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WBC
Regular Visitor
WBC
Posts: 4
Registered: ‎11-23-2012
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What do you think these are worth?

[ Edited ]

http://www.trulia.com/property/3096066628-6815-Cahuenga-Park-Trl-Los-Angeles-CA-90068

 

Any comments on what you think it is worth, the rental potential, freeway noise, size of lot?

 

vs 

 

http://www.redfin.com/CA/West-Hollywood/1233-N-Laurel-Ave-90046/unit-205/home/7117530

 

Same questions as above....Currently renting at $2300/month

 

Is real estate seriously overpriced in LA at the moment?

Trusted Contributor
Mortmain
Posts: 198
Registered: ‎10-29-2012

Re: What do you think these are worth?


WBC wrote:

http://www.trulia.com/property/3096066628-6815-Cahuenga-Park-Trl-Los-Angeles-CA-90068

 

Any comments on what you think it is worth, the rental potential, freeway noise, size of lot?

 

vs 

 

http://www.redfin.com/CA/West-Hollywood/1233-N-Laurel-Ave-90046/unit-205/home/7117530

 

Same questions as above....Currently renting at $2300/month

 

Is real estate seriously overpriced in LA at the moment?


RE is always comparatively over-priced in LA. For an investment to be worth considering multiply the annual rent by 10 to get to the price you should pay. Capitalization rates (return/net yield) are low in CA. You might find some multi units that offer better returns, but the higher the return the higher the risk (quality of neighborhood). Ongoing costs associated with investment properties are much, much higher than you think. The CA market is really for flippers and very experienced full time investors, and not for the casual investor, unless of course you've got lots of cash to park somewhere and just want to beat current CD rates. So even if shaved off a few bucks on these two homes you are not even close to where you want to be.

Contributor
MrWow
Posts: 10
Registered: ‎12-04-2012
0

Re: What do you think these are worth?

[ Edited ]

Mortmain wrote:

RE is always comparatively over-priced in LA. For an investment to be worth considering multiply the annual rent by 10 to get to the price you should pay. Capitalization rates (return/net yield) are low in CA. You might find some multi units that offer better returns, but the higher the return the higher the risk (quality of neighborhood). Ongoing costs associated with investment properties are much, much higher than you think. The CA market is really for flippers and very experienced full time investors, and not for the casual investor, unless of course you've got lots of cash to park somewhere and just want to beat current CD rates. So even if shaved off a few bucks on these two homes you are not even close to where you want to be.


I understand the blue high-lighted sentence. However, I have a primary residence purchased 2005. This area has not gone down even during the real estate down period 2008. Now, it is 25% up (5% year over year) in price and is in a very desirable area. For example, if I put it on sale, I may get minimum 3 full cash offers at 125% of what I paid - no doubt. 

 

However, I can get a rent of $3500 which puts me minus $500 after expenses (Rent - Interest - Insurance - Tax - 2%Maint cost). If I keep it ten years, this will be doubled from current price. Since this is very highly desirable school district, there is no issue for rent and tenants even if there is another downturn. 

 

I have sufficient money to purchase my next home and leave this as rental. I do not have any issue for my income - at least next ten years as I earn top 2% income group.

 

My loss for an year is $6000 + Depreciation ($9000), but overall return, after 10 years, is very high (at minimum 50k/year = 5%) increase in price. If I sell the home after 20 years, when I become 70, I will pay off every home loan with adequate retirement money. My base is only on the resale value and price appreciation rather than return on Income.

 

Is it worth or good strategy to rent it rather than sell the home?

 

 

 

Super Contributor
not_ally
Posts: 201
Registered: ‎08-27-2010
0

Re: What do you think these are worth?

I think it is a good strategy, but I think this is one of those questions where reasonable minds can differ (of which you will no doubt receive ample proof imminently :smileyhappy:

 

Have you factored in passive loss effects, too? Of course those will depend on your income and are completely phased-out over 150k AGI.  You probably have already considered that, you seem like a numbers person.

Contributor
MrWow
Posts: 10
Registered: ‎12-04-2012
0

Re: What do you think these are worth?

Not_Ally,

 

Yes, I am not eligible for passive loss as my AGI is high. 

 

There is a backup option that I can sell the home anytime, if it is not working as expected, within next three years to get a tax benefit / break as I lived there sufficient time. If I manage one year as rental, I will be confident for rest of the period. 

 

Even though I can review numbers, when it comes to actual implementation I am disturbed little bit due to potential high value involved. I am also not a realtor, but jumping into kind of opportunistic investor.

 

Hence, I just shared possible values for expert reviews in this forum.

Super Contributor
newatthis
Posts: 318
Registered: ‎03-28-2009
0

Re: What do you think these are worth?

Can you say what area you are in, because I can't think of an  area in Southern California that hasn't had a pricing correction of some type in the past 5 years. Also if you bought in 2005 and it has gone up 5% a year, you should be up 35%, or 40% on a compounded basis.

 

Also, there is nothing, including housing, that you can say will generate a return of X over the next 7 years. Its just impossible to know. There is risk in any investment. Doesn't mean your investment is bad, just that its not a sure thing because nothing is a sure thing.

 

.

BayMan wrote:


Mortmain wrote:

RE is always comparatively over-priced in LA. For an investment to be worth considering multiply the annual rent by 10 to get to the price you should pay. Capitalization rates (return/net yield) are low in CA. You might find some multi units that offer better returns, but the higher the return the higher the risk (quality of neighborhood). Ongoing costs associated with investment properties are much, much higher than you think. The CA market is really for flippers and very experienced full time investors, and not for the casual investor, unless of course you've got lots of cash to park somewhere and just want to beat current CD rates. So even if shaved off a few bucks on these two homes you are not even close to where you want to be.


I understand the blue high-lighted sentence. However, I have a primary residence purchased 2005. This area has not gone down even during the real estate down period 2008. Now, it is 25% up (5% year over year) in price and is in a very desirable area. For example, if I put it on sale, I may get minimum 3 full cash offers at 125% of what I paid - no doubt. 

 

However, I can get a rent of $3500 which puts me minus $500 after expenses (Rent - Interest - Insurance - Tax - 2%Maint cost). If I keep it ten years, this will be doubled from current price. Since this is very highly desirable school district, there is no issue for rent and tenants even if there is another downturn. 

 

I have sufficient money to purchase my next home and leave this as rental. I do not have any issue for my income - at least next ten years as I earn top 2% income group.

 

My loss for an year is $6000 + Depreciation ($9000), but overall return, after 10 years, is very high (at minimum 50k/year = 5%) increase in price. If I sell the home after 20 years, when I become 70, I will pay off every home loan with adequate retirement money. My base is only on the resale value and price appreciation rather than return on Income.

 

Is it worth or good strategy to rent it rather than sell the home?

 

 

 


 

Regular Contributor
DeathToWallSt
Posts: 57
Registered: ‎08-25-2012
0

Re: What do you think these are worth?


newatthis wrote:

Can you say what area you are in, because I can't think of an  area in Southern California that hasn't had a pricing correction of some type in the past 5 years.

 

 


 


 

I'm guessing BayMan is from the Bay Area. I find it extremely hard to believe that ANYONE bought a house ANYWHERE in California in 2005 that has appreciated in value 5% per year since then.

Gold Super Contributor
Jil
Posts: 3,136
Registered: ‎10-24-2011
0

Re: What do you think these are worth?


DeathToWallSt wrote:

newatthis wrote:

Can you say what area you are in, because I can't think of an  area in Southern California that hasn't had a pricing correction of some type in the past 5 years.

 

 


 


 

I'm guessing BayMan is from the Bay Area. I find it extremely hard to believe that ANYONE bought a house ANYWHERE in California in 2005 that has appreciated in value 5% per year since then.


There are places more than doubled. See the statement, this is true, it seems to be a townhouse.

 

http://forums.redfin.com/t5/Bay-Area/2013-Bay-Area-Trend-Predictions/m-p/387338#M67933

 

Silver Trusted Contributor
NAR_SHILL
Posts: 831
Registered: ‎03-02-2011
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Re: What do you think these are worth?

[ Edited ]

In Los Gatos, parts of Palo Alto and various other parts of Silicon Valley/San Fran/the Bay Area his statement could be true.

 

That said, why not try something a bit fancier if you're already high on AGI.  Let's say you are either self employed or own a business or at least have the authority/power in your position to command how you are paid.  You could create various LLCs/S Corps/LLPs for yourself that receive your primary salary.  Then, claim all sorts of deductions as well as have the LLC/S Corp/LLP pay you NO salary or a modest/minimal/very little salary, and instead, have it LOAN you money at 0% interest/open ended loan.

 

Thus, you are not being paid but rather loaned money that you for all intents and purposes will never have to pay back.  Then you can also use any such income property to produce the proper/highest deductions/losses, also potentially via other or the same LLC/S Corp/LLP etc. 

 

Consult with a good quality tax attorney/accountant.

Contributor
MrWow
Posts: 10
Registered: ‎12-04-2012
0

Re: What do you think these are worth?

[ Edited ]

NAR_SHILL wrote:

In Los Gatos, parts of Palo Alto and various other parts of Silicon Valley/San Fran/the Bay Area his statement could be true.

 

That said, why not try something a bit fancier if you're already high on AGI.  Let's say you are either self employed or own a business or at least have the authority/power in your position to command how you are paid.  You could create various LLCs/S Corps/LLPs for yourself that receive your primary salary.  Then, claim all sorts of deductions as well as have the LLC/S Corp/LLP pay you NO salary or a modest/minimal/very little salary, and instead, have it LOAN you money at 0% interest/open ended loan.

 

Thus, you are not being paid but rather loaned money that you for all intents and purposes will never have to pay back.  Then you can also use any such income property to produce the proper/highest deductions/losses, also potentially via other or the same LLC/S Corp/LLP etc. 

 

Consult with a good quality tax attorney/accountant.


NAR_SHILL,

 

Your points are very valid for the self employed. I am salaried employee for 20 years. I need to find right way to make it happen for salaried person.

 

My real estate lawyer has suggested the same route you have indicated, but also told me the issue that many companies are not giving loan to LLCs. There are very limited companies that give loan to LLC. Since I am salaried, the account history or revenue history is not established for LLC. Hence, assigning loan to LLC is an issue. The discussion with attorney happened long time before. I will re-open the subject at appropriate time.

 

He suggested to create one LLC for each home other than primary living home. This way, any accident or big claims, people can not come after the LLC as each LLC is different entity. He is the real estate finance lawyer - Dan Casas - and one of best from Los Altos.

 

Thanks for bringing this to the forum.