House-hunting 3.0

Saw another open house yesterday... looks like the owners are really trying to cash in low inventory because their asking is $200k above comps of the same exact floorplan within the last year.

Now we are wondering if we should have bought those ones last year (or the year before) considering how insane the market is right now. Back then we were thinking that they were still high and that the prices should drop and now we are regretting not making the jump back then because they seem cheap and reasonable in comparison... bah.
 
USCTrojanCPA said:
Baby Irvine said:
Cubic, any home that does not cash flow with 20% down is pure speculation and not an investment. I will not buy an sfr investment unless it gives me a minimum of 10% cash on cash return. The strategy now is leverage as much as you can from the banks at a fixed rate and wait for a short term bond and cd laddering. As interest rates rise, I believe that the us dollar will strengthen and will suprise many. Investing in an irvine home is not different to buying gold today at 1600 an ounce.

I like to do the opposite of the crowd and cash will be king in the years ahead with a rising interest rate environment. It is important not to put all your eggs in basket no matter what the market conditions are. Personally for my real estate investment equity portfolio including my primary make up 29% of my networth. Hope this helps.
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Even at the bottom (2009 and 2011) there were very few Irvine property would actually be cash flow positive with 20% down, especially homes in desirable villages of Irvine.
Click to expand...

So investing in Irvine is probably not a good idea.  Buying a home to live in might be if you can afford the payments and don't mind losing money.
 
The hedgies who bought 10 properties in Irvine will need to rent it out, so perhaps there will be a rental glut, and rents will start dropping.
 
zubs said:
The hedgies who bought 10 properties in Irvine will need to rent it out, so perhaps there will be a rental glut, and rents will start dropping.
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I don't think hedgies are interested in Irvine because there's no yield to be had, but how many TIC apartments will be launched in the next 3 years?
 
zubs said:
The hedgies who bought 10 properties in Irvine will need to rent it out, so perhaps there will be a rental glut, and rents will start dropping.
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It's not hedgies....it's the FBCies who are buying homes and then flipping them into rentals within weeks of closing.  Seems like they are more than happy with their 3-4% cash-on-cash yields.
 
jayl23 said:
Baby Irvine said:
Cubic, any home that does not cash flow with 20% down is pure speculation and not an investment. I will not buy an sfr investment unless it gives me a minimum of 10% cash on cash return. The strategy now is leverage as much as you can from the banks at a fixed rate and wait for a short term bond and cd laddering. As interest rates rise, I believe that the us dollar will strengthen and will suprise many. Investing in an irvine home is not different to buying gold today at 1600 an ounce.

I like to do the opposite of the crowd and cash will be king in the years ahead with a rising interest rate environment. It is important not to put all your eggs in basket no matter what the market conditions are. Personally for my real estate investment equity portfolio including my primary make up 29% of my networth. Hope this helps.
Click to expand...

Diversification is probably the best investment strategy lots of ppl follow.  Have stocks/ETFs in different sectors, bonds, real estate, precious metals, and of course, straight cash.  Be wary of anyone who tells you to "put ALL your money in/on...".  Remember: bulls make money, bears make money, pigs get slaughtered.
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Exactly! When neighborhood investors start giving out advice, it's time to be cautious :)
I should start another thread for college investments. Have a couple of "real world" questions..
 
In Taipei, a $1,000,000 property can only be rented out at $2,000.  The Asian FCB get a greater rental cash flow in Irvine than Taipei for the same money.
 
zubs said:
In Taipei, a $1,000,000 property can only be rented out at $2,000.  The Asian FCB get a greater rental cash flow in Irvine than Taipei for the same money.
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Yup, you should be able to get about $4,000 +/- in rent for a $1m home in Irvine. 
 
For a $1 million house that rents for $4k, after paying:

Property taxes
Mello Roos
Maintenance
Property Management
Insurance

I'm calculating less than a 1.5% cap rate.  Wouldn't it be smarter to park your money in a CD?
 
Taiwan actually has a surplus in housing.  There are over 1 million homes that are vacant across the island.  Demand in urban cities are high while rural areas are depopulating.  My ex-fiance's brother in law worked for the local court in Yilan, a rural area on the coast, East of Taipei.  He paid NT 600, or roughly $20 USD per month to rent a 3 bed flat as part of his benefit package of being a government employee there.  The building is old and has no elevator.  The town's government would rather have someone live in the unit for $20/month than to leave the building empty.

The ex-fiance's father also owned a flat in Yilan that had been empty for over a decade.  We call it "empty home to raise mosquitoes" and nobody wanted to buy it.  He gave the flat to his eldest daughter as dowry when she got married.

In comparison, my parents live in Shilin, which is on the outskirts of Taipei.  To rent a small flat/condo in her area, which is quite old, will cost you at least $500 USD/month.  If you're willing to go out to Xindian, half way up the mountain you'd find Rose Town (?????) [1] where it rains frequently and traffic can be bad (limited access roads), but prices are much better and somewhat suited for retired folks looking for clean air.

Taiwan also has very high home ownership ratio (87%), so there are fewer tenants on the market.  The interest rate for borrowing money to buy a home is also very low.  Here's some stats on rental income in TW:
http://www.globalpropertyguide.com/Asia/Taiwan/Rental-Yields



[1]http://zh.wikipedia.org/wiki/玫瑰中國城
 
Liar Loan said:
For a $1 million house that rents for $4k, after paying:

Property taxes
Mello Roos
Maintenance
Property Management
Insurance

I'm calculating less than a 1.5% cap rate.  Wouldn't it be smarter to park your money in a CD?
Click to expand...

Well in Asia, people buy homes for the appreciation, and not the cash flow.  ..I like Momos chart.  It's a pretty clear indication why Asian FCB's prefer to buy property in the US than their home countries.  According to the chart $1,852,000 apartment can only rent for $2,266 in Taipei.

And since Irvine is just an extension of Taipei...Does rental parity matter?
 
zubs said:
Liar Loan said:
For a $1 million house that rents for $4k, after paying:

Property taxes
Mello Roos
Maintenance
Property Management
Insurance

I'm calculating less than a 1.5% cap rate.  Wouldn't it be smarter to park your money in a CD?
Click to expand...

Well in Asia, people buy homes for the appreciation, and not the cash flow.  ..I like Momos chart.  It's a pretty clear indication why Asian FCB's prefer to buy property in the US than their home countries.  According to the chart $1,852,000 apartment can only rent for $2,266 in Taipei.

And since Irvine is just an extension of Taipei...Does rental parity matter?
Click to expand...

Not really, as long as we can shop at 99 Ranch(es)/Zion/H-Mart, and the weather is good/better than Taiwan.  Irvine is/will be the Rowland Heights of OC.  Good safe place to park/diversify your money in case black swan event happens in Asia.
 
Do you guys remember back in 2008 we talked about rental parity being 160X the rent.
So a rent of $4,000 should equal a house worth $640,000.

Using USC's numbers for Irvine, a $1,000,000 home rents for $4,000 = 250X parity.
Using Momo's link for Taipei, a $1,852,200 home rents for $2,266 = 817X parity.

I guess we'll never go back to 160X parity again.  One should probably shoot for 200X parity, but we are already over that thresh hold.
 
wait but taiwan has laws to cushion foreigners from buying... like u can only buy 1 unit if u are a foreigner, if u want multiple units, then u gotta find urself a local "human head", u cant use ur own name... there are ways around this by incorporating, but u still have to find a "human head" to maximize efficiency, cause foreign corp tax rate is 25% and i think local corp tax rate is like 15% i believe... i dunno exactly... i just know i have to wait till im 37 or something to get my residency... to begin my residency prior to that then i gotta join the army n shoot some gay ass hand me down ww2 rifle for a year and half... cause our m16's are expensive and only for show and can only be found on our troops that guard the chiang kai shek memorial hahahaha

not 100% sure, but i remember hearing that the majority of ppl there buying down significantly more then 20%... 20% is like only USA man so of course home prices are sky high here... cept last i heard taiwans got its own inequality problems, cause no new college grad can afford rent in the city haha... interest rates are a lot more awesome there though...
 
zubs said:
Liar Loan said:
For a $1 million house that rents for $4k, after paying:

Property taxes
Mello Roos
Maintenance
Property Management
Insurance

I'm calculating less than a 1.5% cap rate.  Wouldn't it be smarter to park your money in a CD?
Click to expand...

Well in Asia, people buy homes for the appreciation, and not the cash flow.  ..I like Momos chart.  It's a pretty clear indication why Asian FCB's prefer to buy property in the US than their home countries.  According to the chart $1,852,000 apartment can only rent for $2,266 in Taipei.

And since Irvine is just an extension of Taipei...Does rental parity matter?
Click to expand...

I would argue that appreciation will be limited with such a low cap rate.  Other areas of OC crashed harder and have more ground to make up, plus the ability to cover your costs with cashflow.  I guess as long as FCB's have money to blow, the greater fool theory still holds true, but what happens when the Chinese economy goes belly up?
 
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