Buying a 1 bedroom in AV? Who thinks my idea is a good idea

wendyinoc_IHB

wendyinoc_IHB

New member
Ok so my rent is $2200 currently in Irvine. I found a 1 bedroom for $120 K. If I put 20% down my total payment with HOA and tax is $1000. So I would save $1200 a month in rent. I would then in the future make it a rental. I want to buy a house in 2011 when prices are at the bottom. IF I hold this property for the long haul I should profit correct? I know people say don't buy a 1 bedroom but in the boom some people paid $350k for this house.



Good Idea or not a good idea?? I could buy a two bedroom but don't have enough down payment for 20%. I refuse to have PMI. My goal would be to put the savings in a bank to save for the 2011 house.
 
Saving $14K a year is an excelent reason to buy.



Can you stand to live there for seven years till you own it outright (assuming you continue to pay down the mortgage at the same rate as your rental)?
 
I think we have a few people from AV here on the forums. Might want to check with them on the property & area for suggestions.



The reason why I'm suggesting, is that you actually intend to live in the property for x number of years.
 
[quote author="wendyinoc" date=1234363545]Ok so my rent is $2200 currently in Irvine. I found a 1 bedroom for $120 K. If I put 20% down my total payment with HOA and tax is $1000. So I would save $1200 a month in rent. I would then in the future make it a rental. I want to buy a house in 2011 when prices are at the bottom. IF I hold this property for the long haul I should profit correct? I know people say don't buy a 1 bedroom but in the boom some people paid $350k for this house.



Good Idea or not a good idea?? I could buy a two bedroom but don't have enough down payment for 20%. I refuse to have PMI. My goal would be to put the savings in a bank to save for the 2011 house.</blockquote>
If you can buy it for that much then it sounds like a good deal. The thing you might want to check in is if the HOA is having financial problems (which may result in higher HOA dues and special assessments). It sounds like you are renting a 2-bedroom in Irvine for $2,200 so you aren't comparing apples to apples. That being said, you'd be hard pressed to find a nice 1-bedroom rental in Irvine or AV for less than $1,300 a month so you are still ahead of the game (plus you might get a tax benefit as well). Just curious, but is the property under $200/sf? That seems to pencil out for rental parity.
 
[quote author="wendyinoc" date=1234363545]Ok so my rent is $2200 currently in Irvine. I found a 1 bedroom for $120 K. If I put 20% down my total payment with HOA and tax is $1000. So I would save $1200 a month in rent. I would then in the future make it a rental. I want to buy a house in 2011 when prices are at the bottom. IF I hold this property for the long haul I should profit correct? I know people say don't buy a 1 bedroom but in the boom some people paid $350k for this house.



Good Idea or not a good idea?? I could buy a two bedroom but don't have enough down payment for 20%. I refuse to have PMI. My goal would be to put the savings in a bank to save for the 2011 house.</blockquote>


One bedrooms are the dark side of investing, and the last to rebound, if they ever do. By 2011 you will be lucky to break even, and more likely you will have lost money. Seriously, I know I am known as a downer and doom and gloomer here on IHB, but I wouldn't touch a 1bd with no_vas's money even if the over under favored me. Especially when I could buy a 3bd condo in a good part of Costa Mesa for the same price $120k, and have a much higher cash flow. To be brutally harsh, in 2011, I will be picking up 1bds in AV for $25k and renting them out for less than market, because I can, and because it will cash flow.



For the love of gawd, stop thinking you need to buy now or you will be priced out forever. Get over this, and realize how stupid it is to be buying a 1bd in AV really sounds, when I know I can pickup a 2bd or even a 3bd for $120k. It's just nuts.
 
I hope things don't get to $25k because we will be in a great depression. I love renting so I am not against waiting. I just like the idea of $1000 payment. If I lose my job or my spouse loses his will be ok. I can't stay in it 7 years but I could rent it out for at least $1000 and break even. How long will it take for 2 bedrooms to get to $150K?? Why does the second bedroom cost an additional $100K?? It's crazy the difference.
 
Me and my husband use to rent a 2 bedroom place, then we decided to be owners and purchased a 1 bedroom.

It was good for a while and then 2.5 to 3 years later its cramped, and we can't wait to move.



IMHO, don't do it. Wait till you can at least buy a 2 bedroom place. That extra bedroom makes all the difference.
 
Hey, how'd that "Thanks" get posted? I didn't do that. Not that I'm not thankful for uscguy, I'm just sayin'.



Anyway, do your calcs come out to $1000 because there is no MelloRoos? Is that because the location is down near El Toro in the older area? I can't say I'm too fond of that area and I can't imagine it going like hot cakes anytime soon. Maybe if the Cotton-tops from Leisure World start making their way over there but otherwise it's a ways away from anything to be in demand over other places.



Median rents in AV for a 1-bd are around $1350 so while this may be at or below rental parity I'm not sure it's enough wiggle room for my tastes especially dealing with a 1-bd. Being that close to parity I think I'd still prefer the freedom of mobility with all the uncertainty we're facing, but that's just me. Also, be careful with rents in AV, especially at the lower end, because it seems they are really starting to come down. There are some highly transient rental neighborhoods in AV and I'd assume they'll be the first to get clobbered with rising unemployment and lower wages.



I don't know which area you're looking at but an extra $150-$200/month would be worth a better area and peace of mind with my investment.
 
Talk to lenders about buying down the PMI. For a 95% loan it was only about 1 point to eliminate PMI. The total was 1.8 points to bring the rate down to only 4.75 with no PMI. A 90% loan was even less to eliminate PMI. I would wait to buy the SFR over buying a 1 bd condo. You may find that you won't have the 20% down for the SFR in 2011 if you buy the condo now and you may have to qualify to cover both mortgages. If you want to save money on rent, you could move to a place that is much less than $2200/ mo.
 
[quote author="wendyinoc" date=1234395787]I hope things don't get to $25k because we will be in a great depression. I love renting so I am not against waiting. I just like the idea of $1000 payment. If I lose my job or my spouse loses his will be ok. I can't stay in it 7 years but I could rent it out for at least $1000 and break even. How long will it take for 2 bedrooms to get to $150K?? Why does the second bedroom cost an additional $100K?? It's crazy the difference.</blockquote>


The second BR has the 2nd car stall requirement and the extra land costs more. The 1/1 that you are interested has a single stall. 1/1 in Aliso Viejo does not have any appeal to renters due to its location unless you lower your rent as a big draw. IAC junior 1/1 has been a big hit due to the lifestyle amenities that come along with the package. The unit is cramp and renters do spend a lot of time at the pools and business center. A private 1/1 might a little land-lock and will not command the appeal of an IAC 1/1.



2/1.5 is popular and has a higher demand therefore the price reflects that. It is not just the extra BR but also the 1/2 bath and the extra stall.



You will regret fast having a 1/1 due to the lack of storage and among other inconveniences. Good luck in finding a future renter or buyer in the future. 2/1.5 is a safer bet.
 
<a href="http://www.zillow.com/homedetails/23535-Los-Adornos-Aliso-Viejo-CA-92656/25542396_zpid/">You could have picked up this 3/2 in AV for $186,000.01 today at the auction</a>. Looks like the investor bought it for cash flow, <a href="http://www.redfin.com/CA/Aliso-Viejo/23546-Los-Adornos-92656/home/4850449">because this one is for sale for $225k</a> and it wouldn't net enough to flip at that price. Not the best complex in AV, but that is below 2003 prices.
 
1 bedroom apartments in Aliso Viejo rent for about $1300 to 1400. So if you can buy it with a 30 year fixed mortgage and a total payment including taxes & insurance of $1000 how is that not a good investment. As long as you are comfortable owning it for the long term.
 
[quote author="Joe33" date=1234428908]1 bedroom apartments in Aliso Viejo rent for about $1300 to 1400. So if you can buy it with a 30 year fixed mortgage and a total payment including taxes & insurance of $1000 how is that not a good investment. As long as you are comfortable owning it for the long term.</blockquote>




"how is that not a good investment"



let me count the ways:

1. what is the HOA? is it likely to rise? what is the deadbeat situation with the HOA? how old is the place? is it likely there will be big assessments to pay for age/upkeep/deadbeats?

2. what about maintainence of the inside? how much budget for that?

3. what about vacancy if you rent it? 10%? 20%?

4. if you live there, how much more will your commuting costs be? the extra time?

5. are rents likely to go down?

6. are there a lot of upside down owners? you will have a hard time getting a loan if so, and will pay more if you can.

7. are the demographics of the complex going to change? will you want to live there then? will it be more difficult to rent it out?



etc
 
I agree with Freedom because all of his scenarios are likely. Especially in a condo where the owners have no control over maintenance expenditure for an aging complex.
 
The low end is going killed and the high unemployment rate will really put the hammer to places this size I think. It doesn't sound like a terrible idea, but it would sound a whole lot better a year from now at $20K less...
 
<blockquote>I hope things don?t get to $25k because we will be in a great depression.</blockquote>


More like Colossal Manic Depression. I'm as skeptical as the next guy but $120K for a 3BD in NICE part of CM or a $25K in AV will lead to massive chaos and looting. It's as improbable as "Real Estate will always go up".
 
[quote author="gepetoh" date=1234600287]<blockquote>I hope things don?t get to $25k because we will be in a great depression.</blockquote>


More like Colossal Manic Depression. I'm as skeptical as the next guy but $120K for a 3BD in NICE part of CM or a $25K in AV will lead to massive chaos and looting. It's as improbable as "Real Estate will always go up".</blockquote>
I agree, I just can't see even a nice 1-bedroom condo in AV go for less than $100/sf (I'm thinking around $125-$150/sf would be about the bottom). We'd have to have HUGE unemployment (depression like 25%+ unemployment) and big drop in incomes to have a nice 1-bedroom condo in BV sell for $25k.
 
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