Newer Irvine listings with crazy WTF asking prices from equity sellers

Leaf said:
https://www.redfin.com/CA/Irvine/15-Bluff-Vw-92603/home/4743140
5/1/2018 listed for $2,249,000, 11/29/2018 sold for $1,700,000, more than half million reduction
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Owners managed to buy at the bottom during 2012 and sold at the peak in 2018, yet squeaked out only 18.8% appreciation in 6.5 years.  That is about 2.9% gain per year of ownership, barely above inflation.  This would be a good example of why one should not bank on your house as an investment.  Consider costs financing, owning and selling costs, then you are in negative returns.
 
meccos12 said:
Leaf said:
https://www.redfin.com/CA/Irvine/15-Bluff-Vw-92603/home/4743140
5/1/2018 listed for $2,249,000, 11/29/2018 sold for $1,700,000, more than half million reduction
Click to expand...

Owners managed to buy at the bottom during 2012 and sold at the peak in 2018, yet squeaked out only 18.8% appreciation in 6.5 years.  That is about 2.9% gain per year of ownership, barely above inflation.  This would be a good example of why one should not bank on your house as an investment.  Consider costs financing, owning and selling costs, then you are in negative returns.
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That?s still fine if it?s their primary.  After all, they need to live somewhere. Rental price for that size house is ~$5k? X 12 mos X 6.5 yrs. is what they have saved instead of renting outside
 
AW said:
$5k? X 12 mos X 6.5 yrs. is what they have saved instead of renting outside
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Not entirely accurate. And if they were renting they would not have to pay commission for the sale of the home. Also do not have to pay for the property tax, HOA, Insurance, landscaping, maintenance, etc

It probably cost the owner around 80K to sell the home. So the profit goes down to about 190K.

Let's just use some ballpark figures. In 6.5 years you're looking at about 100K property tax, 13K HOA, 15K insurance, 15K landscaping and ????? maintenance.

You are already down to below 50K profit even before factoring in maintenance cost. Sure you will get some tax deductions but is it really worth it? Worth the opportunity cost of the down-payment just sitting there doing nothing except capturing appreciation?

A 20% down payment would have been 286k in June 2012. Had the owner just put it into Dow index fund non leveraged, he would have made about 250k by now. If the owner leveraged it, like he/she did with the house, the profit would be much much more.
 
Kenkoko said:
AW said:
$5k? X 12 mos X 6.5 yrs. is what they have saved instead of renting outside
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Not entirely accurate. And if they were renting they would not have to pay commission for the sale of the home. Also do not have to pay for the property tax, HOA, Insurance, landscaping, maintenance, etc

It probably cost the owner around 80K to sell the home. So the profit goes down to about 190K.

Let's just use some ballpark figures. In 6.5 years you're looking at about 100K property tax, 13K HOA, 15K insurance, 15K landscaping and ????? maintenance.

You are already down to below 50K profit even before factoring in maintenance cost. Sure you will get some tax deductions but is it really worth it? Worth the opportunity cost of the down-payment just sitting there doing nothing except capturing appreciation?

A 20% down payment would have been 286k in June 2012. Had the owner just put it into Dow index fund non leveraged, he would have made about 250k by now. If the owner leveraged it, like he/she did with the house, the profit would be much much more.
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Owner would still have to pay the equivalent rental amount though, let?s say 5x12x6.5=390k you say within 5 years profit is down to $50k (not including tax deduction on mtg interest during those years) and would?ve made $250k in Dow (not including tax on long term gains), it?s still better to have own than rent, if primary residence
 
AW said:
Owner would still have to pay the equivalent rental amount though, let?s say 5x12x6.5=390k you say within 5 years profit is down to $50k (not including tax deduction on mtg interest during those years) and would?ve made $250k in Dow (not including tax on long term gains), it?s still better to have own than rent, if primary residence
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Rent for 6.5 years = 390k.
20% Down payment invested in Dow index fund for 6.5 years minus 15% capital gains tax = 212k

Cost 178k to rent for 6.5 years

Mortgage interest for 6.5 years, not including principal, is 261k. Using 3.75% rate for jumbo loan of 1.144 million.
Offset that with the profit of 47k from the sale you will lower the cost down to 214k.
Using fed tax 25% and to estimate the mortgage interest tax deduction comes out to be approximately 55k for the 6.5 years.

That brings to cost to own for 6.5 years to 159k.
But that?s counting 0 for repair/maintenance on a large 3000+ sqft house built in 1977.
If you factor in any sort of major repair happening, renting comes out ahead.

Meccos12 is right. This a good example of why one should not bank on your house as an investment.
 
Kenkoko said:
AW said:
Owner would still have to pay the equivalent rental amount though, let?s say 5x12x6.5=390k you say within 5 years profit is down to $50k (not including tax deduction on mtg interest during those years) and would?ve made $250k in Dow (not including tax on long term gains), it?s still better to have own than rent, if primary residence
Click to expand...

Rent for 6.5 years = 390k.
20% Down payment invested in Dow index fund for 6.5 years minus 15% capital gains tax = 212k

Cost 178k to rent for 6.5 years

Mortgage interest for 6.5 years, not including principal, is 261k. Using 3.75% rate for jumbo loan of 1.144 million.
Offset that with the profit of 47k from the sale you will lower the cost down to 214k.
Using fed tax 25% and to estimate the mortgage interest tax deduction comes out to be approximately 55k for the 6.5 years.

That brings to cost to own for 6.5 years to 159k.
But that?s counting 0 for repair/maintenance on a large 3000+ sqft house built in 1977.
If you factor in any sort of major repair happening, renting comes out ahead.

Meccos12 is right. This a good example of why one should not bank on your house as an investment.
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what's the 178k cost to rent for 6.5 yrs?
 
Kenkoko said:
AW said:
what's the 178k cost to rent for 6.5 yrs?
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390k - 212k =178k
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ok, got it,
in your calc for owning the house scenario, did you add in the equity build up in 6.5 yrs? (sorry, it's hard to see if things aren't itemized, sorted on a table and comparing both scenarios)

(have to also see actual average of TR rent on a 3.2k sq ft 5 bd house in last 6.5 yrs, I was guessing $5k)
 
How about buy with Open Listing and get almost the full closing cost covered and sell with Redfin to minimize the selling cost?

You're welcome.  ;D

 
AW said:
ok, got it,
in your calc for owning the house scenario, did you add in the equity build up in 6.5 yrs? (sorry, it's hard to see if things aren't itemized, sorted on a table and comparing both scenarios)

(have to also see actual average of TR rent on a 3.2k sq ft 5 bd house in last 6.5 yrs, I was guessing $5k)
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Yes, I included it. Used ballpark figures but I think the point is still well illustrated even with minor tweaks. I used 4.7% as transaction cost but it could have been higher.

 
Kenkoko said:
AW said:
ok, got it,
in your calc for owning the house scenario, did you add in the equity build up in 6.5 yrs? (sorry, it's hard to see if things aren't itemized, sorted on a table and comparing both scenarios)

(have to also see actual average of TR rent on a 3.2k sq ft 5 bd house in last 6.5 yrs, I was guessing $5k)
Click to expand...

Yes, I included it. Used ballpark figures but I think the point is still well illustrated even with minor tweaks. I used 4.7% as transaction cost but it could have been higher.
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I think the problem is that we're both using ballpark figures, but since this is a high priced property, any small factor will skew the numbers
For example, I didn't even look how much rental prices are in the last 6.5 years for that zip code and just used $5k/mo, looking at zillow:https://www.zillow.com/irvine-ca-92603/home-values/
go to the rentals, select rent price/sq ft for sfr for last 5 years, it shows $2 (wow!) (x 3273 sqft) = $6.5k/mo, don't know if this is true, would need to run actual leased (12 or 24 mo) for that zip code, for 5 bd and around that size and avg last 6.5 years, if true, it'd negate any major repair

My hunch is that it's still better to have owned than rent for this property, and would be even more evident if we construct and use better estimates
 
woodburyowner said:
https://www.redfin.com/CA/Irvine/107-Cardinal-92618/home/51682525

Looks like a very stubborn seller. 

8/2017 - $1.6M.  Nothing.
6/2018 - $1.528M.  Nothing
7/2018 - $1.469M.  Nothing

Then today, with a new agent, property is listed for $1.699M!  I didn't realize the market had a 15% gain between Summer 2018 and now. 
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Not stubborn....a better word is delusional.  They'll be lucky to get $472/sf let along $572/sf.  haha
 
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