Rental Market in Irvine

[usctrojancpa]

My point was that Irvine properties aren't as far from cash flowing as you think, especially since rental prices are up 8-10% YOY.  I've owned several type of rentals...and I much rather own one in better areas with lower monthly cash on cash returns but a higher probability of rent and price appreciation in the future.  Like it or not, but Irvine/Tustin Ranch are one of the most desirable locations in Southern California which will translate to better value retention and price/rent appreciation as well as having higher quality tenants.  When they are done building out OH, EW, and PS....we will get a pop in resale prices, mark my words.

 

[usctrojancpa]

Btw, my upcoming Northwood Villas listing will cash flow by about $300...cost of around $2,100/mo versus rent of $2,400/mo using 20% down and a 7 year ARM thanks to a $165 HOA and no Mello Roos.

 

[hello]

Btw, my upcoming Northwood Villas listing will cash flow by about $300...cost of around $2,100/mo versus rent of $2,400/mo using 20% down and a 7 year ARM thanks to a $165 HOA and no Mello Roos.

Are you really advertising this as a cash flow investment property?  When you advertise this as a 300 a month cash flow property, you should place a big asterisk next to it and write all the disclaimers in small print at the bottom of the page.  The disclaimers being  1.  you have to take a 7 year ARM  2.  you will have awesome tenants that live there forever.  3.  assume nothing will ever ever break in this house.  4.  assume you will have no other maintenance costs ever because nothing in this house will ever wear down. 

 

[hello]

My point was that Irvine properties aren't as far from cash flowing as you think, especially since rental prices are up 8-10% YOY.  I've owned several type of rentals...and I much rather own one in better areas with lower monthly cash on cash returns but a higher probability of rent and price appreciation in the future.  Like it or not, but Irvine/Tustin Ranch are one of the most desirable locations in Southern California which will translate to better value retention and price/rent appreciation as well as having higher quality tenants.  When they are done building out OH, EW, and PS....we will get a pop in resale prices, mark my words.

Many strawman arguments here.  I am not making any claims about future prices or rents.  Without doubt these will increase as they always do in the long term.  I am also not claiming rentals in one area are better than others.  My point was very simple and straight forward.  Buying homes in Irvine as rentals WILL NOT CASH FLOW.  You keep arguing otherwise, but its simple math.

BTW, if one can cash flow $300 a month on a Irvine rental as you claim, there would be thousands of investors lining up to buy your Northwood house right now and I would be one of them.

 

[Bullsback]

Hello....since you seem to run pretty conservative numbers, let me run a scenario by you and let me know what your model spits out.

Irvine Property: Built in 2000; 3 bedroom / 3 bath attached condo (1650 sqft)

Rent: I'm presuming $3K/month
Mortgage (including property taxes): $2400 (int rate of 3.4%)
HOA: $224
Insurance: $60/month

 

[hello]

Hello....since you seem to run pretty conservative numbers, let me run a scenario by you and let me know what your model spits out.

Irvine Property: Built in 2000; 3 bedroom / 3 bath attached condo (1650 sqft)

Rent: I'm presuming $3K/month
Mortgage (including property taxes): $2400 (int rate of 3.4%)
HOA: $224
Insurance: $60/month

Just out of curiosity, what are your reasons for thinking my calculations are conservative? 


Just so I can run a clean calculation, what will be purchase price, % down payment, exact taxes, any initial rehab costs? 

 

[Bullsback]

Hello....since you seem to run pretty conservative numbers, let me run a scenario by you and let me know what your model spits out.

Irvine Property: Built in 2000; 3 bedroom / 3 bath attached condo (1650 sqft)

Rent: I'm presuming $3K/month
Mortgage (including property taxes): $2400 (int rate of 3.4%)
HOA: $224
Insurance: $60/month

Just out of curiosity, what are your reasons for thinking my calculations are conservative? 


Just so I can run a clean calculation, what will be purchase price, % down payment, exact taxes, any initial rehab costs?

Originally purchase price was $525 w/25% down.  Property taxes are $6581 per year.  No rehab costs. It is the home I'll be moving from and intend on renting out (I've done my own runs and am not necessarily looking at cash flow, rather fact that the property should be relatively cash-flow neutral, but I'd get the benefit of someone else paying the property down and longer term it would be a nice revenue generator as part of a portfolio of properties I'd like to grow for when I'm retired...which I'm a long ways from) but figured why not let the TI'ers analyze this for me.  25% downpayment (at the time).  House is probably worth between $650-$700 today.  I would manage the property myself and my dad is an agent so have free services from his side of the equation. 

House has new appliances, older carpet, and new floors (well 2-3 years new since it was a few years ago that we moved).  I do presume at some point the original AC will go out and it will need carpet probably after the next tenant. 

 

[LongIrvine]

probably should do return on equity type of calcs and do risk adj returns relative to other options. 
on tax front.  loss of 2 out of 5 years as primary residence

 

[YellowFever]

.

 

[hello]

Hello....since you seem to run pretty conservative numbers, let me run a scenario by you and let me know what your model spits out.

Irvine Property: Built in 2000; 3 bedroom / 3 bath attached condo (1650 sqft)

Rent: I'm presuming $3K/month
Mortgage (including property taxes): $2400 (int rate of 3.4%)
HOA: $224
Insurance: $60/month

Just out of curiosity, what are your reasons for thinking my calculations are conservative? 


Just so I can run a clean calculation, what will be purchase price, % down payment, exact taxes, any initial rehab costs?

Originally purchase price was $525 w/25% down.  Property taxes are $6581 per year.  No rehab costs. It is the home I'll be moving from and intend on renting out (I've done my own runs and am not necessarily looking at cash flow, rather fact that the property should be relatively cash-flow neutral, but I'd get the benefit of someone else paying the property down and longer term it would be a nice revenue generator as part of a portfolio of properties I'd like to grow for when I'm retired...which I'm a long ways from) but figured why not let the TI'ers analyze this for me.  25% downpayment (at the time).  House is probably worth between $650-$700 today.  I would manage the property myself and my dad is an agent so have free services from his side of the equation. 

House has new appliances, older carpet, and new floors (well 2-3 years new since it was a few years ago that we moved).  I do presume at some point the original AC will go out and it will need carpet probably after the next tenant.

Purchase price: 525K
Down: 131,250 (25%)
rate of 3.4%
Rent: 3000/month
Taxes: 6581/year
insurance 720/year

Estimated costs:
vacancy: 1800/year (5%)
maintenance: 1500/year
Capex: left out (better for you to decide like the HVAC you mentioned)

Assuming all of the above without consideration for Cap-ex (which you should add in):

Annual cash flow: $4445
Cash on Cash: 3.14%
Total ROI: 8.56%

 

[hello]

Does this mean then that it is actually worth it to be a renter in Irvine than to be a landlord as of today 10/2016 and moving forward?  Am I right?

If renting is far cheaper than owning (factoring in PITI, taxes, mello roos, maintenance, no more appreciation possible since we've hit the peak), then perhaps its time for everyone to dump their houses now and rent! 

Oh the crash is coming!  ;D

There is a difference between renting a house to live in versus buying a rental investment.  Different things to consider.

 

[SoclosetoIrvine]

Hello....since you seem to run pretty conservative numbers, let me run a scenario by you and let me know what your model spits out.

Irvine Property: Built in 2000; 3 bedroom / 3 bath attached condo (1650 sqft)

Rent: I'm presuming $3K/month
Mortgage (including property taxes): $2400 (int rate of 3.4%)
HOA: $224
Insurance: $60/month

Just out of curiosity, what are your reasons for thinking my calculations are conservative? 


Just so I can run a clean calculation, what will be purchase price, % down payment, exact taxes, any initial rehab costs?

Originally purchase price was $525 w/25% down.  Property taxes are $6581 per year.  No rehab costs. It is the home I'll be moving from and intend on renting out (I've done my own runs and am not necessarily looking at cash flow, rather fact that the property should be relatively cash-flow neutral, but I'd get the benefit of someone else paying the property down and longer term it would be a nice revenue generator as part of a portfolio of properties I'd like to grow for when I'm retired...which I'm a long ways from) but figured why not let the TI'ers analyze this for me.  25% downpayment (at the time).  House is probably worth between $650-$700 today.  I would manage the property myself and my dad is an agent so have free services from his side of the equation. 

House has new appliances, older carpet, and new floors (well 2-3 years new since it was a few years ago that we moved).  I do presume at some point the original AC will go out and it will need carpet probably after the next tenant.

Purchase price: 525K
Down: 131,250 (25%)
rate of 3.4%
Rent: 3000/month
Taxes: 6581/year
insurance 720/year

Estimated costs:
vacancy: 1800/year (5%)
maintenance: 1500/year
Capex: left out (better for you to decide like the HVAC you mentioned)

Assuming all of the above without consideration for Cap-ex (which you should add in):

Annual cash flow: $4445
Cash on Cash: 3.14%
Total ROI: 8.56%

Nice numbers! Probably only possible since they bought it years back when Irvine could still cashflow.  $525k for a 3 bedroom/3 bathroom is impossible now  especially at 1650 sq feet.  It'll probably sell for $675k+ today so that's a huge appreciation of $150k. 

Today $525k, you can barely get a 2 bedroom/2 bathroom condo in the newer communities, which are usually 1000-1100 sq ft.  It would probably have to be an older resale to get 2 bedrooms with more sq ft or get a 1 bedroom in woodbury.  Congrats on the good timing "Bullsback"  8)

 

[usctrojancpa]

Btw, my upcoming Northwood Villas listing will cash flow by about $300...cost of around $2,100/mo versus rent of $2,400/mo using 20% down and a 7 year ARM thanks to a $165 HOA and no Mello Roos.

Are you really advertising this as a cash flow investment property?  When you advertise this as a 300 a month cash flow property, you should place a big asterisk next to it and write all the disclaimers in small print at the bottom of the page.  The disclaimers being  1.  you have to take a 7 year ARM  2.  you will have awesome tenants that live there forever.  3.  assume nothing will ever ever break in this house.  4.  assume you will have no other maintenance costs ever because nothing in this house will ever wear down. 

I'm not advertising it as cash flow....just showing that the cost of ownership is less than the cost to rent for that particular property.  Again, shows that some Irvine properties aren't that far away from cash flowing even using your conservative parameters.  But the reality is, Irvine properties will never provide good cash flow using your model because the demand to own is so high.  If an investor is looking for monthly cash flow, then areas like Texas or Florida.  But to me and others, monthly cash flow is only one piece of the puzzle and not the be all and end all.  ROI return will mostly be driven off of price appreciation. 

 

[usctrojancpa]

Hello....since you seem to run pretty conservative numbers, let me run a scenario by you and let me know what your model spits out.

Irvine Property: Built in 2000; 3 bedroom / 3 bath attached condo (1650 sqft)

Rent: I'm presuming $3K/month
Mortgage (including property taxes): $2400 (int rate of 3.4%)
HOA: $224
Insurance: $60/month

Just out of curiosity, what are your reasons for thinking my calculations are conservative? 


Just so I can run a clean calculation, what will be purchase price, % down payment, exact taxes, any initial rehab costs?

Originally purchase price was $525 w/25% down.  Property taxes are $6581 per year.  No rehab costs. It is the home I'll be moving from and intend on renting out (I've done my own runs and am not necessarily looking at cash flow, rather fact that the property should be relatively cash-flow neutral, but I'd get the benefit of someone else paying the property down and longer term it would be a nice revenue generator as part of a portfolio of properties I'd like to grow for when I'm retired...which I'm a long ways from) but figured why not let the TI'ers analyze this for me.  25% downpayment (at the time).  House is probably worth between $650-$700 today.  I would manage the property myself and my dad is an agent so have free services from his side of the equation. 

House has new appliances, older carpet, and new floors (well 2-3 years new since it was a few years ago that we moved).  I do presume at some point the original AC will go out and it will need carpet probably after the next tenant. 

Replace the carpet with laminate when it comes time.  Your AC should be good for 15-20 years if you service it once a year (many occasional relay or what not going out every 5-6 years).  It's not like we live in Texas or Florida where it'd be on 24/7 for half a year.

 

[Bullsback]

Hello....since you seem to run pretty conservative numbers, let me run a scenario by you and let me know what your model spits out.

Irvine Property: Built in 2000; 3 bedroom / 3 bath attached condo (1650 sqft)

Rent: I'm presuming $3K/month
Mortgage (including property taxes): $2400 (int rate of 3.4%)
HOA: $224
Insurance: $60/month

Just out of curiosity, what are your reasons for thinking my calculations are conservative? 


Just so I can run a clean calculation, what will be purchase price, % down payment, exact taxes, any initial rehab costs?

Originally purchase price was $525 w/25% down.  Property taxes are $6581 per year.  No rehab costs. It is the home I'll be moving from and intend on renting out (I've done my own runs and am not necessarily looking at cash flow, rather fact that the property should be relatively cash-flow neutral, but I'd get the benefit of someone else paying the property down and longer term it would be a nice revenue generator as part of a portfolio of properties I'd like to grow for when I'm retired...which I'm a long ways from) but figured why not let the TI'ers analyze this for me.  25% downpayment (at the time).  House is probably worth between $650-$700 today.  I would manage the property myself and my dad is an agent so have free services from his side of the equation. 

House has new appliances, older carpet, and new floors (well 2-3 years new since it was a few years ago that we moved).  I do presume at some point the original AC will go out and it will need carpet probably after the next tenant.

Purchase price: 525K
Down: 131,250 (25%)
rate of 3.4%
Rent: 3000/month
Taxes: 6581/year
insurance 720/year

Estimated costs:
vacancy: 1800/year (5%)
maintenance: 1500/year
Capex: left out (better for you to decide like the HVAC you mentioned)

Assuming all of the above without consideration for Cap-ex (which you should add in):

Annual cash flow: $4445
Cash on Cash: 3.14%
Total ROI: 8.56%

Nice numbers! Probably only possible since they bought it years back when Irvine could still cashflow.  $525k for a 3 bedroom/3 bathroom is impossible now  especially at 1650 sq feet.  It'll probably sell for $675k+ today so that's a huge appreciation of $150k. 

Today $525k, you can barely get a 2 bedroom/2 bathroom condo in the newer communities, which are usually 1000-1100 sq ft.  It would probably have to be an older resale to get 2 bedrooms with more sq ft or get a 1 bedroom in woodbury.  Congrats on the good timing "Bullsback"  8)

It was actually good and bad timing. I should have stretched the budget at that time, but given the comeback from the real estate bubble, still wasn't quite ready to go full fledged (also had first kid coming soon and was on the hinge of a couple significant promotions that were to come...good idea they were coming, but you never know at those times...and who knows if at some point it all hits the fan later). Had I just bought the size I wanted (and could have stretched to afford at the time), I would have flipped to a 15 year mortgage sometime around now and been looking at a nice projection towards having minimal overhead and being in a place where I could (doesn't mean I would) retire well before 50, haha.

 

[Bullsback]

Hello....since you seem to run pretty conservative numbers, let me run a scenario by you and let me know what your model spits out.

Irvine Property: Built in 2000; 3 bedroom / 3 bath attached condo (1650 sqft)

Rent: I'm presuming $3K/month
Mortgage (including property taxes): $2400 (int rate of 3.4%)
HOA: $224
Insurance: $60/month

Just out of curiosity, what are your reasons for thinking my calculations are conservative? 


Just so I can run a clean calculation, what will be purchase price, % down payment, exact taxes, any initial rehab costs?

Originally purchase price was $525 w/25% down.  Property taxes are $6581 per year.  No rehab costs. It is the home I'll be moving from and intend on renting out (I've done my own runs and am not necessarily looking at cash flow, rather fact that the property should be relatively cash-flow neutral, but I'd get the benefit of someone else paying the property down and longer term it would be a nice revenue generator as part of a portfolio of properties I'd like to grow for when I'm retired...which I'm a long ways from) but figured why not let the TI'ers analyze this for me.  25% downpayment (at the time).  House is probably worth between $650-$700 today.  I would manage the property myself and my dad is an agent so have free services from his side of the equation. 

House has new appliances, older carpet, and new floors (well 2-3 years new since it was a few years ago that we moved).  I do presume at some point the original AC will go out and it will need carpet probably after the next tenant. 

Replace the carpet with laminate when it comes time.  Your AC should be good for 15-20 years if you service it once a year (many occasional relay or what not going out every 5-6 years).  It's not like we live in Texas or Florida where it'd be on 24/7 for half a year.

Wouldn't have thought of laminate. Is that because it holds up so well (water won't be a huge impact) vs. the dirt that is hard to get off of carpet?  I'm going to guess given the AC is already 16 years old, that it craps up sometime. If it goes another 15 to 20, sweet.  I am hoping that somehow I luck into better tenants in Irvine (vs. other areas where I have had rentals before; some tenants are just brutal as to what they can do to a property...it is the one aspect that makes me double take vs. just freaking selling the property and taking the tax free return today). 

By the way, in my analysis, I do factor in the fact that from a true ROE perspective, I am getting an embedded benefit in the sense that the portion that goes to principal reduction on my mortgage is obviously a direct return to myself (not a liquid return in its current state, but if rent continues to appreciate, cash flow becomes better with time and one day you have a property free and clear, which at that point in my life, where I'm looking at fixed income, that is a good problem to have (even if I'm not fully taking advantage of "leverage"). 

 

[hello]

Btw, my upcoming Northwood Villas listing will cash flow by about $300...cost of around $2,100/mo versus rent of $2,400/mo using 20% down and a 7 year ARM thanks to a $165 HOA and no Mello Roos.

Are you really advertising this as a cash flow investment property?  When you advertise this as a 300 a month cash flow property, you should place a big asterisk next to it and write all the disclaimers in small print at the bottom of the page.  The disclaimers being  1.  you have to take a 7 year ARM  2.  you will have awesome tenants that live there forever.  3.  assume nothing will ever ever break in this house.  4.  assume you will have no other maintenance costs ever because nothing in this house will ever wear down. 

I'm not advertising it as cash flow....just showing that the cost of ownership is less than the cost to rent for that particular property.  Again, shows that some Irvine properties aren't that far away from cash flowing even using your conservative parameters.  But the reality is, Irvine properties will never provide good cash flow using your model because the demand to own is so high.  If an investor is looking for monthly cash flow, then areas like Texas or Florida.  But to me and others, monthly cash flow is only one piece of the puzzle and not the be all and end all.  ROI return will mostly be driven off of price appreciation.

Sorry, it seemed like advertisement as cash flow since thats exactly what you said and the only thing you said.   
Calculating rent versus purchase for ones personal residence is ENTIRELY different from looking at a rental investment.   

So yes, you finally agree Irvine purchases will not cash flow.  Reason is simple... purchase prices are too high for rents attainable.
I agree that cash flow is not the end all be all, however for buy and hold investments, if you do not have cash flow you are a dead duck without significant appreciation.  The first rule to buy and hold real estate investments should be that it cash flow positives with reasonable down payment.  Why?  because if a property cash flows positive, you have many outs.  Otherwise your only game is appreciation and banking only on appreciation is a fools game.  If you are looking at rental investments, cash flow is king and appreciation is icing on the cake.   

 

[WTTCHMN]

You need to earn $62,000 a year to rent a studio apartment in O.C., report says
http://www.ocregister.com/articles/month-732589-rents-rent.html

 

[panda]

One thing I would like to add is that owning rental properties in California and Illinois is a challenge when you have a bad tenant in place. These two states are probably one of the most challenging states for landlord where an eviction process can potentially take 3-5 months depending if the problematic tenant decides to fight back or not.

Serving the 5 day notice must be served directly to the tenant and just attaching the 5 day notice in the door will not count. The other method is to send a certified mail to the tenant with a green return label acknowledging the tenant who is about to be evicted that he or she received the five day notice. If the tenant does not sign, serving the 5 day notice fails. If your rent is $3000 - $4000 a month, you can imagine the financial damage and mental illness a bad tenant who knows how to work the system can bring to his or her landlord. The fact that California and Illinois are more favorable to tenants, I personally will never own any rental properties in these two states myself.

Btw, my upcoming Northwood Villas listing will cash flow by about $300...cost of around $2,100/mo versus rent of $2,400/mo using 20% down and a 7 year ARM thanks to a $165 HOA and no Mello Roos.

Are you really advertising this as a cash flow investment property?  When you advertise this as a 300 a month cash flow property, you should place a big asterisk next to it and write all the disclaimers in small print at the bottom of the page.  The disclaimers being  1.  you have to take a 7 year ARM  2.  you will have awesome tenants that live there forever.  3.  assume nothing will ever ever break in this house.  4.  assume you will have no other maintenance costs ever because nothing in this house will ever wear down. 

I'm not advertising it as cash flow....just showing that the cost of ownership is less than the cost to rent for that particular property.  Again, shows that some Irvine properties aren't that far away from cash flowing even using your conservative parameters.  But the reality is, Irvine properties will never provide good cash flow using your model because the demand to own is so high.  If an investor is looking for monthly cash flow, then areas like Texas or Florida.  But to me and others, monthly cash flow is only one piece of the puzzle and not the be all and end all.  ROI return will mostly be driven off of price appreciation.

Sorry, it seemed like advertisement as cash flow since thats exactly what you said and the only thing you said.   
Calculating rent versus purchase for ones personal residence is ENTIRELY different from looking at a rental investment.   

So yes, you finally agree Irvine purchases will not cash flow.  Reason is simple... purchase prices are too high for rents attainable.
I agree that cash flow is not the end all be all, however for buy and hold investments, if you do not have cash flow you are a dead duck without significant appreciation.  The first rule to buy and hold real estate investments should be that it cash flow positives with reasonable down payment.  Why?  because if a property cash flows positive, you have many outs.  Otherwise your only game is appreciation and banking only on appreciation is a fools game.  If you are looking at rental investments, cash flow is king and appreciation is icing on the cake.   

 

[eyephone]

Btw, my upcoming Northwood Villas listing will cash flow by about $300...cost of around $2,100/mo versus rent of $2,400/mo using 20% down and a 7 year ARM thanks to a $165 HOA and no Mello Roos.

Are you really advertising this as a cash flow investment property?  When you advertise this as a 300 a month cash flow property, you should place a big asterisk next to it and write all the disclaimers in small print at the bottom of the page.  The disclaimers being  1.  you have to take a 7 year ARM  2.  you will have awesome tenants that live there forever.  3.  assume nothing will ever ever break in this house.  4.  assume you will have no other maintenance costs ever because nothing in this house will ever wear down. 

I'm not advertising it as cash flow....just showing that the cost of ownership is less than the cost to rent for that particular property.  Again, shows that some Irvine properties aren't that far away from cash flowing even using your conservative parameters.  But the reality is, Irvine properties will never provide good cash flow using your model because the demand to own is so high.  If an investor is looking for monthly cash flow, then areas like Texas or Florida.  But to me and others, monthly cash flow is only one piece of the puzzle and not the be all and end all.  ROI return will mostly be driven off of price appreciation.

Sorry, it seemed like advertisement as cash flow since thats exactly what you said and the only thing you said.   
Calculating rent versus purchase for ones personal residence is ENTIRELY different from looking at a rental investment.   

So yes, you finally agree Irvine purchases will not cash flow.  Reason is simple... purchase prices are too high for rents attainable.
I agree that cash flow is not the end all be all, however for buy and hold investments, if you do not have cash flow you are a dead duck without significant appreciation.  The first rule to buy and hold real estate investments should be that it cash flow positives with reasonable down payment.  Why?  because if a property cash flows positive, you have many outs.  Otherwise your only game is appreciation and banking only on appreciation is a fools game.  If you are looking at rental investments, cash flow is king and appreciation is icing on the cake. 

No need to be sorry. Having positive cash flow > negative cash flow.