IHB Investor Reports

Cashflow investors require different information than owner-occupants; therefore, we have designed a property valuation report just for investors.

BTW, our new calculator is up and running. Check it out.

Marquee at Park Place at Night

Asking Price: $360,000

Address: 3131 Michelson Dr #301 Irvine, CA 92612


Snow, cement and ivory young towersbruegel-tower-of-babel-ruins
Someone called us Babylon
Those hungry hunters
Tracking down the hours
But where were all your shoulders when we cried
Were the darlings on the sideline
Dreaming up such cherished lies
To whisper in your ear before you die

Tower of Babel — Elton John

Are we the darlings on the sideline dreaming up such cherished lies? Am I crazy to think prices will still fall? Is it all a fantasy?

From Wikipedia’s entry on Tower of Babel — Genesis 11:1-9

And the whole earth was of one language, and of one speech. And it came to pass, as they journeyed from the east, that they found a plain in the land of Shinar; and they dwelt there…. Therefore is the name of it called Babel; because the Lord did there confound the language of all the earth: and from thence did the Lord scatter them abroad upon the face of all the earth.

During the bubble, everyone was of one language and one speech — kool aid; the collapse has counfounded the “real estate always goes up” crowd and scattered them upon the face of the pavement.


As I documented in Equity Inferno, these towers have a special significance to me; “(the) dark tower is
going to stand as the symbol for the height of hubris of the housing
bubble.” To me this property has always been the worst of the worst as far as valuations being detached from fundamentals. The readers of this blog should not be surprised to see properties like the ones I am featuring today are going for 60% off their peak purchase prices. As I will demonstrate, even at these prices, the properties are still greatly overvalued. I will go on record today making a bold prediction:

A condo at the Marquee at Park Place will sell for under $200,000.

That’s right, one of these condos will go for under $200,000, perhaps well under.

To demonstrate why I believe this will happen, we need to look at a different IHB report — one tailored to cashflow investors.

Cover Sheet

Similar to the report we prepare for owner-occupants, the report cover sheet contains summary information including
pictures, the address, and a few identifying characteristics. The first piece of summary data is the asking price, and
this is followed by the Comparable Value, and the Likely Transaction Price. There is no IHB Fundamental Value. Cashflow investors are not interested in how we may value the property, they want to know what rates of return are available, and they can decide their own price based on the cashflow. We provide the necessary data to make this determination.

Capitalization Rate and Cash-On-Cash Return

One key concept for Investment Value of Residential Real Estate is capitalization rate. The Capitalization (cap) Rate is the (yearly) Net Operating Income divided by Asking Price (assumed purchase price). It is the simplest measure of an investment’s financial performance, and it provides a convenient comparison to competing investment alternatives. A cap rate is like an interest rate on a checking account, a mutual fund return, or a bond yield. Cap rates change over time to reflect the perception of risk in real estate as compared to other investments.

The cap rate is inversely related to price; in other words, high cap rates are synonymous with low prices and visa versa. The cap rate an investor will accept varies from person to person. There is no single appropriate rate to apply to value. Instead, we show a range of values at different cap rates to show the current investment return someone can expect from this property.

The Cash-On-Cash Return is similar to a capitalization rate in that it shows a return on investment, but it is measured by comparing the Total Profit and Loss after Expenses, Debt and Taxes to the Total Cash Costs. This is the important rate of return for investors who are not purchasing with all cash. As long as debt is less expensive than the cap rate, the cash-on-cash returns can be magnified by increasing debt. This is an appropriate use of leverage to increase investment returns — to a point.

This property, even with a $360,000 asking price, only reflects a 3.67% cap rate. You would be better off in 10 year Treasuries. Since the cap rate is less than the interest rate (cost of debt), applying a mortgage to the property actually hurts the returns. This very unusual circumstance reflects how low cap rates became and how much the market was depending on appreciation.

IHB Cashflow Investor Brokers Opinion 3131 Michelson Dr 301-1

Rental Income, Operating Expenses and Net Operating Income

An accurate estimate of income and expenses is required to value a property based on cashflow. The Gross Rent is the monthly rental rate pulled from comparable properties. Assuming this rent can be obtained, an allowance for Vacancy and Collection Loss is subtracted to arrive at a realistic Monthly Rental Income. The Operating Expenses are those fees and costs typical of rental properties. This does not include any financing or tax implications.

Many properties are purchased by wealthy individuals looking to diversify their holdings among asset classes. These investors want to deploy capital with safety and obtain a periodic, measurable return on their investment. Under those circumstances, the properties are purchased without debt. The preponderance of all-cash investments creates the need to view the investment on an all-cash basis.

Net Income is Rental Income minus Operating Expenses. The capitalization rate is based on Net Income. It is the rate of return on the investment when no debt is utilized. Once you introduce debt, returns get magnified, but so do the risks. This spreadsheet allows viewing different financing alternatives.

There are a few different line items to consider when the property is a rental investment. The Maintenance and Replacement Reserves are often double the cost of an owner occupied property. Unless you are managing the property yourself, there will be a Property Management Fee for someone to handle tenant issues. There will also be expenses related to your owning the property through tax filings and other Miscellaneous Expenses.

Financing and Taxes

The financing and taxes are considered separately because some owners do not finance the purchase. There are two items of note in this section as it differs from the owner occupant version. (1) The Tax Savings % will be your highest marginal tax rate. The assumption is that an owner of investment property has already given up the personal exemption, so any interest write off would be at the highest marginal rates — there is one caveat — the property must positive cashflow for the write-off to be allowed.

(2) The opportunity cost is ignored. The whole point of calculating the cap rate or the cash-on-cash return is to establish a value to compare to your opportunity cost. To try to adjust for it here would make the results inaccurate. It would be like comparing twice or double counting.

Cash Acquisition Demands

The Cash Acquisition Demands is similar to the owner occupant version except that the emergency cash reserves are removed. Emergency cash reserves is an important financial planning consideration for an owner-occupant, but an investor has other concerns.

IHB Cashflow Investor Brokers Opinion 3131 Michelson Dr 301-2

Comparative Sales Value and Negotiating Range

This table is similar to the owner-occupant version as it shows the recent comps and projects negotiating ranges. When we estimate the Likely Transaction Price, we look at comparables and adjust it for the market trend. In order to see the reasoning behind our determination, I have added the Short Term Direction of Prices.

Capitalization Rates and Property Values

The Capitalization Rates and Property Values section replaces the Cashflow Value and IHB Fundamental Value section. As I said, each investor has their own required rate of return, so rather than present what we believe to be the right value, we show investors a range of values based on the cashflow. An investor who demands higher cap rates will bid more conservatively, and a more aggressive investor will bid higher.

Asking Price and Value Ranges

As with the owner-occupant version, the information is presented in a graphic form. The property values at different cap rates makes for an interesting view of pricing.

IHB Cashflow Investor Brokers Opinion 3131 Michelson Dr 301-3

I base my prediction of a unit in this complex selling for under $200,000 from the chart above. The cap rate values are so low they fall off the bottom of my chart. Cap rates have to stay under 6.5% for this property not to fall below $200,000.

Comparable Sales, Comparable Rentals and Notes

This is the new and improved section based on the feedback from readers asking for the dates of the comparables. The notes are different including a section on the Capitalization Rate and Cash-On-Cash Return.

IHB Cashflow Investor Brokers Opinion 3131 Michelson Dr 301-4

IHB Cashflow Investor Brokers Opinion 3131 Michelson Dr 301-5

IHB Cashflow Investor Brokers Opinion 3131 Michelson Dr 301-6

What were they thinking?

It is obvious that I do not believe these condos are a good investment. Any cashflow analysis at all would have revealed this fact to even the most kool aid intoxicated. The only reason people bought in these towers was to flip the property to an even bigger fool. There is no better example of Ponzi Scheme thinking and behavior than the buyers in the North Korea Towers.

Marquee at Park Place at Night

Asking Price: $360,000

Income Requirement: $90,000

Downpayment Needed: $72,000

Purchase Price: $889,000

Purchase Date: 8/24/2006

Address: 3131 Michelson Dr #301 Irvine, CA 92612

Beds: 2
Baths: 2
Sq. Ft.: 1,520
$/Sq. Ft.: $237
Lot Size:
Property Type: Condominium
Style: Hi-Rise/Mid-Rise Condominimum
Stories: 3+
Floor: 3
View: Park or Green Belt
Year Built: 2006
Community: Airport Area
County: Orange
MLS#: S584611
Source: SoCalMLS
Status: Active
On Redfin: 9 days

This desirable round plan ‘A’unit has 2beds,2baths with 200 degrees of
glass walls,lots of closet,top of the line fixtures. This luxious tower
offers 24 hr concierge,gated parking,pool,spa,fitness,guest
parking,meeting room,theater room & billiard room.It is also close
to HWY 405,55,Airport,world class shops.This unit has one of the
preimer terrace locations so fountain, city view, lush green lawns,
arbours are added bonuns.

200 degrees? Does this seem like an odd measurement to you?

bonuns? luxious? preimer?

OMG!!! 60% OFF!!!

3141 Michelson Dr 502   Irvine, CA 92612  front 3141 Michelson Dr 502   Irvine, CA 92612  inside

Asking Price: $399,000

Income Requirement: $99,750

Downpayment Needed: $79,800

Purchase Price: $829,000

Purchase Date: 8/24/2006

Address: 3141 Michelson Dr #502 Irvine, CA 92612

Beds: 2
Baths: 2
Sq. Ft.: 1,500
$/Sq. Ft.: $266
Lot Size:
Property Type: Condominium
Style: Contemporary/Modern
Stories: 1
Floor: 5
Year Built: 2006
Community: Airport Area
County: Orange
MLS#: S579815
Source: SoCalMLS
Status: Active
On Redfin: 46 days

Beautifully upgraded, light and bright 2 bedroom condo plus separate
Den for guests or office in fabulous Marquee Park Place. Built in 2006,
this lovely condo has a spacious living room and separate formal dining
room. Kitchen with granite counters, Stainless Steel Appliances,
beautiful maple hardwood flooring throughout living area, carpet in
bedrooms, Master Suite with separate shower and spa tub, marble
flooring. Lots of community amenities, close to airport and shopping,
24 hour Concierge, Elegant Lobby, fitness center, community pool, spa,
guard gated entry, guest parking. 2 parking spaces and much more.

How do you upgrade one of these? Gold fixtures?

The Marquee Park Place North Korea Towers are imploding. This was foreseeable. Cashflow analysis is not overly complicated, and it is a powerful to for avoiding catastrophes like today’s featured properties. There are no guarantees in investing, and we can only provide analysis and recommendations. Cashflow analysis has its limitations (you wouldn’t have bought anything after 2002), but these limitations are also its strength; unless you want to speculate in a housing bubble.

57 thoughts on “IHB Investor Reports

  1. scott

    Your model is also assuming only the as listed homeowners dues @ $1200 month. Most certainly this will rise as your neighbors in the building default, maintenance is deferred and special assessments come. It’s not hard to see this rising by at least 30% and when that happens your NOI falls 30% and kills your cap rate value. Alternatively that is a reason to argue for 7-8% cap rate.

    I didn’t play with the calc but to look at this another way to justify >$800k value you probably need rents in the $6-7k range, that is 2 BR in Tribeca territory and these apartments aren’t in Tribeca.

  2. Marc

    I am surprised by the data in your comparable rentals section. Unless these units are furnished they rent for $2500, not $3,000 or more (check craigslist). There are a few on the market for $3,000 but they don’t rent, the $2,500 ones rent. Assuming a $2500 rent would further reduce the price…

    1. IrvineRenter

      If someone were seriously looking at buying in this tower, I would probably go through the comps and the asking rents and try to identify the most accurate comps to use in the analysis. With buildings like these, different floorplans and different floors can make a big difference in rental rates. Even identical floorplans with different views can rent for different amounts.

      Unfortunately, my data source is the MLS, and if there are a number of Craigslist rentals at lower rates, the MLS will not pick those up.

      Realistically, this unit on the third floor will have the lowest rents in the complex. If you can only rent this for $2,500, the values drop off significantly. At 8% cap rates the value is just over $100,000.

      Wouldn’t it be ironic if my wild prediction of a unit selling for under $200,000 was bested by a unit selling for under $100,000?

      1. winstongator

        FWIW – I checked a condo that sold for $170k in 2005 in a nicer section of Broward Co. FL, now listed for $50k. Per your calculator, rental equivalent is $400/mo. It’s a crash-n-burn apt-to-condo conversion. Comp unit on craigslist for $800/mo.

        I think the market for people looking to rent units like this Broward Co. one is near-zero. Either they already have a place or have moved back in with the parents. I’ll bet a lot of people will either be looking to move to cheaper places or negotiating rents down.

        For rental type investment properties, you need an actual occupant, while appreciation linked or vacation properties can possibly draw from a larger pool, especially given current conditions. The number of potential occupants is given by job & other local conditions. It is easy to conceive of a situation where the number of available rental units exceeds the number of occupants in an area putting massive downward pressure on rents & unit prices.

  3. Mcdonna1980

    The calculator goes haywire when I try to edit the % fields. I tried to change the % down and interest rate and it changes to the thousands. Anyone else have this problem?

    1. IrvineRenter

      You may have to convert it to a decimal when you input it. I.E. if you want 5%, you must enter 0.05. Another method is to enter the percent sign after the number, and the spreadsheet will convert it.

        1. IrvineRenter

          It only shows the rounded number. The number it uses for the calculation will be what you input. I can increase the displayed decimal precision.

          1. mike

            Can you fix the “Number of Years” field?

            The PMT() function is using a fixed “360” payments over 30 years, but should be B6*12.

  4. OCRefugee

    Under what circumstances could this HOA be lowered?

    Cutting out amenities and services or a cheaper management company?

    I read on one of the forums (I can’t seem to find it now) that a decent portion (maybe $400) is an easement to another land owner.

    1. IrvineRenter

      This is an area for some investigative reporting. The HOA dues are the real issue with this property. It becomes very clear from the cashflow analysis that all the value is wiped out by this fee.

      Somewhere in that fee is a party who is raking in the money. It obviously does not take $1,127 per month per unit to operate that building and set aside reserves. I could easily see $400 or more per unit per month going to someone who is doing nothing.

      There is a procedure for lowering HOA fees, but it is deliberately difficult, and if the egregious profit someone is making is hidden as a fee to the HOA, there isn’t much the HOA can do about it — other than perhaps a lawsuit.

      If the management company is the one making the big bucks, they probably have a long-term contract with a prohibitively expensive exit clause. In fact, management companies often develop properties like this one to create their own cash cows. I don’t know if that is what is going on here. It depends on who is making the big money.

      If there really is an easement holder getting $400 a month, perhaps TIC got their tentacles on the property, or perhaps the developer retained some easement right in order to extract the extra money over time. This may be the mechanism for siphoning the money out of the project. The question is then, “who gets this money?”

      In all likelihood, these fees will not be going down any time soon. As long as the rents can cover the fees, the units will be occupied and the project will function. In the process, the fees may reduce resale values in there by 80%-90%, but that is the world of speculation….

      1. Joanne

        From my experience, my reasonable assumption is this money ($400) does not go to TIC and Don won’t go so details for making this trick, the person that benefit this is the person, or 2 to 3 persons cover up each other, that in TIC in charge of this project, you know there are a lot of methods to operate this.

      2. furious sugar

        I wonder what % of owners have simply stopped paying the HOA– wouldn’t this drive up the fees to the other homeowners?

    2. OCRefugee

      I don’t think that the Irvine Company or “Don” (do you know him personally? )has a piece of this any longer.

      This was the Fluor Daniel headquarters since the 70’s and maybe the 60s, they or their successor is probably the easement benefactor.

      I don’t know if they bought the land or it was on a long term lease, but when this started to get developed (Edwards Theater, Sport Chalet, CPK) in the mid 90s, newspaper articles never mentioned the Irvine Company at all,at least that I recall.

  5. aeneid

    I don’t understand most of this but love the Tower of Babel by Pieter Bruegel the Elder. I saw this painting in Vienna two days ago. Yes, I am a faithful reader even when I am oversea.

  6. John

    All I can say about the > 50% roll back is “holy sh*t”… I thought the general sentiment of Irvine residents is that Irvine is IMMUNE to this kind of rollback… NOT!

    Bottom line: fundamental valuation still rules when exotic financing is taken out of the equation.


    Base on what you know and from your gut feeling, do you think this is going to be the fate of Turtle Rock, Turtle Ridge, Shady Canyon, Newport Coast in 2012-13?

    1. tonyE

      TRidge and Shady Canyon? Yes, a 50% or more is likely before they were wildly overpriced to everything to begin with.

      As I recall, TRidge prices were 50% _more_ than TR. That was pure speculation.

      TR is back to 04 pricing. I think it will go to 03. There seems to be a floor being created because (a) there are not many housed in TR for sale and (b) when compared to TRidge, TR at 04 is way cheaper than TRidge at 04.

      So, yeah, I think TRidge wmay well become the “Gardens of North Korea”.

      Quail Hill? Oh God! That place has the potential -IMHO- to become the “Ghetto of Pyongyang”.

      Newport Coast, well there are areas just north of the old dump, with all them fancy french names and the stuff along the toll Road (between Jamboree and Bison) that will likely crater. All of that stuff was built after ’00. Again, hugely overpriced from day one.

      Shady Canyon? Well, it all depends on how well funded those people are. If they are well funded, those folks may just stay.

      Look at it from this point of view: Newport Land Rover Service is doing good business because the folks that bought Land Rovers there had the money regardless of the value of their homes. Meanwhile, Land Rover of Mission Viejo is screwed because those folks were leasing by using their homes as ATM.

      So, the more high end you go and the more established the area the less likely that the mortages are toxic. Also, the older the area the less price speculation (driven by the developers) there was.

      1. John

        Thanks TonyE for your opinion!

        You’re funny re: Quail Hill! but I absolutely agree with you.

        Where was IR all day? I’d like to hear his thoughts on this.

        1. IrvineRenter

          I am of the opinion that the new areas and the high end is going to get crushed. I think the beach communities might see 2/3 off before we find a bottom. Most Irvine neighborhoods will see 40%-50% off the peak.

          1. tonye

            We’re already 40% off the peak. An REO just up the street from me went for around $770K. Granted, it was pretty well run down -old beat up rental house- and was sold on the cheap side in ’04 for around… $800K. At two stories, 4b/2.5ba, 2100 sq feet that comes out to be $366 sq/foot.

            For reference, I did a refi in April. Our appraised value (based on actual comp sales in April) was $376 per sq/foot.

            So, someone overpaid for the REO (my house is bigger so I get less per sq foot but then my house is rebuild and in good shape…).

            At the peak our chateau was going for $490 sq/foot. I think we’ll hit 300 per sq/foot at the bottom.

            This is, of course, TR, in a rather well stable neighborhood, so as you can see… this means that most of the new areas in Irvine, specially the would be High End areas in the flats will more than crushed, they’ll go down a Black Hole.

  7. Astute Observer

    I wonder how the “200 degrees of glass walls” is measured or calculated. I only see 90 degree.

  8. hedgehog

    The cap rate is a good indicator, but ultimately if you are looking to make an investment wouldn’t you look at the final ROI? The ROI would vary based on the size of the downpayment and the financing rate. So I think it would be useful to provide a matrix (downpayment varying by row, and interest rate varying by column) of ROIs.

    1. Mike

      Zillow’s estimates are totally made-up.

      I worked for 6 years for First American, one of the major innovators, and a premier provider of automated-valuation models (AVMs) in the industry. Unlike Zillow, First American certified every single one of their AVM’s against rigirous mathematical procedures, and produced MONTHLY reports of how each and every valuation performed against LIVE data, in every single zipcode in the United States where such data was available (read: 85-95% of the counties, depending upon quarter).

      In my opinion Zillow’s valuations are a crock. They represented nothing more than the pent-up-dreams of homeowners who continually called Zillow during the bubble saying something like “I just looked up my valuation on your website, and it seemed way too low. The bank is going to give me X dollars for my re-fi. You should change my house’s valuation to Y.”

      THAT, IMHO, drove Zillow’s valuation algorithm – not strict, mathematical, verifyable calculation and certification procedures.

      BTW – First American’s (and others’) AVM’s were not totally at fault for the bubble. These AVM’s were tuned to respond with numbers that matched what the over-zealous speculators would be willing to pay for a property. In a sense, the AVM’s were continually tuned to include greed, and routinely produced valuations that matched the behavior of those speculators they modeled.

      What I find informative was that these AVM’s were often set against eachother by the banks and mortgage companies, and a “the highest one wins” mentality was used to select an AVM to support a desired home valuation. The practice is called “shopping for a valuation”, and – while expressly illegal – was a routine practice in the industry.

      Yes, AVM’s were a tool. Yes, AVM’s modeled greed. Yes, AVM’s colluded in the delusion that was the bubble. But, in the end, like almost everything in nature, (or so we’re being told in the schools), “the bubble” was the fault of “us humans”.

      – Mike S.

      1. Geotpf

        Zillow is also frequently fooled by REOs. That is, when the bank takes back a property in a failed auction, there is a “sale” recorded at an arbitrary figure, usually the total amount owed, which is frequently significantly above the actual current value of the property. Zillow should throw out that figure, but a lot of time they don’t, artifically boosting their Zestimate. You can see this in their graph of values over time for a given property-the price often will be falling until the foreclosure, then it will shoot up to the recorded amount of the foreclosure “sale”.

        Of course, then the house soon (in theory) is put on the market as an REO, and Zillow will show potential buyers the inflated value.

      2. IrvineRenter


        I enjoyed reading your comment. I can picture the workings of these models and how they adapted. These programming monsters competed to survive. In the end, they did mirror the animal instincts of their creators. Delusion in the Machine.

        I wonder how many homeowners in denial are going to Zillow or Cyberhomes or whomever to “shop” for the highest value. Whatever service panders to the delusion best will probably emerge the dominant player.

      1. wheresthebeef

        I had to read that again. It’s amazing how things have changed in that last 3 years. In that thread, there were all sorts of Marquee residents defending their proud purchase. The kool-aid was stronger than heroin at the time…

        1. Art Student in Atlanta

          I just read some of those posts.

          It is like reading letters from happy titanic passengers. It is like they had no idea what was about to happen. IR predicted this problem and, they just continued oblivious to their impending doom. It is really eerie. They just bashed him without thinking of the logic or data that was being presented.

        2. Blueberry Pie

          hahaha. I like the first comment. It includes this: “having the concierge handle my package”

          Maybe this place is worth a lot more money than you think if it turns out part of the price includes having your package handled.

        3. e

          That thread of comments was priceless.

          I have always wondered if condos like these are where the bulk of the option-ARMs are hiding out.

        1. winstongator

          It’s the no lights on at night. NK is easily found on a nighttime satellite image because it’s black. NKT has so few residents that the place is dark at night too.

          1. Blueberry Pie

            Got it now.

            This reminds me of a new “condo” complex that was built down the street from me. It’s probably been finished for close to a year now – but I don’t think anybody has moved in yet. My wife wants to know why anybody would move into a condo complex that doesn’t even have a pool.

    1. tonyE

      Well we’re movin on up,
      To the east side.
      To a deluxe apartment in the sky.
      Movin on up
      To the east side.
      We finally got a piece of the pie.

      Fish don’t fry in the kitchen;
      Beans don’t burn on the grill.
      Took a whole lotta tryin’
      Just to get up that hill.
      Now we’re up in teh big leagues
      Gettin’ our turn at bat.
      As long as we live, it’s you and me baby
      There ain’t nothin wrong with that.

      Well we’re movin on up,
      To the east side.
      To a deluxe apartment in the sky.
      Movin on up
      To the east side.
      We finally got a piece of the pie.

    2. Art Student in Atlanta

      Maybe the city of Irvine can contact HUD and form a housing authority here.
      Those towers would make excellent affordable housing or a project. Lots of room and space for families and the pools/facilities can be converted to allow recreational activities for children to encourage safe after school activities. The former concierge areas can be converted into aid and assistance areas. It is a safe place that according to the posters in 2006 allows comfortable living with or without a form of transportation. This place would make the perfect housing authority.

      The Irvine Marque Housing Authority.

      A safe place to live for everyone.

      1. IrvineRenter


        The marketing people from the Marquee just gasped at the thought of this creme de la creme project going affordable.

        At the rate prices are dropping, people won’t need a special affordability program because market prices will be affordable.

      2. tonyE

        Not only that, but the building is in the Santa Ana School District, so we can finally achieve Larry Agran’s dream: to house our workers in Irvine, without having to force their kids to change school district.

        A win win situation.

        PS: I wonder if anyone who bought into that building knew (or cared) about the school district. I guess when this place was a High Falutin’ place it would make no difference as it was either childless occupants or folks so rich that private school was expected. Now that they prices have crashed from Mt. Whitney down to Death Valley, more “normal” folks might be interested, but the school district must be a real downer.

  9. tazman

    The HOA on this place is about $50 less than the apt I rent about 3-4 miles from the beach. Geez, this sounds like a good deal, I can take on a monthly PITI nut of $3k+ and then pay rent for the rest of my life. No thanks realtards!

  10. Lee in Irvine

    Why would ANY cash-flow investor select any property in Orange County? It’s flat out stupid. There are so many better opportunities out there. I know a guy who manages more than 500 rentals in Vegas, and he tells me that investors are buying real estate out there, paying cash, and yielding 10-15% on their investments. Try doing that anywhere in Orange County. You can’t.

  11. MalibuRenter

    I am assuming the condo association could declare BK without affecting the credit of the owners.

    If so, I’ll bet that the bankruptcy judge would make major changes in the HOA services and fees.

    I have a funny feeling this is already being discussed with the condo board (no inside info, just speculation). Otherwise, the people who are still there and not in default will be subsidizing an ever-larger group of condos in default.

  12. freedomCM

    I think you really need to re-examine your vacancy allowance.

    its only 5%? one month per two years?

    Since every time the apartment turns over, it has to go off the market for paint/carpet for a week or more, then get rented again, even in the best of times this seems optimistic unless you are assuring yourself of attracting renters using a below market rent.

    (unless you are in Tribeca, as was said above)

  13. chuckconners

    Item 18 page 5 of 6 (notes), typo. Dammit I keep looking at the notes and you have two page 18s, etc.

    1. Bitter Renter

      IR, in case you are no longer monitoring comments on Tuesday’s post, here are the typos I posted about noticing in the Property Valuation Report:

      ‘Very cool service for your target customers.

      I noticed a few typos in your sample report. Presumably you’re going to have someone properly proofread your template before you start having people pay for this document (not sure if I happened to see all of them).

      “a properties minimum value” -> “a property’s minimum value”

      “a impound” -> “an impound”

      “savings typical run” -> “savings typically run”

      “paid buy” -> “paid by”’

  14. OC Progressive

    A modest amount of research shows that the twin towers are managed by Action Property Management, one of the larger companies that generally offers fairly competitive pricing, and average service. Standard contracts offer annual renewal, and it’s not all that difficult to switch, but only a few OC property management companies will have the expertise to manage a high rise.

    The problem stems not from the management company, but rather from the fact that you have a lot of costs divided among 228 units. The association will cover property insurance, liability insurance, directors and officer’s insurance, a monthly management fee, salaries for a concierge, part-time manager, 24 hour security services, and a series of contracts for elevator maintenance, gate maintenance, fire sprinkler maintenance, pool service, landscape service, janitorial services, a lighting maintenance contract, window washing, utilities for the common areas, government fees, et cetera.

    Reserve funding will cover maintenance and replacement of major components.

    The two things that skew the costs of a place like this are the labor costs for providing on-site services and all the extra costs involved in maintaining a high rise building.

    Don’t forget that there are directors elected by the unit owners who direct the management company, and approve every contract. There’s no reason to believe that they’re not relatively competent, and that they’re getting competitive bids on every one of the contracts that they approve, which is fairly standard industry practice.

    I know this seems crazily expensive, but if you start to add up the costs of operating a highly complex, high-service building, there’s no reason to start making baseless accusations.

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