Are TIC rental apartment prices inflated?

NEW -> Contingent Buyer Assistance Program
G

garfangle_IHB

New member
I did a quick check of some of TIC Irvine rental properties and they seem to be a bit inflated, meaning that as home prices rose in the bubble, rents followed along, albeit a tad slower. An average 1BR and 2BR apartment, managed by TIC, runs $1750 for 800 sqft and $2150 for 1000 sqft, respectively. Using IR's 160 price multiplier we'd get a ownership value of $280K for the 1BR and $344K for the 2BR. While those prices are not as high as some homes, on a per square foot basis it is still pricey. The 1BR would be $350/sqft and the 2BR would be $344/sqft.

Long term Irvine residents, what were rental prices back in 2000 for comparable TIC apartments? Were they much lower? My guess would be $1000 for the 1BR and $1250 for the 2BR? If that is the case, the inflation would be 75% for the 1BR and 72% for the 2BR or more than 10% annualized inflation. Am I right/wrong?

N.B., I am not saying TIC can't price their apartments as they wish, but I'm wondering about the price increase sustainability.
 
I don't remember the rental prices back in 2000. But Irvine rental prop. tend to cost $300 plus more than other cities in the county.
 
I agree it is higher than current market for rents. I have been in in a TIC Apartment now for 16 months while I wait for the oncoming affordability of a home to purchase. One thing I do notice. Very high turnover. The vacancy rate seems to be going up. More parking spaces in the evening is a tip off. TIC at some point may need to reduce rents. I am not going to hold my breath on that one though. They are so anal they would just let them stay empty rather than "god forbid" Lower a rental price on an apartment home. Dont you know ? Rents only go up !!!!
 
Rents have been rising 4% to 6% for the last several years. Pretty high rent growth but hardly indicative of a bubble.

I would think that if Irvine Co were to put up their apartment portfolio for sale to an institutional investor that it would sell for over $350 per foot. Maybe $350 per foot for the Irvine stuff and $400 per foot for the Newport stuff.

As for lowering rents, TIC is far more likely to give you some up-front discount (1/2 month free rent, 1 month free rent) than actually lower the rental rate.
 
This makes me think....and want the opinion of some of you very smart people. I rent a TIC/IAC townhouse apartment. 3 bd 2.5 ba 1303 sq ft. Current lease (through March) is $2,397. For IAC, I feel like this is a decent deal, it is one of the renovated complexes (San Carlo) and we have a good location that we are very happy with. Although I agree that IAC is indeed inflated over private party rentals, at this point I would not consider renting from a pp because of all the horror stories about foreclosed renters --- IAC is the only option I give myself.

Assuming that, using the calcs above, I figure I am paying $295 per sq ft for my rental --- $2,400 x 160 = $384k / 1,303 = $295. Assuming that rental rate stays flat next year, I can make the case in my own twisted mind that if I can find a place equal to or better than my current apartment for <$295 psf next March, I should buy. Looking at current for sale inventory, I think that finding a good place for $295 psf in Irvine is very plausible by next April.

My question: Would it be a bad idea (and why) to jump in April, assuming the above holds up, and what is for sale in the $295 psf range is something I would be happy with for 5 or so years? Thanks for your thoughts.
 
It is not a good idea if you think that for-sale comps will fall closer to $250 psf (or lower) by year-end 2008 or the beginning 2009. Assuming this happens, I'd rather wait with my $295 psf rental for a few extra couple of months than be strapped to a $295 psf home for many years to come...
 
Personally I wouldn't do it. On top of that 1303 sqft home is kinda small and thinking that you will want it for another 5yrs after purchase you could out grow if you plan on starting a family.

I would either a) wait the market out a bit longer or b) save up alot more now and then maybe you could be in the market for something more like 1800sqft.
 
mino - agree that 1,300 sq ft is a bit small for a growing family (parents + 4 year old). Exactly why we want to upgrade. We are really trying to stick to income x 3 for purchase price, which leaves us under $600k. This is also a convenient purchase price for us in that the CA Veterans (VA) loan max (I'm a Vet) is $521k. We are going to use this as it allows us to borrow in excess of conforming amount at a good fixed rate (currently 6.55 I believe). Right now, I am thinking that something like the following two properties might be in that pricce range next spring --- clearly an upgrade from where we are now --- but maybe not as good as what we will find in that range in Dec 08?

http://www.redfin.com/stingray/do/printable-listing?listing-id=1176363

http://www.redfin.com/stingray/do/printable-listing?listing-id=989832

It's so hard to wait....we have been waiting so long.....Arghhh!!
 
CK....first off I would just like to say thank you for serving and protecting us during your military stint.

I am in the same position you are. My significant other and I want to buy so bad and I have looked outside of the state were affordability is more reasonable. I believe prices are heading near $225 to $250 per sqft in the coming months to years. We are waiting patiently and making the best of a situation at a TIC complex while saving tons of money. Hopefully the "New Hope Plan" or whatever that damn thing is called doesn't forestall everything and hurt the ppl like you and I don't spend outside their means.
 
mino --- thanks, and we think very much alike. I think $250 psf is where Irvine will settle, and just am trying to hang on until it gets there. To that end, I just had to close my office door so I could release a barage of effenheimers at my screen after reading that msnbc article....
 
Hello All- from what i have been reading on the blog and news about houses in irvine.... i think TIC is holding it at 359 or so per sqft for a 1200 ft or so townhouses. Here is why i come up with this..... i bought a place in irvine from lennar and they would give me anything and everything except lower the price. The sales guy was like this is as far as i can go and this is all that they approved me for.... it seems like everytime they want to lower the price they would need to get approval or agreement with TIC. read about that in some other blog on here. So if you buy a place in irvine at least you know that TIC will at least protect their land value. i also think it depends on the sqft of the place.... the bigger the place the cheap it is per sqft. thus TIC probably has different group and how much they will let them go down to. AGAIN.... THIS IS JUST MY OBSERVATIONS.
 
"So if you buy a place in irvine at least you know that TIC will at least protect their land value."

They will certainly try. However, they only control the "ask." They do not control the "bid." As people are unable to finance the ridiculous sums available during the bubble, TIC will be forced to lower their prices or they will not sell any homes.
 
TIC certainly has a lot of say in irvine housing prices, but even with their monopoly, they are not powerful enough to control the mkt even locally. fine, lets put a floor at $359 sq ft. so you have entry level homes in the mid $400k range. with high taxes, mello roos, hoas thrown in, it still requires an income lvl far higher than what families are earning, especially the sort of folks that would be looking at these townhomes. combine with the fact that most people dont have the cash for the down pymts that are now required, cant get financing a larger loan, sure as heck aren't increasing savings, real income isnt going up, and other necessities of life not getting any cheaper, these homes still aren't going to get sold.
 
You must log in or register to reply here.
Back
Top