NewportSkipper

[quote author="NewportSkipper" date=1252729407]My points are more than proven. You are arguing to argue....and all for nothing.</blockquote>


Seriously? The original question was about investment properties for an individual investor, and these are spectacularly unsuitable for that purpose.



Newport Skipper, have you ever been over there? Unless you have deep pockets and seasoned property management with an efficient machine (oversight, maintenance, professional HOA, legal, etc.), these properties would kill an individual investor. The typical tenants only pay these inflated rents because they have no/bad credit and keeping tenants who won't trash the place and will actually pay on time would be tough. 10% margins are only 10% if the place stays rented, repairs are infrequent and management related fees/HOAs don't sap the profit margin.



That is not argument for the sake of argument, but reality.
 
[quote author="bltserv" date=1252730142]Skippy.



I think you need to meet us down at Tustin Village.

Maybe back away from the keyboard and your lists of data and step out into the real world.



I cant stop laughing at you man. Your a riot. "Slums as we put it"



<blockquote>I concede the $1,500 is rare (for the slums as you put it) and the $1,400 is even a tad high. However, considering these units do not cost $150,000 the point is moot. </blockquote>


Like Graph says. Lets go down there. I got my Sig Sauer and its coming too. I got a thousand cash for you

if you can go door to door for a couple hours after dark doing your RE thing. You will get rolled quicker than

I can say Skippy.</blockquote>


I will only go if Bix will be our sniper. No way in hell I am going in there without someone with a good shot getting my back.
 
[quote author="graphrix" date=1252730383][quote author="bltserv" date=1252730142]Skippy.



I think you need to meet us down at Tustin Village.

Maybe back away from the keyboard and your lists of data and step out into the real world.



I cant stop laughing at you man. Your a riot. "Slums as we put it"



<blockquote>I concede the $1,500 is rare (for the slums as you put it) and the $1,400 is even a tad high. However, considering these units do not cost $150,000 the point is moot. </blockquote>


Like Graph says. Lets go down there. I got my Sig Sauer and its coming too. I got a thousand cash for you

if you can go door to door for a couple hours after dark doing your RE thing. You will get rolled quicker than

I can say Skippy.</blockquote>


I will only go if Bix will be our sniper. No way in hell I am going in there without someone with a good shot getting my back.</blockquote>


My M4 should come in handy. When should we meet?
 
[quote author="CM_Dude" date=1252730314][quote author="NewportSkipper" date=1252729407]My points are more than proven. You are arguing to argue....and all for nothing.</blockquote>


Seriously? The original question was about investment properties for an individual investor, and these are spectacularly unsuitable for that purpose.



Newport Skipper, have you ever been over there? Unless you have deep pockets and seasoned property management with an efficient machine (oversight, maintenance, professional HOA, legal, etc.), these properties would kill an individual investor. The typical tenants only pay these inflated rents because they have no/bad credit and keeping tenants who won't trash the place and will actually pay on time would be tough. 10% margins are only 10% if the place stays rented, repairs are infrequent and management related fees/HOAs don't sap the profit margin.



That is not argument for the sake of argument, but reality.</blockquote>


Those arr 10% monthly margins, even allowing for avg of 2 months vacancy, you are looking at ~100% annual. I realize there are cost associated with managing the property, and perhaps the overall low cash flows is the reason this would be so unattractive. That said, if I were to put money into the purples I would rather do it in mobile homes.
 
[quote author="CapitalismWorks" date=1252729371]

Skip's accuracy aside, the idea of buying condos for $150K that earn $1000 a month is remarkable.

</blockquote>
It depends on who is buying it. The OP doesn't sound like an experienced investor (just by asking the question) so the prospect of managing one (much less two) such properties may prove daunting. This does not even speak to the credit-worthiness of the renters and quite honestly, the people who do rent in that area could be questionable.



Even at $1300, I find it quite surprising because I believe IAC rentals are around $1400 for 2br units and have dropped just from a year ago. I don't think that area can sustain $1300 rents, esp with competing apartments at $1100 or less. The private rentals are just slow to realize that you can't command that type of money for rentals anymore (I see this everywhere).



At $1000 positive cash flow, I'm still not sure if those properties are worth the investment but having been a landlord for the last few years has probably tainted my perspective. And the prospect of that cash flow dropping every year makes it worse.



I would rather invest in something more stable and easier to maintain and rent out even at a lower net.



If they were nicer $150k condos in a nicer area, it's a no-brainer... but that's why the responses were as such.
 
[quote author="CapitalismWorks" date=1252730841][quote author="CM_Dude" date=1252730314][quote author="NewportSkipper" date=1252729407]My points are more than proven. You are arguing to argue....and all for nothing.</blockquote>


Seriously? The original question was about investment properties for an individual investor, and these are spectacularly unsuitable for that purpose.



Newport Skipper, have you ever been over there? Unless you have deep pockets and seasoned property management with an efficient machine (oversight, maintenance, professional HOA, legal, etc.), these properties would kill an individual investor. The typical tenants only pay these inflated rents because they have no/bad credit and keeping tenants who won't trash the place and will actually pay on time would be tough. 10% margins are only 10% if the place stays rented, repairs are infrequent and management related fees/HOAs don't sap the profit margin.



That is not argument for the sake of argument, but reality.</blockquote>


Those arr 10% monthly margins, even allowing for avg of 2 months vacancy, you are looking at ~100% annual. I realize there are cost associated with managing the property, and perhaps the overall low cash flows is the reason this would be so unattractive. That said, if I were to put money into the purples I would rather do it in mobile homes.</blockquote>


Certainly - but I am talking about the realities of complexes like Tustin Village, not Huntington Beach. My anecdotal evidence shows 10 months trouble-free occupancy as a pipe dream in these marginal complexes. Nothing can kill an investment like lack of return.
 
[quote author="irvine_home_owner" date=1252730936]Even at $1300, I find it quite surprising because I believe IAC rentals are around $1400 for 2br units and have dropped just from a year ago. I don't think that area can sustain $1300 rents, esp with competing apartments at $1100 or less. The private rentals are just slow to realize that you can't command that type of money for rentals anymore (I see this everywhere).</blockquote>


If you look at the lease data from Robert, there are three "condos" on Gallery Way that rented for $1500, $1550, and $1600. These are in Tustin Ranch, a very nice area of Tustin Ranch, and if IIRC they were built by CalPac/TIC because they are the same floorplans and complex layouts as Rancho Mariposa and like around there. Some garages, some carports, but you are in TUSTIN FREAKIN RANCH. You might get your car broken into, and maybe an overdose once a year, but not 3-4 times a week. Plus you can go outside at night.
 
Oh yeah... and this has been mentioned before but the HOAs at Tustin Village are $240 a month.



WHAT?!? Is there some lake or private resort that comes with it that I'm not aware of? That ROI is getting smaller.
 
[quote author="graphrix" date=1252731380][quote author="irvine_home_owner" date=1252730936]Even at $1300, I find it quite surprising because I believe IAC rentals are around $1400 for 2br units and have dropped just from a year ago. I don't think that area can sustain $1300 rents, esp with competing apartments at $1100 or less. The private rentals are just slow to realize that you can't command that type of money for rentals anymore (I see this everywhere).</blockquote>


If you look at the lease data from Robert, there are three "condos" on Gallery Way that rented for $1500, $1550, and $1600. These are in Tustin Ranch, a very nice area of Tustin Ranch, and if IIRC they were built by CalPac/TIC because they are the same floorplans and complex layouts as Rancho Mariposa and like around there. Some garages, some carports, but you are in TUSTIN FREAKIN RANCH. You might get your car broken into, and maybe an overdose once a year, but not 3-4 times a week. Plus you can go outside at night.</blockquote>


Golf course living! A far cry from Tustin Village.
 
[quote author="irvine_home_owner" date=1252731591]Oh yeah... and this has been mentioned before but the HOAs at Tustin Village are $240 a month.



WHAT?!? Is there some lake or private resort that comes with it that I'm not aware of? That ROI is getting smaller.</blockquote>


Lets review the math ONE more time...



Rent $1300 - $240 HOA = $1060 X 12 = $12,270 X .75 = $9540 / $130,000 purchase price = 7.3% annual return on a cash investment. Not bad, but will your management company go there at 11pm to fix a broken toilet? Heh... good luck with that.
 
[quote author="RoLar_USC" date=1252724382]Here are the 20 cheapest sales in tustin with a minimum of 2 bedrooms over the past 3 months</blockquote>Good data, but your 1st map is screwed up



e.g. #18 and #20 are not in the correct locations on the 1st map, actually I think almost all are offset by one
 
Its not really very dangerous down there on Tustin Village/Lyon/Pasadena/Williams/Mitchell/etc; I am sure there are plenty of property crimes, drunk and disorderlies, and domestic disputes, but I have not heard much about any recent murders, rapes, or other violent felonies committed against persons.



But I am certain managing a rental would be a PITA. Suppose you could hire a firm, but at around $1300 minus $240 for HOAs, not much left to play with.
 
[quote author="xoneinax" date=1252733456]But I am certain managing a rental would be a PITA. Suppose you could hire a firm, but at around $1300 minus $240 for HOAs, not much less to play with.</blockquote>
I would say don't forget the maintenance costs but according to NewSkip:

<blockquote>

There is little-to-no maintenance on a condo.

</blockquote>
Those almost 40+year condos must be built pretty well.
 
NewportSkipper - This is besides the point and you do make the blog for better reading.



You remind me of somebody from the OCREGISTER realestate blog. You are a she, not a he?
 
[quote author="graphrix" date=1252732520][quote author="irvine_home_owner" date=1252731591]Oh yeah... and this has been mentioned before but the HOAs at Tustin Village are $240 a month.



WHAT?!? Is there some lake or private resort that comes with it that I'm not aware of? That ROI is getting smaller.</blockquote>


Lets review the math ONE more time...



Rent $1300 - $240 HOA = $1060 X 12 = $12,270 X .75 = $9540 / $130,000 purchase price = 7.3% annual return on a cash investment. Not bad, but will your management company go there at 11pm to fix a broken toilet? Heh... good luck with that.</blockquote>
Your vacancy of 25% might be a bit high (I'd use a 1 or 1.5 vacancy factor), but that being said you have to take off the property tax expense and a 1% R&M provision of the purchase price which will bring that return down below 7%.
 
[quote author="USCTrojanCPA" date=1252763525][quote author="graphrix" date=1252732520][quote author="irvine_home_owner" date=1252731591]Oh yeah... and this has been mentioned before but the HOAs at Tustin Village are $240 a month.



WHAT?!? Is there some lake or private resort that comes with it that I'm not aware of? That ROI is getting smaller.</blockquote>


Lets review the math ONE more time...



Rent $1300 - $240 HOA = $1060 X 12 = $12,270 X .75 = $9540 / $130,000 purchase price = 7.3% annual return on a cash investment. Not bad, but will your management company go there at 11pm to fix a broken toilet? Heh... good luck with that.</blockquote>
Your vacancy of 25% might be a bit high (I'd use a 1 or 1.5 vacancy factor), but that being said you have to take off the property tax expense and a 1% R&M provision of the purchase price which will bring that return down below 7%.</blockquote>


It is not just a vacancy expense I include, it is an overall vacancy/repair/property tax/WTF!... you have to be kidding me you shoved tampons down the toilet... are you dumber than a sack of nails expense. It comes from a <a href="http://www.johntreed.com/positive.html">simple method that John T. Reed follows</a>, and that my father followed, and my grandfather followed, all before John T. Reed published it. I am following in their footsteps, because it has worked best for my family and will for mine... in fact it is working as I type this. It is simple but it works.
 
Nice points all. Those HOAs are MAMMOTH considering the very low rents. This type of development would have to be among the riskiest type of real estate investing considering the crime, credit, and management issues, thus necessitating corresponding high rates of return (which are obviously lacking).



Skippy, your thesis has been disproven, however it was a worthwhile discussion.
 
Darn. What did I miss ?

I come back from lunch and the Skippers ship has been torpedoed ?

Just tragic.



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