Bottom Calling: Quail Hill Price-to-Rent Ratios = $220 - $293 per square foot

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GavriloPrincip_IHB

GavriloPrincip_IHB

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Irvine Renter has provided a formula to help determine where the bottom might lie: (rent * 160) divided by square footage.





Using it, I ran a few numbers on recent rentals in Quail Hill:





The following properties were rented in the last two weeks:





102 Pageantry: $5,500 rent * 160 = implied value of $880,000, divided by 4,000 square feet = $220 per foot


114 Mosaic: $5,500 * 160 = implied value of $880,000, divided by 3,600 square feet = $244 per square foot


109 Lattice: $4,200 * 160 = implied value of $672,000, divided by 2,500 square feet = $268 per square foot





Before being rented, each house was for sale:





102 Pageantry was for sale for $2.2million ($550 per square foot).


114 Mosaic was for sale for $1.820 million ($505 per square foot--a bargain!)


109 Lattice was for sale for $1.425 million (570 per square foot) and was featured on the IHB back in October: http://www.irvinehousingblog.com/2006/10/02/olivos-quail-hill-a-flip-disaster-in-the-making/





There are a few other houses for lease that produce similar numbers.





137 Weathervane: $5,500 rent, 3,000 square feet = implied value of $880,000 ($293 per square foot). Also for sale for $1.529 million ($509 per square foot)





In Vicara:





29 Balcony: $6,950 rent, 4,150 square feet = implied value of $1,112,000 ($267 per square foot). For sale for $2.238 million ($539 per square foot)


16 Silhouette: $6,500 rent, 4150 square feet = implied value of $1,040,000 ($237 per square foot). For sale for $2.149 million ($517 per square foot)


19 Fresco: $6,500 rent, 4100 square feet = implied value of $1,040,000 ($253 per square foot). For sale for $2.249 million ($548 per square foot)





The above numbers for Weathervane, Balcony, Silhouette and Fresco assume that the houses rent for the asking prices. This might not be a valid assumption, as the houses have been for lease on the MLS for several weeks without renting, suggesting that they are overpriced as rentals. Pageantry, Lattice and Mosaic each rented within days of appearing on the MLS, suggesting that they were priced right as rentals.





Please post observations about other neighborhoods here!
 
That is great work. Thank you.





P.S. Those rental rate numbers are a bit surprising. I can remember in March and April, the average rental rate on a per square foot basis was running about $1.85. I don't know if that was asking versus getting, or if that included all the overpriced Irvine company properties, but rental rates of the properties listed above on a per square foot basis are noticeably lower.





I really like calculations like these because they give you a real sense of the degree of inflation of for-sale asking prices and how far the market has yet to fall.
 
More stats! More stats! Feed me Seymour.... I need just a little more blooood, I mean stats, I mean schadenfreude.





Seriously, strong work.
 
<p>Someone mentioned the Irvine properties being overpriced (I am currently in an Irvine property rental) With your 160 figure based on my rental price -$2915- and size of apt -1450 sq ft- it works out to a house value of $321 per square foot - much higher than the numbers above for Quail Hill. </p>

<p>Anyone know if it is normal (other states, areas, etc) for apt complexes to have higher rents than individually owned properties? </p>

<p>Also, anyone have a favorite website for searching for rentals?</p>
 
Quail hill is a newer developed property tract and rent is higher (people like to live in newish properties). If you rent from older places along Culver, it'd should be cheaper.



 
Intriguing numbers indeed. Couple of things to keep in mind. First, rental price per square foot tends to go down considerably as the size of the unit increases. Second, 160 is a very conservative estimate in terms of where the bottom might lie. Numbers well below 160 have been seen in the recent past and will likely be seen again, especially if interest rates stay higher than they have been during the boom. 120 - 130 would be my own guess based on history.
 
<p>This is close to the cost model that I use for my apartments. I try to get 1.85 to 2.00 (*with money down on the loan ~40% sometimes) PSqFt. for rentals (of course the cheaper the better). These number are are well below that, but my average apartment is between 800-1100 sqft. These rentals being SO much bigger than any rental probably prices them WAY out of the average consumer price range.</p>

<p>Like mentioned in this blog before, while Irvine is at the upper end of the some "normal" standard of living, it is by no means cheap and i'm willing to bet that at that upper price range you will start to see alot of compression with rental prices. Anyways good luck and don't work too hard.</p>

<p>-bix</p>
 
A few more Quail Hill Price-to-Rent ratios, for condos on the MLS for rent right now. In each case, the stated rent is the asking price.





15 Tall Oak: $2,700 rent * 160 = $432,000 implied value. 1607 square feet = $268 per square foot.


This gem is also for sale and can be yours for a mere $718,000, or $446 per square foot.





349 Tall Oak: $3500 * 160 = $560,000 implied value. 1761 square feet = $318 per square foot.


(This rental is severely overpriced and has been on the market for several weeks, while other Tall Oak units of similar size have consistently leased out quickly at $2,700--$2,900).





36 Paperwhite: $3150 * 160 = $504,000 implied value. 1840 square feet = $273 per square foot





215 Scarlet: $3700 * 160 = $592,000 implied value. 2412 square feet = $245 per square foot





60 Seasons: $3250 * 160 = $520,000 implied value. 1884 square feet = $276 square feet.





A couple of observations:


*I would have expected the larger houses profiled at the beginnning of this thread to rent for a lower price per square foot, given their much larger size. However, all of these condos except 349 Tall Oak fall in the same price-per-square foot range as the houses.


*The implied values for these condos still seem very high. I believe they are still over the original selling prices. For example, I believe 60 Seasons originally sold for about $420,000. Perhaps someone with access to public records can check. If that is the case, the implied values are still too high, perhaps due to a more robust rental market for smaller places.





Your thoughts?
 
60 Seasons - $411,500


215 Scarlet - ~$646, 500


36 Paperwhite - $752,000 (2005 purchase)


349 Tall Oak - $462,500


15 Tall Oak - ~$580,000





Some didn't have the sale information, so the "~" designation is the assessed tax basis.
 
<p><em>I would have expected the larger houses profiled at the beginnning of this thread to rent for a lower price per square foot, given their much larger size.</em> </p>

<p>Those are asking price, not rented price. Wishing Price applies as much to rent lately as it does to home sellers.</p>
 
<p>Wishing price may be a necessity for most or all of these would-be landlords. All of the properties mentioned above were built/purchased since 2003, so even if they get their "Wishing" rental price, they're almost certainly losing money.</p>

<p>It will be an interesting dynamic in the rental market--owners can't sell, and they can't rent their houses either. Will rents really go much lower than we see now in neighborhoods like Quail Hill, while owners have to chip in money every month to cover carrying costs? And if owners are renting their places at a modest loss now in hopes of riding out the "temporary" downturn, in the hope that prices will come back next year, they could be in for a very rude shock.</p>
 
<em>"if owners are renting their places at a modest loss in hopes of riding out the slow selling season, in the hope that prices will come back next year, they could be in for a very rude shock."</em>





I see the potential for a great many "rent skimming" stories in these new neighborhoods next year.
 
<p>It'll be like the a unit I keep my eye on for six months. It's a unit that is identical floorplan as the unit I rent. The owner fixed it up after the previous tenant left. New tile, appliances, paint, carpet, fixtures, etc. Nothing super expansive, just a gloss coat. Then he raised the rent, and it sat. one month. two months. three months. minor price reduction, still sat. four months. minor price reduction. Still sat. five months. price reduction. six months. Sign came down, three weeks later someone moved in. </p>

<p>Six months empty...</p>
 
Do you have any protection as a renter incase the owner still goes under and can't make the payment? I would be scared that I just rented a place and the homeowner still might go under.
 
<em>"Do you have any protection as a renter incase the owner still goes under and can't make the payment? I would be scared that I just rented a place and the homeowner still might go under."</em>





Not that I am aware of. When I signed on to my latest rental, I checked out the landlord as carefully as they checked me out.
 
Back in April, I visited every rental available in Quail Hill, and made offers on many. For like properties (and some same listed above) I offered similar rents to the comp #'s GP uncovered, and every one said I was crazy....then I realized I was crazy for even contemplating considering paying $4-5k for rent, renting from someone who is upside down, also has the property for sale, and why risk the OC Sheriff at the door telling us time to leave as house is foreclosing.





So, took the advice of some of you, cut a deal with IAC, downsized and sold all the excess, and have the security of knowing my landlord is responsive, and not going anywhere. And, the amenities at our Quail Hill IAC community are nicer than the HOA amenities that the Quail Hill HOA provides. And so far, so good.





I would not rent from a private party unless the homeowner is in a positive cash flow position, meaning an older home or a foreign buyer who has no mortgage. Had a couple of attorneys we have on staff check to see what recourse and protection there is for a renter, and though there are some provisions in CA to protect, bottom line is if the bank wants it back they will make one's life miserable enough that you won't want to fight for the right to stay.
 
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