darrenito1234_IHB
New member
Good morning everyone, I thought that I would ask this question here and get your opinions from some people in the real estate industry and get an opinion on condos particularly those in Santa Ana near South Coast Plaza on land lease land. My brother is very interested in the following properties:
http://www.redfin.com/CA/Santa-Ana/3650-S-Bear-St-92704/unit-H/home/21627909
http://www.redfin.com/CA/Santa-Ana/3650-S-Bear-St-92704/unit-F/home/18974858
've been doing some research into this place and the HOA is determined to buy the land. In fact, on their website they have a dedicated link showing the progress of the HOA trying to purchase the land. The owner has already made an offer to the HOA but the HOA said that at this current moment the HOA is unable to purchase the land because there are a lot of places within this complex that aren't paying HOA fees on time. From my count,about 6-8% of the places in this complex are for short sale and I imagine there are other units that are late on paying that are not for short sale. The HOA is trying to lock in an offer and hopes to purchase the land once the housing market stabilizes.
The reason I think this place is a good deal is that you're starting to see prices in this complex drop like a rock. Comparable condos around this complex are selling for $200-225 per square foot. That includes other land-lease places that are right across the street. I'm thinking that you could buy one of these places for less than $100 per square foot. Plus, I really do think that the HOA is going to purchase the land eventually. If it does, the value of my place will increase significantly over night.
Currently, the owner of the land is offering the land for sale at $8.5 M. I read that there are 220-240 units in this complex and the HOA predicts that the entire transaction could cost as much as $10.5 M. From a rough calculation, if you divide the largest figure (10.5M) by the number of units (220) it only comes out to $47,700 per unit. if I buy the biggest unit in this complex I would have to pay more money than those who purchased smaller ones. So if the HOA purchased the land, I might have to pay as much as $65,000. This would still be a killer deal for me because you figure for a 1440 square foot place it only cost me, $144,000 (assuming $100 per square foot) for purchasing the place + $65,000 (cost of buying land) = $209,000. That means price per square foot if the HOA owned the land would only be $145. That's about a 25% discount off the current market's price per square foot for surrounding units. And, keep in mind, many places around this complex are also on leased land. So, if the HOA buys the land, I would get this discount plus I'd have the advantage of owning the land, unlike other complexes near me.
The only downside to this deal is if the HOA doesn't purchase the land. I figure that this might be a real possibility but even then it's not such a bad situation for me. With the lease payment, my monthly out of pocket expenses would be about $1750 for the big unit. This number is calculated by assuming a purchase price of 149,000 (figures in fees for buying), a lease payment of $200 per month, a $486 HOA fee per month, a 15 year loan* at 5.5%, and property taxes at 1.1%. After taxes, I expect this place to cost me $1600/month. I think I could rent out the other room for about 700-800 so it be at least 28% less than what I'm paying now in rent.
*I would have to take a 15 year loan because there are about 32 years left on the land lease. You cannot get a 30 year loan unless there are at least 35+ years on the lease. I think that's why you're seeing prices in this place crater because buyers cannot take out a conventional 30 year loan.
Yes, I think it's risky, but it may be worth the risk. I mean after 15 years, no matter what I'll have the mortgage on this place done with, which is relief for me. Also, I understand reselling the place would be difficult if there still is a lease-land situation. But I figure why would I ever sell if this place is already or very close to cash flowing. A 2 bedroom in this area for this size has to be at least $1600 per month at the current prices. I went to check out an apartment across the street that was 1 bed and a loft with a 2 car garage (my place only has 1 car garage and 1 dedicated uncovered spot) and it was going for 1950 per month. That place was 1300 square feet and only slighly nicer than the place I'm looking at.
I figure I have a lot of time to see what happens with this place but am starting to think it's a good deal. What do you guys think???
http://www.redfin.com/CA/Santa-Ana/3650-S-Bear-St-92704/unit-H/home/21627909
http://www.redfin.com/CA/Santa-Ana/3650-S-Bear-St-92704/unit-F/home/18974858
've been doing some research into this place and the HOA is determined to buy the land. In fact, on their website they have a dedicated link showing the progress of the HOA trying to purchase the land. The owner has already made an offer to the HOA but the HOA said that at this current moment the HOA is unable to purchase the land because there are a lot of places within this complex that aren't paying HOA fees on time. From my count,about 6-8% of the places in this complex are for short sale and I imagine there are other units that are late on paying that are not for short sale. The HOA is trying to lock in an offer and hopes to purchase the land once the housing market stabilizes.
The reason I think this place is a good deal is that you're starting to see prices in this complex drop like a rock. Comparable condos around this complex are selling for $200-225 per square foot. That includes other land-lease places that are right across the street. I'm thinking that you could buy one of these places for less than $100 per square foot. Plus, I really do think that the HOA is going to purchase the land eventually. If it does, the value of my place will increase significantly over night.
Currently, the owner of the land is offering the land for sale at $8.5 M. I read that there are 220-240 units in this complex and the HOA predicts that the entire transaction could cost as much as $10.5 M. From a rough calculation, if you divide the largest figure (10.5M) by the number of units (220) it only comes out to $47,700 per unit. if I buy the biggest unit in this complex I would have to pay more money than those who purchased smaller ones. So if the HOA purchased the land, I might have to pay as much as $65,000. This would still be a killer deal for me because you figure for a 1440 square foot place it only cost me, $144,000 (assuming $100 per square foot) for purchasing the place + $65,000 (cost of buying land) = $209,000. That means price per square foot if the HOA owned the land would only be $145. That's about a 25% discount off the current market's price per square foot for surrounding units. And, keep in mind, many places around this complex are also on leased land. So, if the HOA buys the land, I would get this discount plus I'd have the advantage of owning the land, unlike other complexes near me.
The only downside to this deal is if the HOA doesn't purchase the land. I figure that this might be a real possibility but even then it's not such a bad situation for me. With the lease payment, my monthly out of pocket expenses would be about $1750 for the big unit. This number is calculated by assuming a purchase price of 149,000 (figures in fees for buying), a lease payment of $200 per month, a $486 HOA fee per month, a 15 year loan* at 5.5%, and property taxes at 1.1%. After taxes, I expect this place to cost me $1600/month. I think I could rent out the other room for about 700-800 so it be at least 28% less than what I'm paying now in rent.
*I would have to take a 15 year loan because there are about 32 years left on the land lease. You cannot get a 30 year loan unless there are at least 35+ years on the lease. I think that's why you're seeing prices in this place crater because buyers cannot take out a conventional 30 year loan.
Yes, I think it's risky, but it may be worth the risk. I mean after 15 years, no matter what I'll have the mortgage on this place done with, which is relief for me. Also, I understand reselling the place would be difficult if there still is a lease-land situation. But I figure why would I ever sell if this place is already or very close to cash flowing. A 2 bedroom in this area for this size has to be at least $1600 per month at the current prices. I went to check out an apartment across the street that was 1 bed and a loft with a 2 car garage (my place only has 1 car garage and 1 dedicated uncovered spot) and it was going for 1950 per month. That place was 1300 square feet and only slighly nicer than the place I'm looking at.
I figure I have a lot of time to see what happens with this place but am starting to think it's a good deal. What do you guys think???
