Any areas below rental parity that are "safe"?

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financeguy_IHB

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Are there any "safe" areas in Orange County, or at least really close by Orange County, where SFRs (not condos) are below rental parity?



In the lastest post by IrvineRenter entitled Apricot Crush, he states "in many other markets, the low-end condos have already fallen to cashflow investor levels, and there is even overshoot in some bad areas."



I was just wondering where those "areas" are and if there are any SFRs that meet the same criteria.
 
[quote author="financeguy" date=1240628449]Are there any "safe" areas in Orange County, or at least really close by Orange County, where SFRs (not condos) are below rental parity?



In the lastest post by IrvineRenter entitled Apricot Crush, he states "in many other markets, the low-end condos have already fallen to cashflow investor levels, and there is even overshoot in some bad areas."



I was just wondering where those "areas" are and if there are any SFRs that meet the same criteria.</blockquote>


Go to Redfin and look at condos near South Coast Plaza. There are many of them in that area, and despite being Santa Ana, the area is not that bad. Basically, if you go north of 55 and east of the 405, there will be neighborhoods here and there with low prices. You have to know the neighborhood to sort out those that are "safe" from those that nobody wants to live in, but there are many properties at or below rental parity.



That doesn't mean the prices these properties cannot and will not fall further; they will. It does mean that they are currently cashflow positive, and if you find the right ones, they can be good investments.



Check out the 50% off thread. Many of those properties will be at or below rental parity.
 
[quote author="IrvineRenter" date=1240639678][quote author="financeguy" date=1240628449]Are there any "safe" areas in Orange County, or at least really close by Orange County, where SFRs (not condos) are below rental parity?



In the lastest post by IrvineRenter entitled Apricot Crush, he states "in many other markets, the low-end condos have already fallen to cashflow investor levels, and there is even overshoot in some bad areas."



I was just wondering where those "areas" are and if there are any SFRs that meet the same criteria.</blockquote>


Go to Redfin and look at condos near South Coast Plaza. There are many of them in that area, and despite being Santa Ana, the area is not that bad. Basically, if you go north of 55 and east of the 405, there will be neighborhoods here and there with low prices. You have to know the neighborhood to sort out those that are "safe" from those that nobody wants to live in, but there are many properties at or below rental parity.



That doesn't mean the prices these properties cannot and will not fall further; they will. It does mean that they are currently cashflow positive, and if you find the right ones, they can be good investments.



Check out the 50% off thread. Many of those properties will be at or below rental parity.</blockquote>


Above, financeguy said he is looking for a SFR. However, I'm curious if any of the condos in the area mentioned above are on leased land, and if/how that affects your analysis, IR. I read through some of the threads on CM and SA land leases when I was looking to buy, but I don't recall reading any detailed analysis on the topic.
 
[quote author="financeguy" date=1240641888]Thanks. What do you guys think of this place?



http://www.redfin.com/CA/Costa-Mesa/778-Hudson-Ave-92626/home/3713883



I'm only looking for SFRs. I define unsafe as a place where there is a reasonable change your home might get burglarized.</blockquote>


I call those foreclosure sucker punch pricing.



They price about 20-30% below the people in the hood that have been sitting with wish list pricing for 120+ days and get a bunch of foreclosure buyers thinking they are getting a deal to a bidding war and end up getting between 10-20% over their list price netting them probably 5-20% over market since the insides are usually no where near the quality of the homes sitting in the hood.



As for rental parity, if you actually can buy it for $340K, your mortgage, tax, insurance will run about $2200/month. Assuming 20% down and you don't commit mortgage fraud. Given that it's small, wedged next to the freeway and likely circa 1960s, that's probably a stretch.
 
[quote author="Sunshine" date=1240643012][quote author="IrvineRenter" date=1240639678][quote author="financeguy" date=1240628449]Are there any "safe" areas in Orange County, or at least really close by Orange County, where SFRs (not condos) are below rental parity?



In the lastest post by IrvineRenter entitled Apricot Crush, he states "in many other markets, the low-end condos have already fallen to cashflow investor levels, and there is even overshoot in some bad areas."



I was just wondering where those "areas" are and if there are any SFRs that meet the same criteria.</blockquote>


Go to Redfin and look at condos near South Coast Plaza. There are many of them in that area, and despite being Santa Ana, the area is not that bad. Basically, if you go north of 55 and east of the 405, there will be neighborhoods here and there with low prices. You have to know the neighborhood to sort out those that are "safe" from those that nobody wants to live in, but there are many properties at or below rental parity.



That doesn't mean the prices these properties cannot and will not fall further; they will. It does mean that they are currently cashflow positive, and if you find the right ones, they can be good investments.



Check out the 50% off thread. Many of those properties will be at or below rental parity.</blockquote>


Above, financeguy said he is looking for a SFR. However, I'm curious if any of the condos in the area mentioned above are on leased land, and if/how that affects your analysis, IR. I read through some of the threads on CM and SA land leases when I was looking to buy, but I don't recall reading any detailed analysis on the topic.</blockquote>


My bad, I did not see the reference to SFRs. I haven't seen too many of those. Right now it is mostly condos. SFRs probably will not fall much below rental parity, particularly in nicer areas.



I do not know if any of these condos are on leased land. If they are, it makes valuation much more difficult because you need to factor in the difficulty in reselling the property as the lease expiration date approaches.
 
[quote author="freedomCM" date=1240646818][quote author="financeguy" date=1240641888]Thanks. What do you guys think of this place?



http://www.redfin.com/CA/Costa-Mesa/778-Hudson-Ave-92626/home/3713883



I'm only looking for SFRs. I define unsafe as a place where there is a reasonable change your home might get burglarized.</blockquote>


This area is Irvine level of safe.



But do you really want to live 400 feet from the 405?</blockquote>


Oh, here's another SFR in Costa Mesa under 350K. It's not close to the 405 and has a bigger lot:



http://www.redfin.com/CA/Costa-Mesa/769-W-Wilson-St-92627/home/4564479



If I find something like this for around 300K, I think it will meet the rental parity criteria, no? I guess I'm going to have to wait.



I'm just worried that interest rates will start going up if I wait too long, but that's another story.
 
[quote author="IrvineRenter" date=1240655109][quote author="Sunshine" date=1240643012]Above, financeguy said he is looking for a SFR. However, I'm curious if any of the condos in the area mentioned above are on leased land, and if/how that affects your analysis, IR. I read through some of the threads on CM and SA land leases when I was looking to buy, but I don't recall reading any detailed analysis on the topic.</blockquote>


My bad, I did not see the reference to SFRs. I haven't seen too many of those. Right now it is mostly condos. SFRs probably will not fall much below rental parity, particularly in nicer areas.



I do not know if any of these condos are on leased land. If they are, it makes valuation much more difficult because you need to factor in the difficulty in reselling the property as the lease expiration date approaches.</blockquote>


None of the condos in CM/92707 of Santa Ana are on leased land that IR speaks of. I could be wrong, but I don't think any condo in CM or 92707 is on leased land. However, the HOAs are kinda high in the upper 300's, and the rental rates seem to be dropping. I know this, because I have seen the rental prices posted on the security office bulletin board for MacArthur Village. I would be very careful in investing there, since the herd has been herded there with the OCR articles. Those that got in before the herd should be fine, but there are plenty of foreclosures in the works there, plus several for rent. Don't be part of the herd, be ahead of the herd.
 
W.Wilson is a busy main street. When you get up to the 800 plus block it is less busy, but still a main street. Are you looking at this for an investment or for your primary residence?
 
652 Cove in Costa Mesa was recently taken back by the bank. It's quite a nice street and very very very little chance your home would be burglarized. I suspect it will be in good condition. If it can be picked up for $375K PITI would be just under $2,200/mo, which would be at or below rental parity. That's with 10% down with B of A's no fee mortgage plus (no PMI) and paying .75 points. The taxes are very low here... .01035 plus about $500/yr for special assessments that includes your trash pick up.
 
Wilson street isn't Irvine level of safe, maybe more like Orange level of safe. That said, it is still pretty darn safe.



769 is in a bad elementary school area, though. you have to get to the 900s to get into the very good elementary school area.
 
I've lived in Santa Ana for over 20 years. The years I was there. These are some of the occurences:

A naked guy running up and down the street in a rainstorm. Yelling he's on fire. (I think he was on drugs)/

One Christmas day, someone hung himself on a telephone pole/

A neighbor had a shoot out with a couple of drug pushers (I heard his son was killed)/

The liquor store got robbed a few times/

Another neighbor discharged his firearm down the street and hit our rain gutter/

Again, another neighbor shooting at birds with his .22 rifle in the front yard/

Numerous incidents of drug pushers and police officers duking it out/

We had 2 burglaries/

Numerous incidents of suspects running through the backyards being chased by police helicopter (one guy actually ran through our house in a chase)/

2 vans load of guys chasing each other up and down the street shooting at one another/



But here's something interesting with regards to home value. Those homes were worth $79k 25 years ago and now they're about $450k. And in the good old days of 2 years ago. They were actually sold for 690k. So much for safety bringing down the value. And if it wasn't for my wife. I would buy and live in Santa Ana. Am I afraid with the stuffs that happened there. Nope. I think you just adapt to your environment.
 
[quote author="reason" date=1240733394]I've lived in Santa Ana for over 20 years. The years I was there. These are some of the occurences:

A naked guy running up and down the street in a rainstorm. Yelling he's on fire. (I think he was on drugs)/

One Christmas day, someone hung himself on a telephone pole/

A neighbor had a shoot out with a couple of drug pushers (I heard his son was killed)/

The liquor store got robbed a few times/

Another neighbor discharged his firearm down the street and hit our rain gutter/

Again, another neighbor shooting at birds with his .22 rifle in the front yard/

Numerous incidents of drug pushers and police officers duking it out/

We had 2 burglaries/

Numerous incidents of suspects running through the backyards being chased by police helicopter (one guy actually ran through our house in a chase)/

2 vans load of guys chasing each other up and down the street shooting at one another/



But here's something interesting with regards to home value. Those homes were worth $79k 25 years ago and now they're about $450k. And in the good old days of 2 years ago. They were actually sold for 690k. So much for safety bringing down the value. And if it wasn't for my wife. I would buy and live in Santa Ana. Am I afraid with the stuffs that happened there. Nope. I think you just adapt to your environment.</blockquote>


And I can also say that you are not describing the SA that I live in. If your only qualification for a SFR is safety and rental parity, I think the original poster has far more options than he/she thinks. I can honestly say that I don't even know where the keys to my front door are, it's been so long since we've locked it.
 
Well, that SA level of crime is way too much for me, and I lived in NYC in the 80s.





No part of Costa Mesa is anywhere near that level of crime.
 
Tmare,



Of course not all of SA is like what I have experienced. I am only speaking on the neighborhood that I lived in. I suppose you can say I was on the wrong side of the tracks. That's all.



Other than the 2 burglaries. The crimes that happened around me were just that. They were around me. They didn't affected me directly. I'ld like to add that the majority of the residents of SA are just really hard working people. There are a few bad apples that ruined it for the rest.
 
[quote author="freedomCM" date=1240735296]Well, that SA level of crime is way too much for me, and I lived in NYC in the 80s.





No part of Costa Mesa is anywhere near that level of crime.</blockquote>


It's a big city and as reason said, not all parts are equal. There are parts of CM that have a higher level of crime than parts of SA. I remember having things stolen from my home growing up in CM and living in CM as an adult, on both the Westside and the Eastside in CM. Never happened in my 10 years in SA.
 
[quote author="financeguy" date=1240661617][quote author="freedomCM" date=1240646818][quote author="financeguy" date=1240641888]Thanks. What do you guys think of this place?



http://www.redfin.com/CA/Costa-Mesa/778-Hudson-Ave-92626/home/3713883



I'm only looking for SFRs. I define unsafe as a place where there is a reasonable change your home might get burglarized.</blockquote>


This area is Irvine level of safe.



But do you really want to live 400 feet from the 405?</blockquote>


Oh, here's another SFR in Costa Mesa under 350K. It's not close to the 405 and has a bigger lot:



http://www.redfin.com/CA/Costa-Mesa/769-W-Wilson-St-92627/home/4564479



If I find something like this for around 300K, I think it will meet the rental parity criteria, no? I guess I'm going to have to wait.



I'm just worried that interest rates will start going up if I wait too long, but that's another story.</blockquote>


That house is a major fixer:



"THE HOME DOES NOT HAVE A KITCHEN. CASH OR A RENOVATION LOAN MAY BE BEST."



Run away.
 
Let me answer the question, but make the answer year dependent:



2006: Hell no.



2009: There are a couple here and there, but you'll have to look real hard for them, and they will be awful thin propositions at best.



2012: Sure! There are plenty! And even better, the rental market has colapsed and interest rates have skyrocketed, further depressing prices!
 
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