We are looking to buy a property for investment purposes under 1mm. The goal is to rent this out. Obviously the main part of calculation where would I get the highest rent/price ratio? I am thinking that possibly we should look out of Irvine here. I am not very familiar with all the nearby towns and area so I am looking for points! Don't want to buy an old house because repairs will be non stop thus a condo seems as a better fit where hopefully there will be some support stuff as well in case tenant needs small things to be fixed.
Buying as investment
- Thread starter arr164
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CalBears96
Well-known member
Personally, I think right now it's a bad time to buy investment property. One really good place would have been Serrano Summit in Lake Forest back in 2019-2020, when the Soria homes were just below $1M. Lake Forest doesn't have MR and IIRC, the HOA fees were around $130/mo. The condos in same the community back then were probably around $700k, but it came with sub HOA, so around $300 or $400.
Irvine is definitely out of the question, with the price premium and $3800 MR, or $7k+ MR for Great Park.
Irvine is definitely out of the question, with the price premium and $3800 MR, or $7k+ MR for Great Park.
why? cap rates are terrible. Much better to put that into intermediate duration investment grade corporate bonds in the 6% range. Do some homework but hey, it's not my money.
usctrojancpa
Well-known member
I would highly recommend purchasing a detached 3bd properties with a yard in areas outside of Irvine that still have 7+ schools like Aliso Viejo, Foothill Ranch, parts of Mission Viejo, etc. The detached condos will have HOA/s less than $200 per month and those areas do not have Mello Roos. Those 3bd detached properties (SFR or detached condos) will attract both move-up renters and move-up buyers.
usctrojancpa
Well-known member
If you believe that we are near a peak in rates, it's not a horrible idea to buy because when rates come down prices will come up. So it's better to lock in a lower price because you can refinance your interest rate but you can't refinance your purchase price.
CalBears96
Well-known member
Actually, I don't believe that prices will go up a lot when rates come down. The reason for lack of inventory right now is that because people are reluctant to upgrade to bigger homes (and usually new construction) due to high rates. If these people stay put, there won't be inventory. On the other hand, when rates come down, these people are more willing to upgrade, which means there will be more inventory because they're selling their old homes.
usctrojancpa
Well-known member
The problem will be that even when rates get to 4% you'll still have people who won't be willing to let go of their 2.50% to 3% mortgages so they either won't move or their try to keep their exit properties as rentals. Inventory will pick up but buyer demand will pick up more which will cause prices to drift higher.
If you think it is a bad time to buy because rates are higher? I think actually this is the time to buy as when rates go down all of a sudden more people will be buying and prices will go up again.
What is MR and IIRC?
CalBears96
Well-known member
Like I said, when rates go down, people who were unwilling to upgrade (via new construction) will do so, and therefore would be selling their old homes, creating more inventory. Why do you think prices aren't going down now even though no one wants to buy? Lack of inventory because those people who wanted to upgrade aren't willing to do so.
MR = Mello-Roos, aka CFD (Community Facilities District), or extra property taxes that go toward building schools, fire/police stations, park, etc.
IIRC = If I Recall Correctly
irvinehomeowner
Well-known member
I'll say this for the nth time... buy when you can. 
Ready2Downsize
Well-known member
Big red candles on the builders. DHI down after hitting an all time high. New permits down. Doesn't mean prices will drop but maybe builders are pulling back............. reducing inventory.
CalBears96
Well-known member
For a home you plan to live in, yeah, but not necessarily for an investment property.I'll say this for the nth time... buy when you can.
irvinehomeowner
Well-known member
Mostly true.
It really depends on your timeline, finance method, cashflow requirements and liquidity.
If I was the one who hit the Powerball yesterday (who here bought the downtown LA ticket?), I would certainly buy a few overpriced Portola Springs new builds now because I know in 5 or 10 years... they will be worth more than homes in other cities... or at least more rentable.
CalBears96
Well-known member
What the hell, dude? If you hit the Powerball yesterday, you wouldn't be able to spend the money in 10 life times just from the interest alone. Why bother with extra work?Mostly true.
It really depends on your timeline, finance method, cashflow requirements and liquidity.
If I was the one who hit the Powerball yesterday (who here bought the downtown LA ticket?), I would certainly buy a few overpriced Portola Springs new builds now because I know in 5 or 10 years... they will be worth more than homes in other cities... or at least more rentable.
irvinehomeowner
Well-known member
Because I like to collect stuff.
But then you have to pay more now. What I mean is that all real estate will appreciate x percent. So you can buy in Irvine for 1.4mm house or you can buy 2 for 700k elsewhere. In the end you get the same appreciation, I don't think Irvine will be growing while the rest of CA not. Rentable yes but it also depends on a lot of factors and what demographics you target.Mostly true.
It really depends on your timeline, finance method, cashflow requirements and liquidity.
If I was the one who hit the Powerball yesterday (who here bought the downtown LA ticket?), I would certainly buy a few overpriced Portola Springs new builds now because I know in 5 or 10 years... they will be worth more than homes in other cities... or at least more rentable.
CalBears96
Well-known member
OC in general, and Irvine in particular, grows faster than other counties. Not all real estate will appreciate the same percentage.
Ok, yes I meant nearby though. Within say 50 miles. Neighboring towns are cheaper than Irvine so I can put money in different ways, what matters where I get most rent on the dollar invested as a percentage.
CalBears96
Well-known member
Well, yeah, I already mentioned that in post #2. Irvine is out of the question as an investment property because you're deep in negative cash flow unless you're a cash buyer. But putting down a couple of million $ for rental isn't worth it either. There are better ways to invest.