What Would You Do?

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[quote author="Strom" date=1252498703][quote author="tmare" date=1252491809][quote author="zubs" date=1252479472]I know someone who had this happen to them. He moved to SF and kept his home in LA. He's now renting the LA home and is hemorrhaging 1400 a month. He is renting in SF.</blockquote>


I think the question of the possibility of the rent being a break-even situation is not even possible. There isn't much chance in the given situation in So Cal that the rent would be anywhere near the mortgage costs.</blockquote>


I don't know if that's true. I know at least one owner whose $1MM mortgage is less than his 7-series lease payment (and less than half my rent for an inferior home). It's a 4BR/3BA place on a canyon in CDM, and he pays about $1,000/month. I think his rate is something like L+125, with no floor, interest-only for 10 years.</blockquote>


Well, that's not really a mortgage, is it? That's renting from the bank.



Probably anywhere in Orange County or central LA County (that is, not Lancaster), rents are less than the monthly payment on a standard 30-year mortgage on a property purchased within the last five years.



Now, in the sticks (Lancaster/Palmdale, the IE), things are reversed, with monthly payments on properties purchased in the last year or two being significantly less than monthly rents.
 
[quote author="Geotpf" date=1252532415]

Now, in the sticks (Lancaster/Palmdale, the IE), things are reversed, with monthly payments on properties purchased in the last year or two being significantly less than monthly rents.</blockquote>
I don't live there so I can't really know for sure (unlike some people who claim facts for places they aren't familiar with), but why is that?



If property values are so low, why haven't rents followed? If I were an investor, I would look into picking up a 4br SFR for less than $275k but I'm wary about the long term rental values in the next 5 years.
 
[quote author="irvine_home_owner" date=1252537808][quote author="Geotpf" date=1252532415]

Now, in the sticks (Lancaster/Palmdale, the IE), things are reversed, with monthly payments on properties purchased in the last year or two being significantly less than monthly rents.</blockquote>
I don't live there so I can't really know for sure (unlike some people who claim facts for places they aren't familiar with), but why is that?



If property values are so low, why haven't rents followed? If I were an investor, I would look into picking up a 4br SFR for less than $275k but I'm wary about the long term rental values in the next 5 years.</blockquote>


I recently purchased a older 4 bedroom/2 bath house, 1,750 sq ft, with a 3 car garage, on a .2 acre lot (8712 sq ft), for $150k, in a good, but older, neighborhood of Riverside. I put 20% down and purchased a few points to get my interest rate super low (4.375%).



My monthly payment, not counting insurance and tax, is $600 ($599.14 is the exact figure I believe).



I was previously paying $675 a month for a dumpy 1 bedroom apartment, also in Riverside, with no patio or balcony or covered parking (just an unassigned space in the parking lot).



I believe I could rent out my house for at least $1,500 a month if I chose to, judging from things like Craigslist postings.



I think that poorer neighborhoods have higher rents as compared to monthly mortgage payments due to poor people having poor credit ratings and/or no down payment and/or unsteady income, and therefore not qualifying for loans, so demand for rentals is higher than normal. This also partially explains the reason that prices skyrocketed out here even more (percentage wise) than in the OC once zero down pick-a-payment liar loans became common place, and why they fell more (percentage wise) after those loans went away. My $150k house previously sold for $400k in 2005.



Also, areas with lots of colleges have higher rents than those without, since college students are almost always renters. Riverside has three major colleges (UCR, Cal Baptist, and La Sierra University).



Rents are probably on the way down a bit, but by much, much less than the fall in housing prices. The guy who lost my house to the bank is probably renting another one somewhere else nearby.
 
[quote author="Geotpf" date=1252532415][quote author="Strom" date=1252498703][quote author="tmare" date=1252491809]

I think the question of the possibility of the rent being a break-even situation is not even possible. There isn't much chance in the given situation in So Cal that the rent would be anywhere near the mortgage costs.</blockquote>


I don't know if that's true. I know at least one owner whose $1MM mortgage is less than his 7-series lease payment (and less than half my rent for an inferior home). It's a 4BR/3BA place on a canyon in CDM, and he pays about $1,000/month. I think his rate is something like L+125, with no floor, interest-only for 10 years.</blockquote>


Well, that's not really a mortgage, is it? That's renting from the bank.



Probably anywhere in Orange County or central LA County (that is, not Lancaster), rents are less than the monthly payment on a standard 30-year mortgage on a property purchased within the last five years.



Now, in the sticks (Lancaster/Palmdale, the IE), things are reversed, with monthly payments on properties purchased in the last year or two being significantly less than monthly rents.</blockquote>


EveN if you threw in 30 year amort, his payment would still be less than rent. The problem is that it was something like 40% LTV on a 2004 purchase, so it doesn't really apply to the question at hand. The $1MM mortgage is used as a tax planning vehicle, and could be paid off at any time in cash.



My point was that there are people out there with some crazy low rates (~1.5% in this case), which could make the renting idea more feasible.
 
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