zovall: The post below is written by Michelle Jones

Hi, I’m Michelle! I’m originally from Sacramento, but I’ve been living in Newport Beach since 2001. Currently, my husband and I live on the edge of Newport Beach and Irvine, with our two dogs. Despite the fact that we are currently renters, we are both very interested in the real estate market, and house hunting. Our guilty pleasure is anything on HGTV. Currently, I work full time as an account manager for an internet company, and help with IHB in my spare time.

Today I’m going to review for you two homes that sold within the past three months for similar prices in the Westpark neighborhood of Irvine.

House 1: 22 Palermo, Irvine, CA 92614

Sold for $604,000 in October 2011

Beds: 3

Baths: 2.5

Sq. Ft: 1,787

$/Sq. Ft: $338

Lot Size: 5,751 Sq. Ft.

Property Type: Residential, Single Family

Style: Two Level, Mediterranean

Year Built: 1988

The house would definitely give you more space, but will require some upgrades to the kitchen. The appliances and tile counter tops need to be upgraded to stainless steel and granite, cupboards are slightly dated, the wallpaper border will need to be taken down, and backsplash added. However, the plantation shutters are a huge plus, and the kitchen windows look out into the backyard.

The backyard has a nice combination of both grass and concrete, and with the minimalist landscaping, at least there isn’t too much additional upkeep.

There are ceramic tile floors throughout the first floor of the house, which are at least durable and easy to clean, if nothing else. The second floor is fully carpeted, appears to be in good condition and is newer carpet.

Another bonus feature with this home is the HOA fee is low, at $41, and it offers a pool, spa and tennis courts in the community.

House 2 – 9 Palagonia Aisle, Irvine, CA 92606

$605,000

Beds: 3

Baths: 2.5

Sq. Ft: 1,500

$/Sq. Ft: $403

Lot Size: 2,500 Sq. Ft.

Property Type: Residential, Condominium

Style: 3+ Levels, Contemporary

View: Park/Green Belt

Year Built: 1999

This condo, on the other hand, offers views, an outdoor space with a BBQ and low maintenance landscape, and is 10 years newer than the house. Additionally, even though it is technically listed as a condo, it is actually a detached “villa”. All pictures for this one were lo-res.

The living room brings in a substantial amount of light, but does lack some decent blinds.

And although the flooring in the kitchen is a step up from the house, the appliances and tile counters need to be upgraded to stainless steel and granite.

And the outdoor space is lacking.

The HOA fees for this one are also substantially more at $172, which apparently only gives you pool, BBQ access, and a gated community.

In summary, for a slightly older home that does require some upgrades, you will have more square footage, but will also need some extra cash to spend on making those upgrades to your home. However, for the newer home at the same price, you not only sacrifice the square footage, but your outdoor space as well, and you would still need to upgrade the kitchen on top of all that. So, since you’re going to need to upgrade the kitchens in either home, why not acquire the extra square footage? Sure, you’ll probably need to spend a little more money to upgrade the house, but at least it will be to your own personal taste, and you’ll have space and privacy from your neighbors, instead of them practically being on top of you in the condo.

28 Taquitz is a 3bd/3ba 1,826 sq. ft. attached condo in the Monticello tract in Northpark Square. Monticello is located across from Beckman High and is bounded by Bryan, Rubicon, Rosenblum, and Montellena. The streets inside Monticello are: Taquitz, Leucadia, Cosentino, Cabazon, and Idyllwild.

Monticella has 4 main floorplans:

Plan 1 – 2 Bed / 2 Bath 1211-1289 square feet

Plan 2 – 2 Bed / 2 Bath 1398 square feet

Plan 3 – 2 Bed / 2 Bath 1471-1663 square feet

Plan 4 – 3 Bed / 3 Bath 1826 square feet

28 Taquitz is a Plan 4 and is listed at $499,000

There is one other Plan 4 that is active and that is 27 Leucadia which is listed at $509,900.

And there is one Plan 4 that is Pending Sale: 9 Cabazon which is a short sale listed at $425,000.

A quick search revealed 3 Plan 4's sold in the last year:

10/20/2011	9 Leucadia	$430,000
9/16/2011	10 Taquitz	$470,000
6/27/2011	28 Taquitz	$481,000

Yes, 28 Taquitz was purchased just about 6 or so months ago. It looks like it was bought for cash and the agent is the owner – not sure why they are selling now.

Seems like the sales prices have a pretty wide range. I'll use an average of the closed and pending sales for the analysis – $451,500

Here's what the numbers might look like if purchased by someone with excellent credit and 20% down:

Purchase Price	$451,500
Closing costs	$13,545	3%
Total price	$465,045
Down payment	$103,845	20%
Loan Amount / Percentage Of Price	$361,200	80%
Interest Rate / Period (months)	4.00%	360
	Monthly	Yearly
Mortgage Payment	$1,724	$20,693
Interest Component	$1,204	$14,448
Property Tax	$399	$4,784	1.06%
Special Assessments	$107	$1,285	0.28%
Effective Tax rate			1.34%
Insurance	$50	$600
HOA 1	$227	$2,724
HOA 2	$74	$888
Cash Out	$2,581	$30,973

There are some possible adjustments that may apply to your situation. Be sure to also consider how long you may own the property (average is around 6 years), what kind of financing you actually qualify for, how much you put down, the effect of giving up the standard deduction, potential price declines, costs to sell the property, etc. The NY Times Buy or Rent calculator is a great tool that helps with some of these.

Possible Adjustments
Interest paid		$14,448
Property tax		$4,784
Total deductible		$19,232
Tax benefit	$401	$4,808	25%
Opportunity cost of down payment	-$173	-$2,077	2%
Principal paid in mortgage payment	$520	-$6,245

So, what do these Plan 4s rent for? I didn't find much in terms of closed leases but 43 Leucadia is listed at $2550/month.

Based on this info, would you buy 28 Taquitz for $451k or rent it for $2550/month? If you wouldn't buy it fo $451k, what price would you pay for it?

You’re ready to buy a house. You have $800,000 in your pocket (give or take), and you’re looking to purchase a place in either University Park or Turtle Rock in Irvine. Since the housing market took a dive, you figure $800K is going to get you into something decent. It’s a large chunk of change and a relatively big commitment, so you want to make sure you’re getting the best bang for your buck. So what exactly will $800K get you in Turtle Rock? The answer is: not much. University Park however, comes with a less expensive price tag—around a couple hundred thousand dollars cheaper. So what’s the difference and can I get a Turtle Rock house on a University Park budget? Well, let’s take a look.

Current listings in the Turtle Rock area are upwards of $900,000 with the majority of properties beginning in the $1 million dollar range. It’s not surprising. Turtle Rock is one of Irvine’s most prestigious locales. But don’t let the large price tag bum you out. If you know what you want, do your homework, and have patience, the stars might align and you could end up in a Turtle Rock neighborhood. There are lower priced options in the area, but you’ll have to make sacrifices on size. But before you let that $800K burn a hole in your pocket, let’s take a step back and make an informed decision about the housing in Turtle Rock. We need to know what’s available, and what we’re getting for the price.

The two villages are divided by University Drive. Turtle Rock sits further back from the 405 freeway against Shady Canyon. Turtle Rock can offer more picturesque views. While still close to UCI and Concordia, Turtle Rock has a separate feel to it. The deeper you go into Turtle Rock, the less you feel the presence of the universities. Turtle Rock has a mixture of housing and condo communities, combined with a great outdoor atmosphere. If I had to choose between the two areas just based upon location criteria, I’d choose Turtle Rock. But let’s be realistic. A great location is definitely on my “must have” checklist, but I also want to make sure I’m maximizing my money.

If we take a look at square footage alone—Turtle Rock would be king. On average, the residences are larger and can range anywhere from 1,600-4,000+ square feet. The properties in University Park, on the other hand, are typically mid-sized ranging from 1,100—2,000+ square feet. So we’ve resolved our first mystery in the price disparity between the two areas—square footage.

What about the number of bedrooms? As you have surmised, the number and size of the bedrooms has a direct relationship to the square footage. You can easily find 2-5 bedroom places in both University Park and Turtle Rock. University Park can offer you 4 and 5 bedroom properties below your $800K budget. If you’re married, with two children and need a home office, University Park fits your price range. If you want 4-5 bedrooms in Turtle Rock, you’re putting yourself in the red, or a very tiny living space. Don’t fall into the trap in thinking that more square footage equals larger bedrooms. That’s not always the case.

Let’s do some comparisons. Here’s a property that just sold in University Park:

Address: 2 Almond Tree Ln

Sale price: $635,000

Residence Type: SFR

Square Footage: 2,234

Bedrooms: 4

Bathrooms: 2.5

Year built: 1973

Lot size: 5,000 square feet

Price per square foot: $284

Here’s a property that just sold in Turtle Rock for around the same price:

Address: 18692 Paseo Cortez

Sale price: $640,000

Residence Type: SFR

Square Footage: 1,450

Bedrooms: 3

Bathrooms: 2

Year built: 1969

Lot size: 4,200 square feet

Price per square foot: $441

It’s obvious that the University Park property offers more bang for your buck based upon the price per square footage ratio. The University Park property also has a bigger lot.

When I look at homes, I imagine myself standing in 1 square foot. In that square foot is the $/sq ft price tag. Each time I take a step into another square foot, I’m subtracting cash out of my wallet—paying the price for each square foot. If I can continue to walk in the house, stepping on each square foot, feeling my wallet become thinner without regret, I know that I’ll be happy with my purchase. I can step on each square foot and feel comfortable that I’m paying a fair price. Personally, I’d rather come in under budget with a larger interior square footage. I can’t imagine stepping on a $441 square foot in a house that only offers me 1,450 square feet of living space. I’m feeling over crowded just thinking about it! In my opinion, it’s not worth the price.

Ultimately, there are many factors to consider when buying a home. The purchase price and size are not always the determining factors. Both University Park and Turtle Rock are excellent communities. I’d live in either one. Now that you’re informed you can choose what’s right for you. Remember: It’s your decision. You have to live in it. What would you do? What factors matter most to you?

30 Danbury Lane is a 3bd/2.5ba 1,357 sq. ft. detached condo in the Cobblestone tract in the village of Oak Creek. Cobblestone is located at the corner of Jeffrey and Alton. There is one main street that forms a loop inside the tract and depending on where the home is in the loop, the street could be named Danbury, Cherrybrook, or Lantern Lane.

Cobblestone has 3 main floorplans:

• Plan 1 – 2 Bed / 2.5 Bath 1127 square feet
• Plan 2 – 3 Bed / 2.5 Bath 1340-1357 square feet
• Plan 3 – 3 Bed / 2.5 Bath 1490 square feet

30 Danbury is a Plan 2. I did a quick search and the only Plan 2 sale I was able to find in the last year was 68 Danbury which closed on 11/17/2011 for $475,000. A Plan 3, 110 Danbury, closed at $492k on 12/27/11 so I'm going to use $475k as the purchase price for the analysis.

Here's what the numbers might look like if purchased by someone with excellent credit and 20% down:

Purchase Price	$475,000
Closing costs	$14,250	3%
Total price	$489,250
Down payment	$109,250	20%
Loan Amount / Percentage Of Price	$380,000	80%
Interest Rate / Period (months)	4.00%	360
	Monthly	Yearly
Mortgage Payment	$1,814	$21,770
Interest Component	$1,267	$15,200
Property Tax	$409	$4,911	1.03%
Special Assessments	$158	$1,896	0.40%
Effective Tax rate			1.43%
Insurance	$50	$600
HOA 1	$60	$720
HOA 2	$79	$948
Cash Out	$2,570	$30,844

From the last buy/rent post, a few people commented and emailed on the adjustments I listed and that some, like the tax deduction, might not be accurate because you need to account for the standard deduction. And that others, like paying down principal, would be more than negated if the property goes down in value (like it has over the past several years). Also, when considering whether to buy/rent, it is important to take into account the costs to sell the property. Many people do not live in or own their homes for more than 10 years. Does anyone have statistics on what the average is? In any case, I can't imagine someone living in one of these detached condos for 30 years. But on the flip side, I could see someone living here and then moving to a larger home and renting this one out. Although these adjustments may not apply to everyone or in all cases, I think there is still value in looking at what they are. When I get some more time, I'd like to see what impact they would have on my situation.

Possible Adjustments

Interest paid		$15,200
Property tax		$4,911
Total deductible		$20,111
Tax benefit	$419	$5,028	25%
Opportunity cost of down payment	-$182	-$2,185	2%
Principal paid in mortgage payment	$548	-$6,570

One of our readers wrote in and suggested to add a Repairs expense for purchasing. Any other ideas on what else to include/exclude?

As far as what these Plan 2s rent for, 68 Danbury, the sales comp from November seems to have been purchased by an investor (looks like an all cash purchase from what I can tell) and it was listed as a rental 2 weeks after being bought. The asking rent is $2650/month. Another Plan 2 rental came on the market just 6 days ago and is also asking $2650/month: 214 Lantern.

The closed Plan 2 leases are 178 Cherrybrook for $2550/month on 9/18/2011 and 165 Cherrybrook for $2550/month on 8/27/2011.

Based on this info, would you buy 30 Danbury for $475k or rent it for $2550/month?

On Monday I received an email from a reader who wanted to see a comparison between the monthly cost of buying a home to that of renting the same basic home. In this post I'm going to look specifically at the Plan 3 homes in the Sage tract at Quail Hill. Sage is a detached condo tract and the Plan 3 is a 3 bedroom, 2.5 bath, 1275 square foot home with an attached 2 car garage and a small private patio. These same, basically exact detached condo floorplans are also found in other villages in Irvine and in the future I may take a look at how pricing differs for the same plan across villages. Today, we'll see what it might cost to buy and rent a Sage Plan 3.

Currently, there are two Plan 3s for sale on the market:

103 Windchime at $529,000 – Listed on 1/2/2012

68 Duet at $450,000 (Short Sale) – Listed 6/20/2011

The actual closed sales for Sage Plan 3's over the last year are:

10/10/11	18 Duet	$455,000
9/29/11	62 Duet (REO)	$440,000
8/25/11	44 Duet	$449,000
8/17/11	201 Dewdrop (REO)	$445,000
6/23/11	84 Windchime	$515,000
4/19/11	54 Reunion (REO)	$455,000

Based on this data, I'm going to use a sales price of $450k. Here's my take on what the cost would be if one were to purchase at $450k and put 20% down.

Purchase Price	$450,000
Closing costs	$13,500	3%
Total price	$463,500
Down payment	$103,500	20%
Loan Amount / Percentage Of Price	$360,000	80%
Interest Rate / Period (months)	4.00%	360
	Monthly	Yearly
Mortgage Payment	$1,719	$20,624
Interest Component	$1,200	$14,400
Property Tax	$394	$4,725	1.05%
Special Assessments	$194	$2,332	0.52%
Effective Tax rate			1​.57%
Insurance	$50	$600
HOA 1	$116	$1,392
HOA 2	$120	$1,440
Cash Out	$2,593	$31,114
Interest paid		$14,400
Property tax		$4,725
Total deductible		$19,125
Tax benefit	$398	$4,781	25%
Opportunity cost of down payment	-$173	-$2,070	2%
Principal paid in mortgage payment	$519	-$6,224
Total Adjustments	$745	$8,936
Cost (Cash Out – Adjustments)	$1,848	$22,178

20% down payments, low interest rates, tax benefits and the amount paid towards principal all bring the cost to about $1848/month. Please let me know if you think any of the inputs are incorrect or if you think the spreadsheet is missing something. Another tool is the NY Times Buy versus Rent calculator that takes into account many other details.

So, what is the cost to rent a Plan 3? There is one available on the market right now:

50 Duet – Available for $2450/month

Also, the last Plan 3 that was leased was 84 Windchime which was leased for $2600/month on 8/19/2011. Although these are all Sage Plan 3s, each unit is different and there are factors such as the condition of the home, the quality of upgrades, the location, etc which will all affect the price/rent. Based on the cost of owning versus that of renting a Plan 3, what would you do?

Let me know if you found this post helpful and if there are any other plans/tracts/neighborhoods that you'd like me to look into.