Debts And Assets

[Irvinecommuter]

Obviously...anyone who "times" the market accurately will make a lot of money...even something like bitcoin.

The question is what is the best risk/reward strategy for the rest of us who are passively investing.  I hold true to the "diversify" and slowly reduce risk policies for investment with stocks taking a bulk of the investment (but slowly reducing as one gets older).

 

[fortune11]

Best predictor of long term home values is local economic activity. west LA and south OC didn't just take off in a vacuum.  They had decades of growth of high paying jobs in a variety of industries. coupled with some of the worst restrictions on new multifamily developments (well maybe not Irvine where developers run amok). 

Nashville was big in healthcare and now diversifying .  Same for some other areas .  But new development is a lot easier there.  this is why the moment these other (tier 2) areas see a modest downturn, you will see an even bigger drop in prices .  because there is nothing else to sustain the local market (not destinations otherwise unlike LA/OC). 

We ourselves got a taste of this back in the early 90s after the Cold War died down and aerospace industries retrenched from the area. Didn't matter how affordable LA was compared to San Francisco, home values here took a bigger hit given a whole industry packed up and left along with its high paying jobs. 

 

[momopi]

Rather than specify age, I'd say time the RE market and buy when it's cheaper (or at least comparable) than rent.

In addition to making the numbers work, if you're buying a home, you should only buy a house that you feel good living in.  If that's not possible then rent and buy elsewhere as investment property.  Never buy a home that you feel miserable living in.

Which beg the question, where are we now in the cycle? From your perspective.

I don't have a crystal ball, but as a RE investor I'm selling investment properties this summer.

 

[eyephone]

Exactly!

 

[irvinebullhousing]

Rather than specify age, I'd say time the RE market and buy when it's cheaper (or at least comparable) than rent.

In addition to making the numbers work, if you're buying a home, you should only buy a house that you feel good living in.  If that's not possible then rent and buy elsewhere as investment property.  Never buy a home that you feel miserable living in.

Which beg the question, where are we now in the cycle? From your perspective.

I don't have a crystal ball, but as a RE investor I'm selling investment properties this summer.

Where have you been targeting for rentals purchase in the past that is around low 200K? Has to be sunbelt states?

 

[momopi]

Where have you been targeting for rentals purchase in the past that is around low 200K? Has to be sunbelt states?

You don't have to go that far.  During previous RE down cycle you could buy 4 bed 2 bath houses in LA County (Norwalk/Downey) for around $250,000 in 2010-2012.  Many cul-de-sac 3/2 and 4/2 homes avail.  However these SFR's were built in 1950's to 1960's, and the local water supply is "hard".  So expect to spend some money on piping, asbestos, etc.

For newer construction you can check Chino.  Wide variety of SFR's built from 1970s-2000's.  The dairy is moving so more land will be made avail for construction, less smelly / fewer flies.  In the next RE down cycle it may be possible to buy a SFR here built in 2000's with 15 year fixed rate loan with payments close to break-even point vs. rent.

If you want to buy SFR's in the $100K range, look along I-15.  You could buy a small house for $100K-$150K @ low and sell for $300K @ high.  If you invest in cheaper homes, when you sell your house will be among the lowest priced on the market for a quick sale.

 

[eyephone]

Buy low sell high aka Pump and dump strategy

Smart guy

 

[irvinebullhousing]

Where have you been targeting for rentals purchase in the past that is around low 200K? Has to be sunbelt states?

You don't have to go that far.  During previous RE down cycle you could buy 4 bed 2 bath houses in LA County (Norwalk/Downey) for around $250,000 in 2010-2012.  Many cul-de-sac 3/2 and 4/2 homes avail.  However these SFR's were built in 1950's to 1960's, and the local water supply is "hard".  So expect to spend some money on piping, asbestos, etc.

For newer construction you can check Chino.  Wide variety of SFR's built from 1970s-2000's.  The dairy is moving so more land will be made avail for construction, less smelly / fewer flies.  In the next RE down cycle it may be possible to buy a SFR here built in 2000's with 15 year fixed rate loan with payments close to break-even point vs. rent.

If you want to buy SFR's in the $100K range, look along I-15.  You could buy a small house for $100K-$150K @ low and sell for $300K @ high.  If you invest in cheaper homes, when you sell your house will be among the lowest priced on the market for a quick sale.

What type of renters do you typically see / run into in this type of price range at your rentals?

 

[momopi]

What type of renters do you typically see / run into in this type of price range at your rentals?

For Riverside County you tend to get more applicants with lower credit scores.  I've been fortunate to get good tenants that always paid on time, but you need to pay for gardener to maintain the landscaping and to make sure the tenant didn't shut off the sprinklers.  For south Riverside County area you might get military applicants.  They get housing subsidies and if they cause any trouble you can call their CO.

For communities in Riverside county popular with retiree's, you'll get old folks with nothing else better to do that get elected to HOA board and write citations all day.  Grass on side walk, dry leaves on palm tree, paint peeling from mail box post, all kinds of things they think of when they're bored.

For the recent built SFR communities in Chino (Irvine style new housing), due to proximity to dairy in the past you have many, many flies and pigeons.  We've spent several thousand dollars on pigeon remediation (roof spikes, bird feed with birth control, etc).  Tenants here tend to have better credit scores but like parts of Irvine, people move in and out all the time so there isn't a long-term sense of community.

For Norwalk/Downey areas you can find many older single level SFR's in cul-de-sac's.  They tend to have decent sized lots and the neighbors lived there for many years.  If you buy investment/rental property here make the effort to greet the neighbors and give them your contact info.  Tenant applicants here tend to be families with kids.  While the long-term residents here may appear lower middle to middle income, some are actually loaded with multiple rental properties acquired over 20-30 years.

Surprisingly Downey has some nice million dollar homes that rivals Whittier, except you won't get the hill location/view that Whittier has.  Proximity to freeway is both a bonus and health hazard.  Upscale housing community can also be found to the south in Rossmor, which is like a cheaper version of Floral Park.  Cerritos was very popular with East Asians in 80s-90s but is starting to show its age, -- I really like Cerritos Library and highly recommend taking the kids to visit.  From investment perspective these more expensive areas are good to live in but won't cash flow.

 

[irvinebullhousing]

What type of renters do you typically see / run into in this type of price range at your rentals?

For Riverside County you tend to get more applicants with lower credit scores.  I've been fortunate to get good tenants that always paid on time, but you need to pay for gardener to maintain the landscaping and to make sure the tenant didn't shut off the sprinklers.  For south Riverside County area you might get military applicants.  They get housing subsidies and if they cause any trouble you can call their CO.

For communities in Riverside county popular with retiree's, you'll get old folks with nothing else better to do that get elected to HOA board and write citations all day.  Grass on side walk, dry leaves on palm tree, paint peeling from mail box post, all kinds of things they think of when they're bored.

For the recent built SFR communities in Chino (Irvine style new housing), due to proximity to dairy in the past you have many, many flies and pigeons.  We've spent several thousand dollars on pigeon remediation (roof spikes, bird feed with birth control, etc).  Tenants here tend to have better credit scores but like parts of Irvine, people move in and out all the time so there isn't a long-term sense of community.

For Norwalk/Downey areas you can find many older single level SFR's in cul-de-sac's.  They tend to have decent sized lots and the neighbors lived there for many years.  If you buy investment/rental property here make the effort to greet the neighbors and give them your contact info.  Tenant applicants here tend to be families with kids.  While the long-term residents here may appear lower middle to middle income, some are actually loaded with multiple rental properties acquired over 20-30 years.

Surprisingly Downey has some nice million dollar homes that rivals Whittier, except you won't get the hill location/view that Whittier has.  Proximity to freeway is both a bonus and health hazard.  Upscale housing community can also be found to the south in Rossmor, which is like a cheaper version of Floral Park.  Cerritos was very popular with East Asians in 80s-90s but is starting to show its age, -- I really like Cerritos Library and highly recommend taking the kids to visit.  From investment perspective these more expensive areas are good to live in but won't cash flow.

Thanks Monopi for your detail insight.

You got me laughing reading the remediation of pigeon (Birth Control) Man, you made my day.