Recommendations for $1M investment property

[rayzam]

Hi, I used to be a member in the old forum and we bought our first home with the help of members there (specially USC Trojan as our agent) back in 2009. Since then, we continued expanding our real estate portfolio and bought several residential and commercial properties including multi-units, office buildings and rental condos mostly in the OC and South Bay between 2010 and 2013. All properties turned out to be good investments with high cap rates and healthy equity growth thanks to the low purchase prices, but with the prices going insanely high and caps getting way below 5, we pretty much stopped acquiring new investment properties and focused on other businesses. Now after a few years with some surplus cash at hand we have decided to add a few other investment properties and got preapproved from BoA for around $1M purchase with 30% down (and if it matters, the rate is 4.75 for 30-yr fixed conventional for an investment property which can be anything from a single dwelling up to fourplex - we can also get a commercial loan for 4+ units but that will be capped at 15-year fixed and hence the purchase price will be a bit lower).
With the market the way it is, do we have any chances to get a decent investment property at this price range in the OC or adjacent counties, and if so, what do you recommend in terms of the type and location of the property to get the best balance between the equity growth and CAP? Thanks!

 

[usctrojancpa]

Happy to have helped to get the ball rolling and glad to hear that all has been well.  One area that one of my clients has had great success in was buying a duplex with 3-bedroom units near Disneyland.  He fully remodeled and furnished both of the units and has been renting them out on airbnb with great success.  It is a bit more involved in terms of managing it but he's generated twice the income even after all his expenses versus just leasing the properties out to long-term tenants. 

 

[hello]

Happy to have helped to get the ball rolling and glad to hear that all has been well.  One area that one of my clients has had great success in was buying a duplex with 3-bedroom units near Disneyland.  He fully remodeled and furnished both of the units and has been renting them out on airbnb with great success.  It is a bit more involved in terms of managing it but he's generated twice the income even after all his expenses versus just leasing the properties out to long-term tenants.

I wouldnt do that.  Anaheim passed a law banning short term rentals.  Airbnb will be dead in anaheim in the near future.

 

[peppy]

Happy to have helped to get the ball rolling and glad to hear that all has been well.  One area that one of my clients has had great success in was buying a duplex with 3-bedroom units near Disneyland.  He fully remodeled and furnished both of the units and has been renting them out on airbnb with great success.  It is a bit more involved in terms of managing it but he's generated twice the income even after all his expenses versus just leasing the properties out to long-term tenants.

I wouldnt do that.  Anaheim passed a law banning short term rentals.  Airbnb will be dead in anaheim in the near future.

There are a lot of localities where it is already prohibited but rarely (or not at all) enforced.

 

[zubs]

Yah, it seems like airbnb and uber are running into problems with the old economy.
I actually like uber, but airbnb not so much because how would you like your neighbor using their house as a hotel?...you wouldn't.

I expect the future holds enormous headwinds for airbnb.  City ordinances are only gonna get tighter.

 

[usctrojancpa]

Happy to have helped to get the ball rolling and glad to hear that all has been well.  One area that one of my clients has had great success in was buying a duplex with 3-bedroom units near Disneyland.  He fully remodeled and furnished both of the units and has been renting them out on airbnb with great success.  It is a bit more involved in terms of managing it but he's generated twice the income even after all his expenses versus just leasing the properties out to long-term tenants.

I wouldnt do that.  Anaheim passed a law banning short term rentals.  Airbnb will be dead in anaheim in the near future.

I guess when they ban/outlaw Airbnb in Anaheim, he'll have the option of either doing traditional leases or selling the property.  Till the City of Anaheim forces him, he'll keep renting the units out on Airbnb.  The smart thing to do for these cities is to impose a requirement to collect occupancy/hotel tax for each Airbnb stay, that would boost revenues. 

 

[hello]

Happy to have helped to get the ball rolling and glad to hear that all has been well.  One area that one of my clients has had great success in was buying a duplex with 3-bedroom units near Disneyland.  He fully remodeled and furnished both of the units and has been renting them out on airbnb with great success.  It is a bit more involved in terms of managing it but he's generated twice the income even after all his expenses versus just leasing the properties out to long-term tenants.

I wouldnt do that.  Anaheim passed a law banning short term rentals.  Airbnb will be dead in anaheim in the near future.

I guess when they ban/outlaw Airbnb in Anaheim, he'll have the option of either doing traditional leases or selling the property.  Till the City of Anaheim forces him, he'll keep renting the units out on Airbnb.  The smart thing to do for these cities is to impose a requirement to collect occupancy/hotel tax for each Airbnb stay, that would boost revenues.

I short term rentals (not just airbnb) are already banned in Anaheim.  No one will be able to renew their permits and within a year from now, all short term rentals will be illegal.  Owners have been given until next year to stop.  Regardless of what we consider to be the smart thing, there are stronger forces in play here.  The teachers union/disneyland and other political forces were behind this new law for their own benefits.

 

[rayzam]

Thanks for all the advice! Before moving to the new place and renting out our old house, we actually looked into the option of Airbnb as the potential income was very high (we rented the house for around $7k/mo while we could collect that much in less than a week through short-term rentals) but we were not sure about the hassles of clean up and dealing with problem renters, etc (although I'm sure there are companies out there that manage the short-term rental properties for a percentage of the rent and keep you largely hands-off). The house is now rented for a year, but I'd be interested to know if Newport has any ordinances on short-term rentals like Anaheim and Irvine...
What other options are out there? Any new constructions at 1M range out there that are priced right? If not, does it make more sense to get a nicer SFR and rent it, or should be continue with our past strategy of smaller condos (or perhaps small multi-units)? Sigh... the cap rates these days are so depressing...

 

[rayzam]

Are there any new constructions in Irvine around $1M that are available for immediate purchase and offer good rental potentials? Thanks!

 

[irvinehomeowner]

Are there any new constructions in Irvine around $1M that are available for immediate purchase and offer good rental potentials? Thanks!

I think new builds give preference to primary residents... but you can always say that you plan to live there.

Target the new builds that are closer to the Spectrum (5 Points properties) or amenities (so Eastwood and Stonegate but not Portola Springs). I haven't priced new homes in a while so I have no idea what's available at the $1m range.

 

[Bullsback]

To answer you question...no new build in Irvine would offer good rental potential, imo.