Sunday, January 11th, 2009 at 10:11 AM
Carlsbad Beach Investors
Some folks from Seal Beach just paid $1.3 million cash for these five units on Acacia, a half-block to the beach. The last listing showed the annual gross scheduled income to be $90,000/year:
Posted on Sunday, January 11th, 2009 at 10:11 AM in Real Estate Investing | 11 Comments » | 
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It looks sort of odd. If a 5-unit building generates gross rents of $90K a year, it means that each apartment rents for $1500 a month (not accounting for any vacancies). I believe you could get that much in San Diego for a decent unit, but that seems a little high for an ugly building.
For the sake of argument that’s true: it means the new owner is paying a GRM of 14.4. That’s more absurd than the assumption that it brings in $90K in rents.
It’s such a strange world. Someday this war is gonna end.
greenlander | January 11th, 2009 at 10:26 amSounds like the condo conversion heyday prices…..quite risky now….maybe a desperate 1031 exchange out of a worse location.
BottomFisher | January 11th, 2009 at 11:14 amWith investments like these, the right price depends on whatever you can rent it for for the next 5-10 years. So time will tell, but it’s sometimes hard to directly compare to what a typical home owner would pay (look at vacation rental prices for example).
Incidentally, my lease is coming up on a 100+ unit complex, and to my surprise they’ve dropped the average rent by almost $150 and thrown in 2 months free rent for new renters. That helps me out because I got a discount moving in, so I was dreading a big spike in rent until I checked. I’m in east UTC, and I wonder how the rest of San Diego rentals will do.
BDiego | January 11th, 2009 at 11:35 amWhen they closed escrow, were they asked to urinate in a cup to verify drug use?
Turnack | January 11th, 2009 at 2:15 pmTheir $1,300,000 investment returns $40,000 after expenses for a 3% return. Better than Treasuries plus there’s $100k depreciation against the $40,000 and other regular income. Let this puppy slowly depreciate and build a nice home 1/2 block from the beach in ten years and there is a very narrow window where this makes sense for people with specific needs; shelter regular income, want to move to the beach in 10 years.
Rob Dawg | January 11th, 2009 at 2:50 pmIf they can afford the place, don’t they likely have an income that limits their ability to use the depreciation loss against their normal income?
No_Such_Reality | January 11th, 2009 at 8:00 pm$260K per door, works as a condo conversion. Very limited inventory in this part of SB.
Assume 25% down, loan of $980K. (Probably more down, 50%?).
Interest only, 6%, 5 years = $58,800/year
P/I= $15,756. Net $15K/year, (marginal return).
Great location and easily re-skinned/refurbished for $100K.
Rent them for $2,200 in this area. $132K gross.
Assume 30% expenses, 5% cap rate= $1,848,000 value.
These days when you only have to beat a -40% stock market this looks pretty good. Banks like apartment right now. Plus the reasons Rob Dawg listed.
Mozart | January 12th, 2009 at 8:52 amPlus it takes 3-5 years to design, approve and build anything new in the Coastal Zone of Solana Beach.
Very anti-development city.
Mozart | January 12th, 2009 at 9:10 amCalifornia may have a dim future
By Dan Walters
dwalters@sacbee.com
Published: Sunday, Jan. 11, 2009
Defense spending in the 1980s, high-tech startups in the 1990s and housing-fueled consumer spending in the 1990s – all were California economic bubbles that burst spectacularly, leaving recession and government deficits in their wake.
What, if anything, will come next to pull us out of recession and return California to prosperity? Some think it will be biotechnology, services to baby boomer retirees or solving global warming.
Lurking in the background, however, is a nagging worry that there won’t be anything, that the state’s endemically high costs, political dysfunction and long list of unresolved dilemmas, from transportation to water to education, have made us uncompetitive in a global economy. Just last week, a new federal survey found that California has the nation’s highest adult illiteracy rate.
We have tended to take the future for granted. No matter how moribund the economy may be at the moment, we think, we have the weather, the entrepreneurial spirit and the strategic location to regroup and prosper.
We may have. But then again, maybe we aren’t so special. Maybe we’re not immune to the societal afflictions that have beset other states. Maybe we are a rust-belt-to-be on the left coast, a Michigan with winter sunshine.
A clue to potential decline may be found in what had been one of the state’s stellar sectors in recent years, international trade. California’s airports and seaports, especially the latter, became the portal for rapidly expanding trade with Asia. The ports of Los Angeles and Long Beach became the nation’s busiest with Oakland just a few notches down the list.
At its high point, a quarter of the nation’s international cargo, imports and exports, was passing through California, including 40 percent of container traffic, despite high costs, traffic congestion and relatively inefficient cargo-handling systems.
The global recession cut into that traffic sharply, as one might expect, but California port officials are forecasting big increases when the economy improves and are planning expensive facility upgrades.
“The forecasts are hogwash,” says Jack O’Connell, an international trade expert with the University of California. He doubts whether consumer demand for Asian goods will return to former levels because of new wariness about personal debt, and he believes that competition will compel shippers to seek cheaper avenues.
Last fall, as Californians were waiting to vote for a new president and fill other offices, an election was held several thousand miles to the south, in Panama. Panamanians approved a multibillion-dollar expansion of the Panama Canal that by the middle of the next decade will allow the biggest container ships – those that have been forced to offload in California – to sail all the way to American ports on the Gulf of Mexico and Atlantic Ocean.
What has been an economic strength for California, in other words, may join a growing list of weaknesses.
Nathan | January 12th, 2009 at 9:13 amIn Cali, there’s a bubble in optimism.
I actually hope that’ll never burst.
Chuck Ponzi | January 12th, 2009 at 11:44 amLooking at craig’s list 1500 per unit seems a little low. But 14.4 GRM? That’s a damn good deal.
Tod | January 13th, 2009 at 4:13 pm