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It’s possible to buy rental property in the $500,000s around the coast, but they tend to come with other baggage; like spending 3 months to convince the tenants to move, plus three additional months for repairs:

A big hurdle for long-time owners of investment real estate is paying the capital-gains tax – people don’t like writing big checks to the IRS!  But if you are thinking of selling a rental property, here’s a reminder that next year it’ll be worse.  From latimes.com:

CNBC’s Larry Kudlow on Wednesday tried to get Treasury Secretary Timothy Geithner to clarify where the administration stands regarding the top tax rates on dividend income and long-term capital gains, which are set to rise on Jan. 1 without congressional action.  But Geithner’s answer may just have confused matters for CNBC viewers.

“We’re going to make sure that we keep at 20% the existing rates on dividends and capital gains,” Geithner said. “We think that’s good policy.”  But the “existing” top rates aren’t 20%, of course. They are 15%. Those were the cuts President George W. Bush pushed through Congress in 2003.

The 15% rate on long-term gains will revert to 20% on Jan. 1 unless Congress acts. Dividend income would return to being taxed at ordinary income tax rates, currently as high as 35% and scheduled to rise to a top rate of 39.6% in 2011.

Real estate investors, like baseball players, are inclined to try for the home run.  Yet hitting singles and doubles can be more effective – ask Tony Gwynn.

Yesterday we wrapped up a 12-month-long escrow!

It was a short sale of a one-bedroom condo in La Mesa for $60,000:

http://www.sdlookup.com/MLS-090030987-7500_Parkway_303_La_Mesa_CA_91942

LGS, a frequent contributor here and long-time investor, was the buyer. 

This is his fourth recent condo purchase in the area.  The lack of financing available has caused the prices to plummet, and cash buyers are able to get a decent return on investment.  But the potential for appreciation looks promising too, based on past results.

He has been down this road before, literally – he owned the 1br across the hall in the same condo complex:

http://www.sdlookup.com/Property-61F9DA39-7500_Parkway_Dr_304_La_Mesa_CA_91942

His purchase price in 1994 was $50,000, and he sold it for $215,000 in 2006. 

In 1995 he paid $45,500 for unit #101, and sold it for $219,800 in 2006:

http://www.sdlookup.com/Property-85804E4F-7506_Parkway_Dr_101_La_Mesa_CA_91942

These units are nothing fancy, just your basic housing where rents are $800 to $900 per month.

LGS has no illusions about appreciation being in the distant future, but we agreed that one day the government is likely to flip the switch and make condo financing available again.  In the meantime he’s getting 10% annual returns.

For those who are looking to build a real estate portfolio, you may want to consider this type of property as a good place to start.  Occupants of one-bedroom units tend to be single people who stick around – in the past he had tenants stay for years.  Combine that stability with the low maintenace of condos and you have a relatively painless investment!

Remember this fixer near the Back Gate in Oceanside?

One of our blog readers ended up buying it, unrelated to this video’s appearance here on July 1st:

In the meantime, other flippers have been busy in the area buying REOs and fixing them up to sell – here are other recent examples nearby:

*Flips by Joella and John, from the Nightline show (see RE VIDEOS in right column)

Here’s how the latest flip turned out:

1,400sf of heaven, built in 1960 and last sold in October 2005 for $430,000, and yes of course financed 100%, plus a cash-out refinance in 2006, resulting in negative skin in game.

Sold for $148,000 in 11/99:

The market can’t be any hotter than it is right now, can it?

The lower-end of each micro-market throughout San Diego County has been red hot lately.  Virtually every decent house under $400,000 is being deluged with buyers, probably in hopes of cashing in on the $8,000 tax credit before the end of November.

Our flipper’s luck has continued – she listed 4 houses for sale, and we found a buyer for all of them:

Here are the last two on the list – taped last Monday, the same day as the others:

It’s not just the cheapies either. After about two years of trying to sell the nondescript 2,558sf house on Summit in Cardiff, the builder sold to pure flippers last November. They held out, hoping their list price of $1,245,000 would work. It went pending today! (ht to dcc!)

An impassioned plea to the good-looking and powerful employees at BofA in charge of assigning the REOs – can you please send me an occasional coastal McMansion please?

In April, 2009, the ABC News Nightline show followed as we looked at buying some fixers in Oceanside (links are in the right column under REAL ESTATE VIDEOS).  Here is a follow-up: