To buy or to rent?

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Cubic Zirconia_IHB

New member
Hello everyone,



I am just another homeless newbie on the forums. Planning to buy/ move to Irvine before the school starts and enjoy the so-called good life.



Here is my dilemma-

I saw two properties at 500k- 1500 sf, decent condos, low HOA, and low Mello-roos in West Irvine.



If I rent, I will pay around 2200/ month on similar properties. If I buy, my expenses per month minus tax deductions are close to 2100/ month.



Should I just buy a condo and move in? Should I rent and incur expenses like moving, money gone in renting that would have been towards my mortgage?



Gurus, please advise.



Cubic Z
 
depends on whether you think the value of what you buy (the condo) will stay even, or continue to decline.



all of the forecasts I have seen predict another 25% drop over the next two years in SoCal. say that averages out to 1%/month. so add on 0.01 x $500k = 5$k/month to the ownership cost of $2100/month. say prices only drop 12% over the next 3 years, so it is only 0.3%/month, or $1500/month



renting = $2200/month



owning = $7100/month @ 25%, $3600/month @ 12%





now what looks better?
 
[quote author="ipoplaya" date=1213080515]Since I am a soon-to-be West Irvine condo seller, I say BUY BUY BUY!</blockquote>


You gonna go less then $300 per sq.ft? :-)
 
Whoa! The way I put my numbers:



Rent= $2200

In an yr= 26400

Property depreciation in an year going by the current trend in West Irvine= 5 to 6%

On 500k = 30000



Also, renting raises the taxable income and tax time last year was so frustrating with absolutely no deductions.



Cubic
 
[quote author="ipoplaya" date=1213080515]Since I am a soon-to-be West Irvine condo seller, I say BUY BUY BUY!</blockquote>


I f I decide to buy now, my offer isn't going to go above 280/290 per SF on low HOA units (say less than 300$). Still want to sell to me? :-)

*You can blame yourself for all the low offers you are going to get on the property- I will probably wear an IHB T-shirt and drop the offer personally*:D



Cubic Z
 
[quote author="25w100k+" date=1213080709][quote author="ipoplaya" date=1213080515]Since I am a soon-to-be West Irvine condo seller, I say BUY BUY BUY!</blockquote>


You gonna go less then $300 per sq.ft? :-)</blockquote>


Nope... Won't need to. The one my same size in my tract on the market has had more than five offers already with none starting out lower than $340/sf. It should sell for $365/sf or so I think. Then again, mine is detached, so the per sf price is higher because you get your own walls, a small backyard, etc.
 
[quote author="Cubic Zirconia" date=1213081652][quote author="ipoplaya" date=1213080515]Since I am a soon-to-be West Irvine condo seller, I say BUY BUY BUY!</blockquote>


I f I decide to buy now, my offer isn't going to go above 280/290 per SF on low HOA units (say less than 300$). Still want to sell to me? :-)

*You can blame yourself for all the low offers you are going to get on the property- I will probably wear an IHB T-shirt and drop the offer personally*:D



Cubic Z</blockquote>


My pad normally rents for $2600-2800 CZ, so I think it's probably not the same spec as what you are looking at. I'll be looking out for your lowball at $500K :)
 
[quote author="Cubic Zirconia" date=1213081481]Whoa! The way I put my numbers:



Rent= $2200

In an yr= 26400

Property depreciation in an year going by the current trend in West Irvine= 5 to 6%

On 500k = 30000



Also, renting raises the taxable income and tax time last year was so frustrating with absolutely no deductions.



Cubic</blockquote>




OK, so your PITI = $2100/month (from your numbers above) + $30k/12 = $2500/month



so you are going to pay

<strong>

$4600/month owning</strong>



versus $2200 + (1/3 (est tax rate) * I (6% x$450k)) =~$9k/12mo =~

<strong>

$3000/month renting</strong>



again, I ask, which do you choose?
 
[quote author="ipoplaya" date=1213085303][quote author="25w100k+" date=1213080709][quote author="ipoplaya" date=1213080515]Since I am a soon-to-be West Irvine condo seller, I say BUY BUY BUY!</blockquote>


You gonna go less then $300 per sq.ft? :-)</blockquote>


Nope... Won't need to. The one my same size in my tract on the market has had more than five offers already with none starting out lower than $340/sf. It should sell for $365/sf or so I think. Then again, mine is detached, so the per sf price is higher because you get your own walls, a small backyard, etc.</blockquote>


Ah. Well, I wish you the best of luck. I really like the model you have, but I can't afford it and I think the higher end stuff in West Irvine will eventually bottom out around 300.



Better sell before <a href="http://www.redfin.com/CA/Irvine/15-Bellevue-92602/unit-1/home/12444464">15 Bellevue</a> closes, might make people think twice about 350 a sq ft.
 
15 bellevue has 2 common walls so it's not the exact same comps. i don't know what the premium for the detached condos should be but i agree it should exist.
 
[quote author="freedomCM" date=1213085678][quote author="Cubic Zirconia" date=1213081481]Whoa! The way I put my numbers:



Rent= $2200

In an yr= 26400

Property depreciation in an year going by the current trend in West Irvine= 5 to 6%

On 500k = 30000



Also, renting raises the taxable income and tax time last year was so frustrating with absolutely no deductions.



Cubic</blockquote>




OK, so your PITI = $2100/month (from your numbers above) + $30k/12 = $2500/month



so you are going to pay

<strong>

$4600/month owning</strong>



versus $2200 + (1/3 (est tax rate) * I (6% x$450k)) =~$9k/12mo =~

<strong>

$3000/month renting</strong>



again, I ask, which do you choose?</blockquote>


Nice work! Yep, figured that out long ago. Owning a home now with equity burn of 3-4k a month is very, very expensive. Plus all the fees, taxes and everything. I don't know about you but 8-9K a month is heafty to own a depreciating asset.



good luck

-bix
 
I'm not one of the gurus, but our rent vs buy scenario was very similar and we bought. The one thing we didn't factor in is 1% of purchase price for maintenance. Had we done that, renting would have been less per month. Equity is burning at a rate of $1,000 per week. One or two months of this in the big picture isn't a big deal, but if it keeps up I'm going to find one of those spotless mind docs to remove any thoughts of real estate from my head!



We bought an REO at decent price for March '08 that ended up with a back up offer $20K over what we paid. Even starting out ahead $20K, if burn rate continues, in one year we are $32K behind minus $5K principal reduction leaving us $27K behind. If you look at that spread over a year it's costing us $2,250 more per month to own. Over 30 years, it's $75/mo more to own. If interest rates are 1% higher next year, the $27K we saved in purchase price is $76 more per month in payments less $22/mo in lower property tax, meaning it would cost us $54 more per month to pay $27K less. Now, if we had to sell in a year or two, we would have to realize the paper loss, which would be very unpleasant. But this isn't Irvine and it seems like there haven't been many 2002 and 2003 rollbacks there.



Traditionally, I had always heard that if you weren't going to stay in a house for at least 5 years, then it didn't make sense to buy. And that's with normal market conditions.
 
[quote author="stepping_up" date=1213144553]I'm not one of the gurus, but our rent vs buy scenario was very similar and we bought. The one thing we didn't factor in is 1% of purchase price for maintenance. Had we done that, renting would have been less per month. Equity is burning at a rate of $1,000 per week. One or two months of this in the big picture isn't a big deal, but if it keeps up I'm going to find one of those spotless mind docs to remove any thoughts of real estate from my head!



We bought an REO at decent price for March '08 that ended up with a back up offer $20K over what we paid. Even starting out ahead $20K, if burn rate continues, in one year we are $32K behind minus $5K principal reduction leaving us $27K behind. If you look at that spread over a year it's costing us $2,250 more per month to own. Over 30 years, it's $75/mo more to own. If interest rates are 1% higher next year, the $27K we saved in purchase price is $76 more per month in payments less $22/mo in lower property tax, meaning it would cost us $54 more per month to pay $27K less. Now, if we had to sell in a year or two, we would have to realize the paper loss, which would be very unpleasant. But this isn't Irvine and it seems like there haven't been many 2002 and 2003 rollbacks there.



Traditionally, I had always heard that if you weren't going to stay in a house for at least 5 years, then it didn't make sense to buy. And that's with normal market conditions.</blockquote>


You bought this year or last step? I assume you mean March 2007...
 
[quote author="ipoplaya" date=1213144838][quote author="stepping_up" date=1213144553]I'm not one of the gurus, but our rent vs buy scenario was very similar and we bought. The one thing we didn't factor in is 1% of purchase price for maintenance. Had we done that, renting would have been less per month. Equity is burning at a rate of $1,000 per week. One or two months of this in the big picture isn't a big deal, but if it keeps up I'm going to find one of those spotless mind docs to remove any thoughts of real estate from my head!



We bought an REO at decent price for March '08 that ended up with a back up offer $20K over what we paid. Even starting out ahead $20K, if burn rate continues, in one year we are $32K behind minus $5K principal reduction leaving us $27K behind. If you look at that spread over a year it's costing us $2,250 more per month to own. Over 30 years, it's $75/mo more to own. If interest rates are 1% higher next year, the $27K we saved in purchase price is $76 more per month in payments less $22/mo in lower property tax, meaning it would cost us $54 more per month to pay $27K less. Now, if we had to sell in a year or two, we would have to realize the paper loss, which would be very unpleasant. But this isn't Irvine and it seems like there haven't been many 2002 and 2003 rollbacks there.



Traditionally, I had always heard that if you weren't going to stay in a house for at least 5 years, then it didn't make sense to buy. And that's with normal market conditions.</blockquote>


You bought this year or last step? I assume you mean March 2007...</blockquote>


We closed May 9th, 2008. FreedomCM calculated our CS to be 163.
 
[quote author="ipoplaya" date=1213085496][quote author="Cubic Zirconia" date=1213081652][quote author="ipoplaya" date=1213080515]Since I am a soon-to-be West Irvine condo seller, I say BUY BUY BUY!</blockquote>


I f I decide to buy now, my offer isn't going to go above 280/290 per SF on low HOA units (say less than 300$). Still want to sell to me? :-)

*You can blame yourself for all the low offers you are going to get on the property- I will probably wear an IHB T-shirt and drop the offer personally*:D



Cubic Z</blockquote>


My pad normally rents for $2600-2800 CZ, so I think it's probably not the same spec as what you are looking at. I'll be looking out for your lowball at $500K :)</blockquote>


IPO, is it in West Irvine? If it's Ok with you, please share the property details, or a similar one on the market.

I had my eyes on 1 Bradford. Went for 570k. My offer was just 50k off...

Another property that I couldn't stop imagining myself and family in was 171 Lockford. Had a midnight enlightenment and withdrew the offer the next day. it's in escrow now, and can't wait to see how much it went for.



Anyway, the rent/own comparable property that I have in mind right now are 449 ridgeway and 59 sapphire. It won't be a move up from my current apartment in terms of space, but the rent is moving up, and mortgage will probably stay the same *and equity will definitely move down*



Cubic
 
[quote author="freedomCM" date=1213085678][quote author="Cubic Zirconia" date=1213081481]Whoa! The way I put my numbers:



Rent= $2200

In an yr= 26400

Property depreciation in an year going by the current trend in West Irvine= 5 to 6%

On 500k = 30000



Also, renting raises the taxable income and tax time last year was so frustrating with absolutely no deductions.



Cubic</blockquote>




OK, so your PITI = $2100/month (from your numbers above) + $30k/12 = $2500/month



so you are going to pay

<strong>

$4600/month owning</strong>



versus $2200 + (1/3 (est tax rate) * I (6% x$450k)) =~$9k/12mo =~

<strong>

$3000/month renting</strong>



again, I ask, which do you choose?</blockquote>


Now it's clear:D



I choose renting for a few more months, and probably will cut paste this and pass up as my own calculation to persuade my dear spouse into renting AGAIN!



Cubic
 
[quote author="stepping_up" date=1213144553]I'm not one of the gurus, but our rent vs buy scenario was very similar and we bought. The one thing we didn't factor in is 1% of purchase price for maintenance. Had we done that, renting would have been less per month. Equity is burning at a rate of $1,000 per week. One or two months of this in the big picture isn't a big deal, but if it keeps up I'm going to find one of those spotless mind docs to remove any thoughts of real estate from my head!



We bought an REO at decent price for March '08 that ended up with a back up offer $20K over what we paid. Even starting out ahead $20K, if burn rate continues, in one year we are $32K behind minus $5K principal reduction leaving us $27K behind. If you look at that spread over a year it's costing us $2,250 more per month to own. Over 30 years, it's $75/mo more to own. If interest rates are 1% higher next year, the $27K we saved in purchase price is $76 more per month in payments less $22/mo in lower property tax, meaning it would cost us $54 more per month to pay $27K less. Now, if we had to sell in a year or two, we would have to realize the paper loss, which would be very unpleasant. But this isn't Irvine and it seems like there haven't been many 2002 and 2003 rollbacks there.



Traditionally, I had always heard that if you weren't going to stay in a house for at least 5 years, then it didn't make sense to buy. And that's with normal market conditions.</blockquote>


If I buy, it will be either in West Irvine or North Park. Going by what I read at the forum and blogs, it looks like boom time is nearing for those "mind doctors" that specialize in real estate...



Cubic
 
[quote author="Cubic Zirconia" date=1213151595][quote author="freedomCM" date=1213085678][quote author="Cubic Zirconia" date=1213081481]Whoa! The way I put my numbers:



Rent= $2200

In an yr= 26400

Property depreciation in an year going by the current trend in West Irvine= 5 to 6%

On 500k = 30000



Also, renting raises the taxable income and tax time last year was so frustrating with absolutely no deductions.



Cubic</blockquote>




OK, so your PITI = $2100/month (from your numbers above) + $30k/12 = $2500/month



so you are going to pay

<strong>

$4600/month owning</strong>



versus $2200 + (1/3 (est tax rate) * I (6% x$450k)) =~$9k/12mo =~

<strong>

$3000/month renting</strong>



again, I ask, which do you choose?</blockquote>


Now it's clear:D



I choose renting for a few more months, and probably will cut paste this and pass up as my own calculation to persuade my dear spouse into renting AGAIN!



Cubic</blockquote>




Cool.



And remember, that $4600/month does not include maint (maybe small on a condo, but 0.5% =~$400/month for an SFR)



And closing costs. what, maybe another few hundred a month if you spread it out over three years?





Good luck with the spouse.
 
[quote author="freedomCM" date=1213154365]

And remember, that $4600/month does not include maint (maybe small on a condo, but 0.5% =~$400/month for an SFR)

</blockquote>


Unless it's a new condo, I say phooey on your 'maybe small'. The interior mods and maintenance are all yours just like an SFR. The exterior mods and maintenance is negotiated by someone else using OPM with a vendor often recommended by the contract management firm that is running off the gravy train. Gaps in assessment and exterior maintenance show up as special assessments to the tune of $3000, $4000 at a pop.



When you buy a condo, look over the books carefully. Look at the reserves and take whatever you think the guesstimate is for something and triple it.
 
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