What do you right now with a Half-Million Dollars in Irvine???

Irvine Soul Brother_IHB

Irvine Soul Brother_IHB

New member
Okay-- I agree that the market is going to tank and all of that. But we're going to buy something in Irvine in the next month, because we're got 1031 money from an LA home sale and we're ready to get something closer to our home in Orange County. The 1031 money will net us about 500k, and we're looking for some place that:





-- Will have a good net rent income flow. (So, HOA, Mello Roos etc matter in that equation).





-- Will have strong resale (So new construction is probably out, it's only "new" initially of course)





-- Won't fall apart, or be a maintainence problem





We're willing to put more money in, but of course are hesitant because of the coming crash. As soon as the sun started shining so much of the inventory we were looking at got snapped up, but that's probably just a wave of buyers who were waiting during the holidays/slow Jan and Feb and were happy to get something for less than what was at the peak. Any input?
 
<p><em>"-- Will have a good net rent income flow. (So, HOA, Mello Roos etc matter in that equation)."</em></p>

<p>Not gonna happen for several years. Period, end.</p>

<p>Unless you have a pre-2002 cost basis, I don't think anyting can be cash-flow positive right now, even top-line. Throw in HOA, MR, maintenance, and I'd say it is impossible.</p>

<p>Not being all doom and gloom. This is just reality.</p>

<p>SCHB</p>
 
Irvine Soul Brother,





socalhousingbubble is right. If there were properties anywhere near cashflow value, we wouldn't be talking about a bubble. You will be lucky to cover 2/3 of your expenses at today's prices. You are better off paying the 15% capital gains rather than putting it into a property that will lose more than 15% of its value.
 
i would say the best homes for rent income right now are the detached condos like cortile at woodbury. these are california pacific homes and the same floorplans are in almost any irvine village since the mid 90s. woodbury, quail hill, north park, and i believe tustin ranch all have these homes. decada at portola springs is similar but i dont think their pricing would get you break-even.





these homes offer a nice balance for many renters with decent income. the homes are right next to each other, but at least it's not on top of each other, and you get a 2 car garage. a nice 2 bedroom apt at woodbury court would cost $2000/mo.





i put my cortile plan 1 up for rent last summer but decided otherwise, but not because there weren't any takers. at 2600/mo i would have no carry costs. my neighbors leased out their plan 3 for 2900/mo. considering we both purchased our homes in 2005, we're both pretty happy to know that we can at least put up our homes for rent with no carry costs. in this mkt, i'd say thats not bad but if you're expecting to make net income from a rental at current purchase prices i'd say it'll be tough.
 
Love this blog. Absolutely agree w/IrvineRenter...rather take the long term cap gains tax then re-investing and risk losing 15-30% over the next few yrs along w/tying up your money.





May as well sit and wait for a good opportunity in the next 2-3 yrs.





My first post too :)
 
I would take the long term cap gains and done with the 1031 and be free! Either way you lose money through tax or through depreciation. Now what if the markets bottom already!!!! Also, are you going to burn the money that you net, or are you going to put it in stocks? ... this option is also a money loser.
 
Can't agree with IrvineRenter more!!! Also, now with the democrats in control of both houses who knows what is going to happen to the capital gains tax. It's a double edge sword either way you look at it.
 
<p>Take the 15% capital gains! There is no way of knowing how long that tax rate will last. I don't want to get into politics on this forum but our government has shifted in a different direction which is not so friendly when it comes to the capital gain tax. </p>

<p>I will see what I can find out if there is a way to transfer that money into something else other than a property. I don't think there is but it would be good to know for sure. </p>
 
I'm appreciating everyone's input. . . It's so hard to take the definite 15% hit! I do <em>feel</em> that the market will be off more than that during this downswing though-- I've read IrvineRenter's posts and they seem solidly quantitatively based.


But that 15% "lost," ouch! Oh, and not to mention the $500 lost with the accomodator who is holding the money for us. . . I'd be curious if anyone can construct a scenario where the market does not go lower than 15% in the next few years. . .





As far as the 1031 law goes, graphrix, my understanding is that it has to be go from property to property, and it has to the same type of property. For example raw land to raw land or rental to rental. If you know something else about this law that would be potentially really relevant.





Thanks Again,


ISB.
 
<p>ISB - I am no tax expert but I read somewhere there are 6 hits for the long term tax. I can not remember all; however I do have 4 main ones:</p>

<p>1. 15% for Federal</p>

<p>2. 11% for State Income tax (no long term, just straight)</p>

<p>3. Alternative minimum tax since your income is more than certain limit</p>

<p>4. Lost of all kind of deductions because you are making too much.</p>

<p>My CPA told me once it's more like 39%. Please check with your tax accountant. Very important. I was in your situation and my accountant told me to do the exchange then move in a few years and get the $500K exemption (I am married). Good luck.</p>
 
Irvine Soul Brother,





Resale home prices in Irvine is pretty expensive right now. If you want a home that won't fall apart, I'd suggest new or new-ish homes that are termite-free. There are a few home tracts with low HOA in Irvine, but they're usually more expensive single family homes.





If cash flow is more important to you, you could check the Village of Columbus - Columbus Grove - Claredon thread on this forum. I think residence 1 is $513,500 new. You could sink the 500k 1031-exchange account into it and rent it out for positive cash flow. I'm not sure if the HOA has owner-occupancy requirement however. The HOA fees are higher, but being a 3 bed 2 bath + 2 car garage unit, you could prolly get more rent to cover the difference.



 
<p>Remember, that is a beyond-small 3 bedroom, and the value is destined to fall, even if it is the best deal around right now (momopi, I'm not saying there's anything better). Next year, people will be saying " Remember, around the peak, you could actually get someone to pay over half a million dollars for a 1200 sf 3 bedroom over garages!"</p>

<p>And the HOAs are $374 a month. That's steep on the >2000 sf plan 3, but it's brutal on the smaller plans.</p>

<p>Take the tax hit and get your money into a CD or MM account.</p>

<p>SCHB</p>
 
<p>SoulBrother, </p>

<p> Taking the money out is more than 15%, 15% is just the start, my experience is between 40-50%. I suggest investing it in an apartment complex if you want a income producing property. Houses are kinda risky and VERY long term at this point. I was at your point a while back. I had something like a few $$ just dumped on me at I needed it to go somewhere. Anways good luck and don't work too hard.</p>

<p>-bix</p>
 
<p>IrvineSoulBrother: <em>Any input?</em></p>

<p>You might want to check to make sure 1031 rules allow investments in multi-family properties. There are several interesting, reasonably-priced properties in OC listed on <a href="http://www.loopnet.com">Loopnet.com</a> (free registration).</p>
 
<p>acpme,





i own one of those cal pac homes you're referring to (plan 2) and i was surprised that you tried to lease your plan 1 for $2600. i was thinking more along the lines of $2000 - $2200 for my plan. good to know what others have in mind! </p>
 
I think it'd be better if Irvine Soul Brother could consult with his accountant, and get a better idea on what his tax penalty is if he opts to cash out. Once we have some numbers to work with, we can better evaluate pluses/minuses on buying vs. taking the tax hit.
 
I'll get the man to run the numbers. . . but I think we're pretty (I know, it's bad!) dead-set on buying. So it'll become the question of what's going to rent well and hold it's value in a long term investment.
 
Irvine Soul Brother,





Good luck with that. There is always the possibility that us bears are wrong. If you can find an investment property that cash flows and won't depreciate in this market, you are a better shopper than I am.
 
Its seeming like a series of bad alternatives now. . . new and high HOA or old and tired. . . wanting at least a 2/2.5 but really shaky about how much extra to put in. I've done alot of research "in the field" now (endless checking out of properties in every Irvine neighborhood), I've heard the bad pitches from realtors and played with numbers endlessly. IrvineRenter, I think we might be in an upswing that you've mentioned-- a mini-one at least, so much inventory has been snapped up recently. I definitely think anything will depreciate big, but the fam would rather ride out the bad times. My tact is we should put in as little as possible above and beyond out base amount. Damage control, I guess. It's pretty challenging-- much hard to pick between several bad alternatives than several good. Anyway, I'm out to hit the open houses-- thank god the sun isn't shining today!





I'll let you know what we end up deciding. Thanks again all, I've really appreciated everyone's perspectives.
 
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