Creativity in the way of financing allowed subprime deadbeats with terrible credit histories to borrow six or seven times their incomes, and we had an influx of Alt-A loans which allowed people with decent FICO scores--but no verifiable income or ability to handle such extreme debt loads--to buy overpriced homes (usually with nothing down).
In addition, we heard creative advice from real estate "professionals" for buyers to raid their 401(k) for down payment help, and heard buyers should rent out rooms to offset the crushing weight of the monthly mortgage payment. From a financial perspective, buying a 2 bedroom, 2 bath place and renting out a room is a good idea. Why anyone would work so hard to finally buy their own home only to have a Craig's List Creeper cramp their style and lower their quality of enjoyment, I have no idea. But financially, sure, I get that.
Today's property is a prime example of a condo too expensive to afford on Long Beach's median income alone--necessitating at least one roommate to achieve some semblance of affordability.
Address: 5585 E Pacific Coast Hwy #154, 90804
Asking Price: $324,900
Year Built: 1970
Size: 2 beds, 2 bath, 913 sq. ft.
$/Sq. Ft.: $356
HOA Fine: $229
Purchase price: NA
Purchase date: NA
MLS#: P646198
On Redfin: 36 days
Down Payment: $64,980
Monthly Payment: $2300
Income Requirement: $81,225
Description: Wonderful 1st floor CORNER location....Quietest in the complex !(Only 1 shared wall) Popular 'Park Ocean' building with Community Pool,Spa,Sauna,Tennis,Basketball,New BBQ grills,Workout Room w/ New Equipment,AND unit is wired for FIOS & Cable all included in the Low Assoc.Dues ! Best floor plan with Two Master Bedrooms and 2 Private Baths-Both Newly Remodeled w/ Custom Tiling,New Vanities,Faucets,Fixtures,Sinks,AND Designer Shower Door and Granite Counters... Modern,Open Living Area w/ Pergo-Type Flooring,Air Cond,New Doors and Custom Blinds. Contemporary Kitchen w/extra storage Maple Cabinets w/under lighting,'2' 7foot Pantries,Recessed Lighting w/ Dimmer Switches (also in Bathrooms),and Stainless Steel Appliances. Desireable 'Park Estates' neighborhood- Conveniently located to Golf Course,Cal-State Long Beach,Stores,Shops,Freeways, and Beaches !!!!!!! One of the Lowest Association Dues with the Most Amenities in the Area. HURRY- Won't Last..Lowest Price per sq.ft.
As I scanned through pictures of this "Desireable" property, I found this gem and began to wonder about the roommate situation in this place:
And then this crazy four-post bed caught my eye:
And I started forming a mental image of the two roommates inhabiting this place:
"WE'RE TWO WILD AND CRAZAAAAY GUYS!"
Can't you totally picture that? Out at the pool in their speedos, doing pushups near the ladies' restroom, trying to get girls to come back to their pad for lukewarm white russians and naked Jenga.
Then I noticed there are no pictures of the second bedroom. Sex dungeon, maybe? Further, the fact there is "only one shared wall" is one of the first things mentioned in the listing description. Maybe this condo is for true players only.
"Don't worry baby, nobody will hear us. 'Discreet' is my middle name. Actually, it's Daniel, but you're pickin' up what I'm puttin' down, right?"
The blue trim around this bathroom door really stood out too.
Is that a subtle homage to the 1972 porno movie Behind the Green Door? Classy!
There, that's more like it.
I could go on for days with this stuff.
Anyhow, back to the property at hand (pimp hand, that is)...
You have to give the listing agent credit for going green. Some people are cutting down on fuel consumption, others are reducing their water usage…this dude is cutting back on spaces after punctuation marks and unnecessary letters. Al Gore approves.
Trying to make sense of that listing description, with its sporadic TiTle CAse madness, is like trying to read the Constitution while hanging upside down on a dimly-lit bullet train. Nauseating.
“Lowest Price per sq.ft.” – Compared to what? A penthouse on the Upper East Side? $356 per square is a joke.
“HURRY- Won’t Last..” – Boy, that sounds familiar. Unless some major price reductions start happening, I have a sneaking suspicion we’ll be seeing this listing a year from now.
In the interest of trying to find ONE positive thing to say about this property, at least the FIOS and cable are included in the HOA fee. Which is important because with a $2,300 monthly nut--even with the income of a true player--you're not going to have any money left over to go to the movies or--DAMN IT! I was trying so hard to stay positive!
I'll try again.
Ummm...your kitchen might be bigger than one in my dad's old Winnebago! Awesome!
And, um, you were able to maximize the three square feet of kitchen counter space by relocating the microwave to a totally natural, not-at-all-awkward location! Functional!
Uhhhh...I think I see Jesus in your kitchen tile! Do you know what that's worth on eBay?! You're rich!
Let's see...the gaps in your kitchen cabinets and the missing cabinet over the refrigerator looks way retro--like, 1930's depression-era retro, where people had to use whatever was around because they had no money. That totally looks like it belongs there! Trend setting!
Oh, and before any of you players out there interested in plunking down nearly 70 grand for a down payment and parting with $2,300 a month for this 913 square foot babe lair, the seller has informed us that the "Listing Price Excludes: PLASMA T.V. AND WALL MOUNT, AND ALL ARTWORK THRU-OUT.... "
Sorry, player, when it comes to recreating the sexy magic of this lovers' lounge, you're on your own.
Hi El Bee,
ReplyDeleteNormally I enjoy your wit and sarcasm having grown up with it myself but I think you’re a little whacked on today’s post. (Ok, I did like the two wild and crazy guys SNL picture) First before I continue let me preface by saying that I’m not a realtor (heaven forbid!) or a hedge fund thief, etc. Just a working class stiff like the rest of you trying to buy a good house.
Let’s delve into the math. At the current price after the down of $64,980 you would be left with a balance of $259,920. Let’s just say $260k. Bankrate’s 30 year average today is 6.44%. Let’s round it off to 6.5%. You end up having a payment of $1683.88. Adding the $209 homeowner’s dues and taxes ($324,900 X 1.1%=3573.90/12= $297.82/mo. The grand total is $2190.70 a month, not $2,300/month.
Please, let me know how you come up with your figures.
Granted, that’s still a bit high but I’ve lived forever on the east side and know close to LB state rents are higher. In fact I do know of a couple of landlord owners that are getting $1800/month for their properties here. That doesn’t cover the $2,190 but after their tax write offs it gets a lot closer.
In fact the two bedroom is much better priced than the one bedrooms there and at Stoneybrook, which is comparable.
Also so many of these condos in LB are short sales and who wants to deal with that crap? This guy looks like he has some equity based on the tax records and unless they used their house as an ATM over the past few years there is probably some fair room for bargaining here.
As for myself, I’m looking for a bigger place for my family and I but I can say I’ve seen worse looking units than this in $600-$800k homes. (or like the one you posted on the previous post-YIKES!)
At least this one has laminate floors and decent cabinets. I’ve seen a couple of units in this place in the past and normally the small kitchen has the frig on the other side so they’ve actually added some extra pantries there.
In fact I don’t see a lot of good inventory out there right now at say the mid range level for houses, not starting homes. I know there is a lot of shadow inventory and Alt-A adjustables due to reset but I have to wonder. Patience I guess.
Back to that condo. As for paint, furniture and artwork, well whatever.. it’s easy to put up my own and paint my own choices.
I really don’t think this place will still be listed in a year but who knows? Want to bet? I don’t know if they’ll get an offer but I think they could rent it and do alright if they have equity. Anyway, just my two cents.
Hi lb dude,
ReplyDeleteAww...I was hoping for "hilarious" or "razor-witted"--not "whacked"!
Bummer.
Honestly, even if you were a realtor or hedge fund manager/thief, I would still welcome your input. This isn't a dictatorship and I'm no real estate expert--just a person like you trying to not to throw away my entire financial future on four walls and a roof.
I stopped posting how I do my calculations out of a fear of redundancy, but aspects of lending have changed so many times that it would probably help to revisit it.
Disclaimer: I do VERY rough calculations to ballpark my estimates--I think we can all agree it is impossible to get an exact figure because there is so much disagreement about what should and should not be included.
Down Payment: I started with 5%, then moved to 10%. I never thought 20% would return because it would disqualify too many buyers too quickly. But, alas, those days are here except for rare exceptions.
Interest Rate: I've been using 7% lately, which is admittedly a bit high, but I'm also padding a bit to factor in what the next few months will bring and assuming not everybody has a perfect FICO that will get them the absolute lowest rate.
If my numbers are dead wrong I strongly encourage my readers to call me out. I don't want to mislead anyone here. But to be fair, ultimately your figures are only $109.30 lower than mine.
But then someone might say we need to add in maintenance costs. And who knows what types of insurance the HOA covers (my calculations add in $100 a month for Homeowner's Insurance)? Then there's the tax benefit, which would bring DOWN all calculations by a few hundred a month. However, every tax situation is different and I think it's helpful to calculate what a conservative person needs to cough up each and every month--and consider the tax refund as a bonus. We could go on and on. But I figure if we're within a hundred or two, we're in good shape.
You're absolutely right about the rents--and for all we know they could creep up. Here is an ad for the same building, $1700:
http://losangeles.craigslist.org/lgb/apa/792855892.html
After tax benefit, it's getting awfully close to rent vs. buy parity--good news. But you're still not going to buy this place as an investment property, and I'm not going to buy it to live in. Why? Because future depreciation is guaranteed.
Check this out (sorry, no photos):
http://www.redfin.com/CA/Long-Beach/5585-Pacific-Coast-Hwy-90804/home/7590175
Smaller with one less bathroom, but $35,000 cheaper. Most frightening for our featured condo, it's STILL UNSOLD at 169 days! Much further to fall.
As far as the quality of inventory in LB, I'd be willing to bet that once the Alt-A garbage starts exploding, you'll see a lot more quality in the $600k-$800k price range. If subprime was for poor people, Alt-A and Option ARM was for middle class trying to look upper class without the means to do so. KA-BOOM!
I'm actually pretty excited for the day (could be years from now) when readers post their purchase stories and are able to show how all the fundamentals aligned.
Anyhow, welcome to the blog lb dude! Glad you found it and I hope to hear more from you in the future.