Rental Property in Irvine, slam dunk?

[woodburyowner]

I know people don't usually consider it when they are buying, but investment homes really help your tax returns with all the expenses, mortgage interest, repairs, yada yada, so with that considered it would help your bottom line 

Your statement really needs to be clarified to mention that anyone (or married couple) with a MAGI over 150k will NOT see any difference on their tax returns due to the passive activity limit rules for non real estate professionals.  I would think that most on this board would fall into this category.

 

[shahshah]

sorry posted that wrong

 

[shahshah]

Ardmore would rent out for about $3,100/mo +/- from the rental comps that I'm seeing.  The rental market is on fire and rents are up 8-10% in the past year or so.  HOA is $227/mo and Mello Roos is only $700/year so with 25% down you'll be about $100 negative...that's as good as it probably gets in Irvine. 

The sweet spot for rentals are 3bed/2.5bath condos/homes.  You have almost no competition from apartments and it opens you up to a much bigger rental pool.  Plus it makes it easier to sell because that's the first move-up type property for many buyers.

USC Trojan you mentioned 3bd/2bath is a sweet spot, how do you see 4bd/2+bath comparing to them with regard to valuations and rental income?  Like the same proportional changes over the long term?

Also seems at this price range income returns are pretty low, must be built in appreciation expectations?

 

[hello]

I cant stress this again, Irvine rentals will yield negative returns with current purchase prices. 

Based on what Ive read about Ardmore, here are the numbers.

purchase prices 650K
rent 3100/month
25% down at 4.7% (investment rates will be much higher, hence 4.7%)
closing costs ~ around 12K

Assume about 5% vacancy
Taxes: 7750/year
insurance: 1450/year
maintenance/repair: 2500/year
Property management: 8%  (even if you manage yourself, you should calculate into cost as your time is money)
HOA: 2750/year


Annual cash flow:  negative 12,278
Cash on Cash:  -6.67%
Total ROI: -2.55%

These numbers suggest you are going to lose money to buy this house as a rental.  So an investor buying this will lose 12K a year along with the headache of owning a rental.  This is not even considering opportunity costs of the 183K cash you will need to put up front to purchase this along with the monthly payments you will make. 

There will be no tax savings on this as rental income is passive income and cannot be written off against active income.

You are much better off putting this in an index fund.  15% return in the S&P 500 in the last 3 months...

Just saying...