Posted by Kenneth Hocking on April 28, 2008 at 10:36:56:
I wonder how Houston, San Antonio, Austin and Dallas would fair on a National Model of Metro areas based upon an INCOME to expense ratio aka an affordability ratio!
I am very interested if one can find someone that has or will produce a chart based upon the Income to expense ratio and ovelay that with Job growth and economic soundness Interesting idea I think I will start Digging.
How is SO CA apartment market? - Posted by james(CA)
Posted by james(CA) on April 25, 2008 at 16:52:25:
Any investors actively investing in apartment in SO CA market…I think it is hard to cash flow? How is the sales like in this market? I am looking to buy…yes good luck right? .but not in a top neighborhood…in working class or lower perhaps.
Re: How is SO CA apartment market? - Posted by Rick, the Probate Guy
Posted by Rick, the Probate Guy on April 26, 2008 at 19:13:34:
Candidly, I’m not buying units at this time, and here’s why:
If I had any left, I’d sell every one that I had that wasn’t going to be a long time keeper because cap rates are outrageously high. Apartments have never been my specialty, either, so I’ve tended to go into them with partners who are either more knowledegable or enthusiastic about the project, the upside, etc.
I’ve done pretty well with the handful that I’ve been in, but can’t chalk it up to anything that I did, other than write the check.
You’re absolutely right about the cash flow in most of the current offerings. Way, way too low, or none at all for some time. If I’m going to gamble on cash flow starting a few years down the road, there better be a no brainer pot of gold at the end of the rainbow and I haven’t seen one like that in years.
I’m of the opinion that it’s way too early to work apartment deals, unless you’re really just buying the note, or fixing a problem that you have an inside perspective on. Retail deals are way too expensive. Wholesale deals are way too rare.
This might be a very good time to bone up on your research and develop a good plan for when the time is right. I think that the timing will be more obvious if and when the SoCal economy for the working man really starts tanking. I’m watching for signs that people with jobs in trades, manufacturing, and service sectors move out of state resulting in some hardship to the apartment owning community. It may not happen, either, but that’s what it may take.
I’ve had units in downtown Long Beach, Newport/Costa Mesa, and Fullerton, to think of a few (and not too many more, either). I haven’t seen signs that any of these communities’ economies have been hurt (yet).
Watch for signs that loans for units become next to impossible, or some other sign that indicates that sector is hurting. Now is just too soon.
It may easily take a few years for the good ol’ bad times to return for apartments. In the meantime, mark out your geo market(s) and neighborhoods and be ready to execute when the timing is right.
Curiosity - Posted by Rich-CA
Posted by Rich-CA on April 27, 2008 at 12:28:30:
II was wondering if you track job trends. I recently read that the net outflow of CA population has averaged between 250,000 and 750,000 (depending on which article and when it was written) since 2000. These tend to be more skilled workers and more than offsets the population growth in illegals. In the school districts in the SF area, elementary schools are closing because its young families with children who are leading the exodous.
Re: Curiosity - Posted by Rick, the Probate Guy
Posted by Rick, the Probate Guy on April 27, 2008 at 20:36:43:
Nope, but I should.
Frankly, I’m a bit lazy and wait until the great stat guys like Bruce Norris et al publish it.
Candidly, I do watch and listen for anecdotal info, recognizing that it is only as good as it’s source.
Your school district observation is very interesting as that ought to be a pretty good indicator, presuming that the real economic engine consists of many parents of school aged children. I’ll see what I can learn in my local markets. THanks
Re: Curiosity - Posted by Rich-CA
Posted by Rich-CA on April 27, 2008 at 22:44:57:
My source on the school closures was the principal of both my children’s school (private) and one for one of the 4 public elementary schools within 3 miles of my house. Both indicated that the problem was when a family had their first child, they would move out of the area (usually out of state) looking for a better income to expense ratio mainly based on the high rents and housing prices in this area. The has gone on long enough to reach 4th grade where in some cases there are half as many classes in 4th grade than in 5th grade in the lower/middle income areas (but not the poorer areas). The loss is worse in SF where they closed a high school last year and high schools tend to be 4 - 6 times the size of the elementary schools. That was happening when we were supposedly still in a boom.
If the state of CA decides to hike taxes a lot to close te budget deficit, then the loss will shift to moves due to loss of jobs as those who can leave do so. Should have sold and rented back my house years ago. Rent is about half what I pay as owner - same floorplan, same neighborhood.