Author Topic: 305k condo as first investment property CA Central Coast  (Read 820 times)

platinumatt

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305k condo as first investment property CA Central Coast
« on: December 18, 2020, 02:06:42 PM »
Hi all,
First post here.  I'd like to buy my first piece of real estate and rent it out.  I don't mind the work and headache that may go into it as long as it's profitable.  A second part time job sounds good to me right now.

I live in the CA Central Coast and everything is really pricey here.  I went to an off market showing of a condo I absolutely love last night.  It's  $305k and that seems to be pretty standard for the area.  The real estate agent told me I could expect to rent the place out for about $1600k a month.   I have a good job and have been pre-approved for a mortgage at a few different places.  The agent told me that HOA fees are  $170 per month.  Property tax is about 0.729. 

Do you all think this makes sense as an investment property?
 I want to make sure I'm making money.  Looks like the cap rate would be a little over 6% (not including pmi, loan interest, his fees).  This is my first investment property so I'm still learning how to do this, what questions to ask, and what makes a good rental property.

Any ideas, criticism , even snyde remarks, would be greatly appreciated!

Cheers Moustachioes!!
« Last Edit: December 29, 2020, 12:53:17 PM by platinumatt »

waltworks

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Re: 305k condo as first investment property CA Central Coast
« Reply #1 on: December 18, 2020, 02:29:43 PM »
Hahahaha!!!!

No.

Go read a few threads on this forum.

-W

platinumatt

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Re: 305k condo as first investment property CA Central Coast
« Reply #2 on: December 18, 2020, 03:30:59 PM »
Ok, Sorry...

icebox92

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Re: 305k condo as first investment property CA Central Coast
« Reply #3 on: December 18, 2020, 03:40:17 PM »
Ok, Sorry...

Don't take it personally @platinumatt ... waltworks is a wealth of knowledge, but he unfortunately has to answer a lot of the same questions over and over from newbie real estate investors that are considering poor RE investments.  Go google the following real estate rules: 50% rule, and the 1% / 2% rule.  That will give you quick insight into why this is NOT a good investment. 
« Last Edit: December 18, 2020, 03:54:58 PM by icebox92 »

sammybiker

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Re: 305k condo as first investment property CA Central Coast
« Reply #4 on: December 18, 2020, 03:54:10 PM »
@platinumatt Keep at it, keep reading and you'll celebrate and laugh with us at this first thread in years to come.

The deal you posted is a cashflow loser.  Keep looking and studying.  I lived for a time in Singapore, even more HCOL than your local, but purchased actual cashflowing properties in the Midwest.  Anything is possible with the right timeframe (long), capital and effort.

platinumatt

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Re: 305k condo as first investment property CA Central Coast
« Reply #5 on: December 18, 2020, 07:03:41 PM »
Thank you all!  Looking at the 50% rule, it seems like there really aren't many if any good real estate investments to be made in this area... It's disappointing, I just moved here a little over year ago.    Makes me think  should have picked a better, less expensive location. 

Maybe that's my next best investment move...to move!

Paul der Krake

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Re: 305k condo as first investment property CA Central Coast
« Reply #6 on: December 18, 2020, 08:08:45 PM »
Thank you all!  Looking at the 50% rule, it seems like there really aren't many if any good real estate investments to be made in this area... It's disappointing, I just moved here a little over year ago.    Makes me think  should have picked a better, less expensive location. 

Maybe that's my next best investment move...to move!
Don't feel bad, most desirable places to live offer terrible returns for RE unless you start banking on appreciation.

For fun, I put in your numbers in my quick-n-dirty evaluation spreadsheet:



Not a great investment. You'd be losing money every month for a while.

« Last Edit: December 18, 2020, 08:16:46 PM by Paul der Krake »

platinumatt

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Re: 305k condo as first investment property CA Central Coast
« Reply #7 on: December 18, 2020, 09:47:01 PM »
Thanks Paul! That really makes it easy to see just how bad the decision to buy this would be.  I appreciate the reality check.

baconschteam

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Re: 305k condo as first investment property CA Central Coast
« Reply #8 on: December 24, 2020, 09:19:32 AM »
I live on the Central Coast too. There's nothing to be had (at least for a beginner like you and me). It's a beautiful place to live and a great place to build up some cash (for me it is, anyway) but the housing market is out of control. I'll be moving back to the East Coast in a year or so and investing in Central Jersey or Upstate NY I think.

waltworks

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Re: 305k condo as first investment property CA Central Coast
« Reply #9 on: December 24, 2020, 09:41:50 AM »
Watch out for property taxes in both of those places. It might look like there are great deals... until you see the $12k of property taxes on a $150k home.

-W

Sandi_k

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Re: 305k condo as first investment property CA Central Coast
« Reply #10 on: December 24, 2020, 12:09:28 PM »
Watch out for property taxes in both of those places. It might look like there are great deals... until you see the $12k of property taxes on a $150k home.

-W

I have no clue where you come up with a possible annual rate of 8% for property taxes; it's a ridiculous estimate.

California is typically 1-1.25% of the purchase price. And once purchased, the rate cannot increase more than 2% per year. So a $150k purchase would be more like $2k per year. However, there are no properties priced at $150k on the Central Coast. ;) Annual taxes on $305k is likely in the $4k per year range.

HOA fees, on the other hand, can increase without control given "special assessments" and other shenanigans.


waltworks

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Re: 305k condo as first investment property CA Central Coast
« Reply #11 on: December 24, 2020, 01:15:54 PM »
Watch out for property taxes in both of those places. It might look like there are great deals... until you see the $12k of property taxes on a $150k home.

-W

I have no clue where you come up with a possible annual rate of 8% for property taxes; it's a ridiculous estimate.

California is typically 1-1.25% of the purchase price. And once purchased, the rate cannot increase more than 2% per year. So a $150k purchase would be more like $2k per year. However, there are no properties priced at $150k on the Central Coast. ;) Annual taxes on $305k is likely in the $4k per year range.

HOA fees, on the other hand, can increase without control given "special assessments" and other shenanigans.

Sorry, should have quoted when replying. I was referring to upstate NY/Mid-Atlantic places, where those rates certainly do occur.

-W

Mr. Green

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Re: 305k condo as first investment property CA Central Coast
« Reply #12 on: December 24, 2020, 05:46:33 PM »
There are many areas where "investment grade" (meets the 50%, 1% rule, etc.) don't exist. I hope you're enjoying the Central Coast area though. We visited SLO, AG, and some of the coastal towns last year and it was amazeballs. The climate is fantastic.
« Last Edit: December 27, 2020, 11:00:14 AM by Mr. Green »

Dicey

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Re: 305k condo as first investment property CA Central Coast
« Reply #13 on: December 26, 2020, 03:05:08 PM »
Watch out for property taxes in both of those places. It might look like there are great deals... until you see the $12k of property taxes on a $150k home.

-W

I have no clue where you come up with a possible annual rate of 8% for property taxes; it's a ridiculous estimate.

California is typically 1-1.25% of the purchase price. And once purchased, the rate cannot increase more than 2% per year. So a $150k purchase would be more like $2k per year. However, there are no properties priced at $150k on the Central Coast. ;) Annual taxes on $305k is likely in the $4k per year range.

HOA fees, on the other hand, can increase without control given "special assessments" and other shenanigans.

Sorry, should have quoted when replying. I was referring to upstate NY/Mid-Atlantic places, where those rates certainly do occur.

-W
Hahaha, Walt beat me to it. I just posted this example on another thread:

Just for fun, per Zillow, my grandmother's former home in Elmhurst, IL is valued at $385k. The 2018 property taxes (the most recent year available) were a whopping $8,015.

A friend who lives in a "three stop light town" between Chicago and Rockford owns a home that Zillow says is worth $289k. Their 2018 property taxes were $7,769.

And neither of these properties have appreciated worth a damn in the last two decades.

New Jersey is worse. I know little about upstate NY, but I do know that Walt is a sage, so I believe him.

waltworks

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Re: 305k condo as first investment property CA Central Coast
« Reply #14 on: December 26, 2020, 05:31:57 PM »
It really varies by township/county. Some places made crazy crazy pension commitments and/or have really expensive public schools (which is usually basically a pensions/healthcare issue as well) and simultaneously have declining populations to support those outlays. And then the next town/county over will be basically ok.

Once property taxes get high enough people just bail and basically hand the keys over to the taxing authority and then you get a real downward spiral, in theory.

I'm far from a hardcore libertarian but public employee unions just straight up shouldn't be able to collectively bargain. A lot of places (IL is probably the poster child for this) will never be able to meet their obligations now and it's unclear what mechanism exists to solve the problem. In the interim in many cases the taxing authority's hands are tied - they legally have to keep raising taxes to pay for pension costs regardless of how the people living in the area feel about it or how outrageous the terms of the pensions are.

-W