For those of you posting For those of you posting “yes”, mind if you post approximately where in S.D. ?
Also, for purposes of this post, primary home isn’t considered investment (I know plenty of you would disagree with that, but humor me 🙂 )
CA renter
September 1, 2008 @
2:57 PM
Here’s a 4/2 in O’side, in Here’s a 4/2 in O’side, in bad zip, but not the worst neighborhood. Sold 3/06 for $475K and had another sale in 2000 for $185K.
You could probably safely* rent this out for $1,200, but current “investors” in this area are hoping for $1400-$1800.
If you put 20% down and finance $147,920 at 7%, your P&I would be $984.12/mo. I figure 1.5% taxes (inclusive of bonds, extra fees, etc.) at $231.13 and insurance at about $100 (also probably high)…for a total of $1,315.25/mo. in fixed costs.
I am not including opportunity cost, maintenance, vacancy, bad tenants, etc., and it would probably take $10K-$20K to make it nice enough to get good tenants.
So, some “investors” would look at current rents (which I think are high and will go down as inventory is released back onto the market and as the recession moves through), and determine that they could get positive cash flow.
If you look in the 92057 zip, you’ll see lots of properties in the lower price range that are VERY close to being safe investments. Naturally lots of flippers/investors are buying there right now, with multiple bids being the norm, so they will end up being their own competition for good tenants (that’s why rents will likely go down, IMO).
*safely rent = people in that area could more easily afford it, resulting in far less turnover and better tenants who pay on time and maintain the place because they know they’re getting a good deal. Also a bit more resilient in a bad economy. I do NOT believe in over-pricing anything, and that applies very much to rents if you’re a LL. Better to underprice the market, and make the difference in lower maintenance and turnover, IMO.
Whew! Sorry so long! 🙂
peterb
September 1, 2008 @
4:14 PM
Could someone who’s been a Could someone who’s been a landlord for at least 10 years chime in with the real math that’s involved with making a rental property “pencil out”? Thanks.
Bumping along……
surveyor
September 1, 2008 @
4:32 PM
da years
If da years
If the landlords chimed in with all the real math involved, I imagine it would discourage many investors on this board…
Coronita
September 1, 2008 @
4:37 PM
surveyor wrote:da years [quote=surveyor]da years
If the landlords chimed in with all the real math involved, I imagine it would discourage many investors on this board…[/quote]
Quite the contrary. I’d rather go through some hairpulling math and learn from the pros… Oh please do share.
surveyor
September 1, 2008 @
5:21 PM
mathematics mathematics
FLU, if you want to see how the math works, you’ll need to see the calculator I put up on piggington (surveyor’s ROE calculator). That simplifies the math a little bit. It also puts in the numbers that real estate investors use.
Still, if you require full understanding of the math, you will need to read up on real estate investing.
In any case, any properties you look at should have the minimum:
1. cash flow
2. cash on cash of interest rate + 3%
CA renter
September 1, 2008 @
4:38 PM
Just to clarify…
I do NOT Just to clarify…
I do NOT think it’s a good time to buy now, and am not looking for rentals. Just pointing out what many “investors” (notice the quotation marks) are saying right now.
Though I’m not a LL, my parents were RE brokers and investors for decades, so I know what the costs and problems are (and why you won’t see me rushing into the LL business).
Coronita
September 1, 2008 @
4:57 PM
CA renter wrote:Here’s a 4/2 [quote=CA renter]Here’s a 4/2 in O’side, in bad zip, but not the worst neighborhood. Sold 3/06 for $475K and had another sale in 2000 for $185K.
You could probably safely* rent this out for $1,200, but current “investors” in this area are hoping for $1400-$1800.
If you put 20% down and finance $147,920 at 7%, your P&I would be $984.12/mo. I figure 1.5% taxes (inclusive of bonds, extra fees, etc.) at $231.13 and insurance at about $100 (also probably high)…for a total of $1,315.25/mo. in fixed costs.
I am not including opportunity cost, maintenance, vacancy, bad tenants, etc., and it would probably take $10K-$20K to make it nice enough to get good tenants.
So, some “investors” would look at current rents (which I think are high and will go down as inventory is released back onto the market and as the recession moves through), and determine that they could get positive cash flow.
If you look in the 92057 zip, you’ll see lots of properties in the lower price range that are VERY close to being safe investments. Naturally lots of flippers/investors are buying there right now, with multiple bids being the norm, so they will end up being their own competition for good tenants (that’s why rents will likely go down, IMO).
*safely rent = people in that area could more easily afford it, resulting in far less turnover and better tenants who pay on time and maintain the place because they know they’re getting a good deal. Also a bit more resilient in a bad economy. I do NOT believe in over-pricing anything, and that applies very much to rents if you’re a LL. Better to underprice the market, and make the difference in lower maintenance and turnover, IMO.
Whew! Sorry so long! 🙂 [/quote]
No problem. I wish more people like you would chime in so more idiots like me would just shut up on this board.
What exactly is “bad” about this specific zip code. I mean, I know there are parts of oceanside that are gang infested, and other parts that are good. Is this sort of in shady area?
CA renter
September 1, 2008 @
5:26 PM
Yes, 92057 has some of the Yes, 92057 has some of the worst gang problems in O’side. That’s where the police officer was shot a couple of years ago.
The worst area is north of North River Road (NRR), near College Ave.
This particular house (above link) is on the south side of NRR, and things get progressively better the further south you go, but this is just the other side of the river from the **really bad** parts, and has its share of undesirables although the majority are just simple, working-class people who make good neighbors.
Personally, I’d be willing to buy a rental there if prices get into the low $100K range (or lower!) for a nice, clean, house.
urbanrealtor
September 1, 2008 @
5:26 PM
I have seen lots of good I have seen lots of good deals that pencil in the 92116 zip code. These are primarily condos with some detached and multi-unit places as a component.
The conversion meltdown at 35th and Meade is bringing down prices in the whole zip code.
In 92101, I am seeing incredible deals in the downtown area. The flats in Little Italy currently represent the largest constituent of deals.
Acqua Vista (425 W Beech) currently pencils best even with the high HOA’s.
Believe it or not, El Cortez is starting to make financial sense also. Despite the monocausal weakness of this assertion, I think Kelly’s articles in Voice were a big part of turning it into a sensibly priced building.
waiting for bottom
September 1, 2008 @
5:40 PM
New listing on Copper court New listing on Copper court in SEH pencils out with 20% down. Negative to maybe even cash flow but even to positive after factoring in principal paydown.
Coronita
September 2, 2008 @
6:00 AM
bump. surveyor, mind if you bump. surveyor, mind if you post the link to your thread again. As you know, I’m a pretty lazy-lized union worker, and am generally “search” challenged. Thank you.
At least in Temecula, I see At least in Temecula, I see rents dropping on apartments about 25% off peak and falling. This will translate into home rentals to, and investors will loose money.
People are loosing jobs in socal, not just home owners, but renters too. There is a mass adjustment of how income/your welfare is spent, and we are already seeing multiple families sharing homes, condos, etc. I have posted the links many times before.
What good is buying a home as an investment unless you are netting at least 10% profit per month. Right now I’d say if you get a good tenant, you might break even. Of coarse, it’ll take a 20% down payment to get the payment even close to rents. And since your peers likely don’t have 20% down of the median price in your area, this is further proof of price declines. This is one of many reasons why housing prices will continue to fall, and rents will fall further slightly as well. Its all about supply and demand, and in the IE, there is just so, so much darn inventory. Pick your pleasure, rental inventory, or for sale inventory. Some way or another, people are spending their diminishing real wages on more important things, like food, and energy costs. They’d rather move back in with ma and pa and “save up” so they can buy a house.
peterb
September 2, 2008 @
9:48 AM
This subject has come up a This subject has come up a few times over the last year or so.
As someone who was a landlord for 5 years, I noticed only one person who laid out the math in a way that reflected my experience. All the other posts I’ve seen were way too optomistic, IMO. The guy who did this post was from a property management company, I think, that calculated the deal based on real world experience. I wish I could remember the post.
September 1, 2008 @ 2:07 PM
For those of you posting
For those of you posting “yes”, mind if you post approximately where in S.D. ?
Also, for purposes of this post, primary home isn’t considered investment (I know plenty of you would disagree with that, but humor me 🙂 )
September 1, 2008 @ 2:57 PM
Here’s a 4/2 in O’side, in
Here’s a 4/2 in O’side, in bad zip, but not the worst neighborhood. Sold 3/06 for $475K and had another sale in 2000 for $185K.
Today’s list price? $184,900.
http://www.sdlookup.com/MLS-080058950-165_Harding_St_Oceanside_Ca_92057
You could probably safely* rent this out for $1,200, but current “investors” in this area are hoping for $1400-$1800.
If you put 20% down and finance $147,920 at 7%, your P&I would be $984.12/mo. I figure 1.5% taxes (inclusive of bonds, extra fees, etc.) at $231.13 and insurance at about $100 (also probably high)…for a total of $1,315.25/mo. in fixed costs.
I am not including opportunity cost, maintenance, vacancy, bad tenants, etc., and it would probably take $10K-$20K to make it nice enough to get good tenants.
So, some “investors” would look at current rents (which I think are high and will go down as inventory is released back onto the market and as the recession moves through), and determine that they could get positive cash flow.
If you look in the 92057 zip, you’ll see lots of properties in the lower price range that are VERY close to being safe investments. Naturally lots of flippers/investors are buying there right now, with multiple bids being the norm, so they will end up being their own competition for good tenants (that’s why rents will likely go down, IMO).
*safely rent = people in that area could more easily afford it, resulting in far less turnover and better tenants who pay on time and maintain the place because they know they’re getting a good deal. Also a bit more resilient in a bad economy. I do NOT believe in over-pricing anything, and that applies very much to rents if you’re a LL. Better to underprice the market, and make the difference in lower maintenance and turnover, IMO.
Whew! Sorry so long! 🙂
September 1, 2008 @ 4:14 PM
Could someone who’s been a
Could someone who’s been a landlord for at least 10 years chime in with the real math that’s involved with making a rental property “pencil out”? Thanks.
Bumping along……
September 1, 2008 @ 4:32 PM
da years
If
da years
If the landlords chimed in with all the real math involved, I imagine it would discourage many investors on this board…
September 1, 2008 @ 4:37 PM
surveyor wrote:da years
[quote=surveyor]da years
If the landlords chimed in with all the real math involved, I imagine it would discourage many investors on this board…[/quote]
Quite the contrary. I’d rather go through some hairpulling math and learn from the pros… Oh please do share.
September 1, 2008 @ 5:21 PM
mathematics
mathematics
FLU, if you want to see how the math works, you’ll need to see the calculator I put up on piggington (surveyor’s ROE calculator). That simplifies the math a little bit. It also puts in the numbers that real estate investors use.
Still, if you require full understanding of the math, you will need to read up on real estate investing.
In any case, any properties you look at should have the minimum:
1. cash flow
2. cash on cash of interest rate + 3%
September 1, 2008 @ 4:38 PM
Just to clarify…
I do NOT
Just to clarify…
I do NOT think it’s a good time to buy now, and am not looking for rentals. Just pointing out what many “investors” (notice the quotation marks) are saying right now.
Though I’m not a LL, my parents were RE brokers and investors for decades, so I know what the costs and problems are (and why you won’t see me rushing into the LL business).
September 1, 2008 @ 4:57 PM
CA renter wrote:Here’s a 4/2
[quote=CA renter]Here’s a 4/2 in O’side, in bad zip, but not the worst neighborhood. Sold 3/06 for $475K and had another sale in 2000 for $185K.
Today’s list price? $184,900.
http://www.sdlookup.com/MLS-080058950-165_Harding_St_Oceanside_Ca_92057
You could probably safely* rent this out for $1,200, but current “investors” in this area are hoping for $1400-$1800.
If you put 20% down and finance $147,920 at 7%, your P&I would be $984.12/mo. I figure 1.5% taxes (inclusive of bonds, extra fees, etc.) at $231.13 and insurance at about $100 (also probably high)…for a total of $1,315.25/mo. in fixed costs.
I am not including opportunity cost, maintenance, vacancy, bad tenants, etc., and it would probably take $10K-$20K to make it nice enough to get good tenants.
So, some “investors” would look at current rents (which I think are high and will go down as inventory is released back onto the market and as the recession moves through), and determine that they could get positive cash flow.
If you look in the 92057 zip, you’ll see lots of properties in the lower price range that are VERY close to being safe investments. Naturally lots of flippers/investors are buying there right now, with multiple bids being the norm, so they will end up being their own competition for good tenants (that’s why rents will likely go down, IMO).
*safely rent = people in that area could more easily afford it, resulting in far less turnover and better tenants who pay on time and maintain the place because they know they’re getting a good deal. Also a bit more resilient in a bad economy. I do NOT believe in over-pricing anything, and that applies very much to rents if you’re a LL. Better to underprice the market, and make the difference in lower maintenance and turnover, IMO.
Whew! Sorry so long! 🙂 [/quote]
No problem. I wish more people like you would chime in so more idiots like me would just shut up on this board.
What exactly is “bad” about this specific zip code. I mean, I know there are parts of oceanside that are gang infested, and other parts that are good. Is this sort of in shady area?
September 1, 2008 @ 5:26 PM
Yes, 92057 has some of the
Yes, 92057 has some of the worst gang problems in O’side. That’s where the police officer was shot a couple of years ago.
The worst area is north of North River Road (NRR), near College Ave.
This particular house (above link) is on the south side of NRR, and things get progressively better the further south you go, but this is just the other side of the river from the **really bad** parts, and has its share of undesirables although the majority are just simple, working-class people who make good neighbors.
Personally, I’d be willing to buy a rental there if prices get into the low $100K range (or lower!) for a nice, clean, house.
September 1, 2008 @ 5:26 PM
I have seen lots of good
I have seen lots of good deals that pencil in the 92116 zip code. These are primarily condos with some detached and multi-unit places as a component.
The conversion meltdown at 35th and Meade is bringing down prices in the whole zip code.
In 92101, I am seeing incredible deals in the downtown area. The flats in Little Italy currently represent the largest constituent of deals.
Acqua Vista (425 W Beech) currently pencils best even with the high HOA’s.
Believe it or not, El Cortez is starting to make financial sense also. Despite the monocausal weakness of this assertion, I think Kelly’s articles in Voice were a big part of turning it into a sensibly priced building.
September 1, 2008 @ 5:40 PM
New listing on Copper court
New listing on Copper court in SEH pencils out with 20% down. Negative to maybe even cash flow but even to positive after factoring in principal paydown.
September 2, 2008 @ 6:00 AM
bump. surveyor, mind if you
bump. surveyor, mind if you post the link to your thread again. As you know, I’m a pretty lazy-lized union worker, and am generally “search” challenged. Thank you.
September 2, 2008 @ 6:20 AM
here you go
here you go
http://piggington.com/surveyor039s_roi_spreadsheet
http://piggington.com/re_sale_in_huntsville_al
http://piggington.com/where_is_rent_headed
Have fun reading.
September 2, 2008 @ 8:18 AM
At least in Temecula, I see
At least in Temecula, I see rents dropping on apartments about 25% off peak and falling. This will translate into home rentals to, and investors will loose money.
People are loosing jobs in socal, not just home owners, but renters too. There is a mass adjustment of how income/your welfare is spent, and we are already seeing multiple families sharing homes, condos, etc. I have posted the links many times before.
What good is buying a home as an investment unless you are netting at least 10% profit per month. Right now I’d say if you get a good tenant, you might break even. Of coarse, it’ll take a 20% down payment to get the payment even close to rents. And since your peers likely don’t have 20% down of the median price in your area, this is further proof of price declines. This is one of many reasons why housing prices will continue to fall, and rents will fall further slightly as well. Its all about supply and demand, and in the IE, there is just so, so much darn inventory. Pick your pleasure, rental inventory, or for sale inventory. Some way or another, people are spending their diminishing real wages on more important things, like food, and energy costs. They’d rather move back in with ma and pa and “save up” so they can buy a house.
September 2, 2008 @ 9:48 AM
This subject has come up a
This subject has come up a few times over the last year or so.
As someone who was a landlord for 5 years, I noticed only one person who laid out the math in a way that reflected my experience. All the other posts I’ve seen were way too optomistic, IMO. The guy who did this post was from a property management company, I think, that calculated the deal based on real world experience. I wish I could remember the post.