San Diego which is why I’m including it here. And this is the county San Diego, not just coastal and metro areas which are specialized submarkets with even lower vacancy rates than the rest of the county.

Anyways, we are the second lowest in the entire country, way ahead of San Francisco even. The national average is 6% and good old San Diego is coming in at 4.7%. We always use a vacancy rate of 5% with cashflow estimates, so this is great.

Phoenix and Las Vegas have over two times the vacancy rate of San Diego, a huge difference.

Check out the article below, it’s in text, and here’s a link if that’s easier for you:

http://docs.google.com/Doc?id=dgx4bmmk_7dc2222c9

Economists’ Commentary: Multi-family
March 25, 2009

By George Ratiu, Research Economist

With the economy still struggling through the prolonged economic recession, with consumers concerned about employment and the prospects for recovery, the multi-family sector is displaying softening, but positive fundamentals. Demand for apartments declined in the fourth quarter of 2008, closing the year at a much lower pace of net absorption than 2007. However, demand is stronger in the first quarter of 2009, at 60 million square feet. Absorption is projected to maintain a moderate, but positive pace for the rest of the year.

Reflecting deteriorating economic conditions, new completions have been slowing down over 2008, closing the year about four percent lower than 2007. Completions are expected to continue dropping another 31 percent during 2009.

The national vacancy rate is at 6.0 percent for the first quarter of 2009, down 10 basis points from the previous quarter. However, following the rise in vacancy rates over the past year, rent growth in the multi-family sector is down. For the first quarter of 2009, rents are 0.4 percent.

Regionally, markets with low vacancies are concentrated along the coasts. In fact, of the 15 markets with the lowest availability rates for the quarter, only three are in the Midwest. Incidentally, topping the list of lowest availability is Pittsburgh, PA, with a vacancy rate of 4.4 percent. It is followed by San Diego, with 4.7 percent vacancy, as well as San Jose, CA and Newark, NJ, both of which post vacancies of 4.8 percent. Washington, DC, Minneapolis, MN and Boston, MA, each have vacancy rates of 5.2 percent.

On the other side, there are a few markets that have experienced a great deal of residential construction over the past few years, which competed for consumers with the multi-family sector. The list includes Phoenix, AZ, with a vacancy rate of 10.9 percent, Jacksonville, FL (10.8%), Atlanta, GA (10.7%), Las Vegas, NV (9.8%), and Orlando, FL (9.6%).

Considering multi-family’s performance during 2008 and weighing the next few months, the sector is projected to remain stable. By the end of 2009, the vacancy rate is expected to be 6.2 percent, while rent growth for the year is expected to be 1.7 percent.

Lowest Multi-Family Vacancy Rates

2009.Q1 Forecast

Pittsburgh, PA

4.4%

San Diego, CA

4.7%

Northern New Jersey (Newark)

4.8%

San Jose, CA

4.8%

Boston, MA

5.2%

Minneapolis, MN

5.2%

Washington, DC

5.2%

Baltimore, MD

5.3%

Oakland, CA

5.4%

San Francisco, CA

5.4%

National Average*

6.0%

Source: NAR/TWR

*Not all markets are represented.

This is one in a series of commentaries by the Research staff of the National Association of REALTORS®. Read more commentaries >

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Did You Know?

Nearly one-quarter of first-time buyers are single females who purchased their first home on a median income of $47,400.
Source: 2008 NAR Profile of Home Buyers and Sellers.

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Beech St Duplex Update-Multiple Offers

Tuesday, May 5th, 2009

Sorry for the delay in posts lately; there’s just been a trickle of properties to look at, but that looks like it’s changing. I’ll be out today looking at a couple.

Beech St ended up having nine offers on it with one accepted within four days. The other agent would not disclose the exact contract price, but said it was just above $350,000, all cash. About half of the offers were all cash on this one.

So, this one sold for over $100,000 more than it was listed. Was it still a good deal? Yes. I figured this one would shake out in between $350,000 and $375,000, and it did at the low end of that estimate.

Much, in fact most of the time, you need to take this kind of scenario into account when making an offer on property that is bank-owned and listed for a deeply discounted price. Just because it sells for above the list price (which is often a “teaser” to get people excited and make offers) does not mean it’s not a good deal anymore.

I have noticed a trend in the last two months that some banks are no longer doing the standard group counteroffer after the first round of offers. They’re just selecting the best initial offer, so in many cases, you may only get one shot at tying a property up in escrow.

Not to worry about paying too much though: the bank’s agent stated that on this one, four of the offers, almost half, were at or below the list price. Come on-are they serious?! Numbers don’t lie, and this one was easily worth more than the list price.

All you have to do is compare the potential rents vs expenses and go from there. Plenty of other people are trying to gouge the bank-owner, so don’t let multiple offers scare you off. They’re normal for this market, and you can still get a good investment.

Posted in South Park | No Comments »