Another reversion!!! Say it ain't so!

2123 Garnet Ave
San Diego, Ca. 92109

This is a conversion that was purchased in 2005 for about $2.7 million. The developer who purchased it has since been doing a renovation (that isn't completed yet) on all the units in the complex and just put them up for sale. They now have granite countertops, stainless steel applicances, w/d in each unit. In short, he did what he could to make the places seem modern. The things that really tell you that it was a conversion are as follows:

1. Only 1 parking space for each 2bdrm
2. Small units (550 and 750 sqft'ish for 1 and 2 bdrm respectively)
3. No pool/spa/weight room

I'm a little surprised that he was able to do the conversion considering having only 1 parking space for a 2bdrm condo. I was under the impression that a restriction was placed which didn't allow this anymore.

Doing the math on this complex, he has 4 units that are 2bdrms which he is trying to sell for an outstanding figure of $450,000 each and he has 4 1bdrms that he's trying to get $325,000 for. This means that if every single unit sells for his asking price, he'll get about $3.1 million (and he's using some of the space for his own office, so it's not a total loss). This may look like he's trying to make a $400,000 profit, but it's not that simple. With all the construction costs, permit costs, commissions, etc.., he'll be lucky to break even on the deal.

I doubt he'll sell for what he wants/needs to sell for. You can get a 1bdrm condo in pb for the 200's and a 2bdrm in the 300's. (closer to the water and not on friggin Garnet Ave) Evidentally, he shares my sentiment as he is now offering the places for rent as well. He's attempting to get $1300 for the 1bdrms and $1650 for the 2bdrms. (the 1bdrm price is too much, the 2bdrm is on the high end)

This is interesting because it gives us a direct buy-rent comparison that we can then plug into a rent vs own calculator to see what we get.

For the 1bdrm:
I used the following figures:
Rent - $1300/mo
Annual rent increase 3% (inflation rate, rounded up)
$325,000, 6% fixed mortgage with all closing costs paid for by the developer (100% financed, but no PMI)
Flat home appreciation (that's closer to the NAR's estimate, not mine. I think it'll go down)
$2712/yr HOA fees
Selling costs 6%
28% tax rate

Using these figures and the developers own prices, it would take 16 years of owning before you would have an advantage to owning.
Note that this is conservative because it expects the following:
1. You do NOT invest the difference between renting and mortgage. You put it in a 0% checking account or in a shoebox.
2. Your property does not depreciate. (I mean it never happens... right?)
3. No maintainence is necessary.
4. HOA fees don't go up.

Sell After	Renting	Owning	Sale	Advantage of
Year	Cost	Cost	Gain	Owning
1	16,068	24,727	-15,509	-24,168
2	32,618	49,524	-11,272	-28,177
3	49,665	74,393	-6,773	-31,502
4	67,223	99,340	-1,997	-34,115
5	85,307	124,370	3,073	-35,989
6	103,934	149,487	8,457	-37,096
7	123,120	174,697	14,172	-37,405
8	142,882	200,006	20,240	-36,884
9	163,237	225,420	26,682	-35,501
10	184,202	250,945	33,521	-33,222
11	205,796	276,588	40,783	-30,009
12	228,038	302,356	48,492	-25,827
13	250,947	328,258	56,676	-20,635
14	274,543	354,301	65,366	-14,392
15	298,847	380,494	74,591	-7,055
16	323,881	406,846	84,386	1,420

How about the 2bdrm:
I used the following figures:
Rent - $1650/mo
Annual rent increase 3% (inflation rate, rounded up)
$325,000, 6% fixed mortgage with all closing costs paid for by the developer (100% financed, but no PMI)
Flat home appreciation (that's closer to the NAR's estimate, not mine. I think it'll go down)
$3072/yr HOA fees
Selling costs 6%
28% tax rate

Using these figures and the developers own prices, it would take 19 years of owning before you would have an advantage to owning.

Sell After	Renting	Owning	Sale	Advantage of
Year	Cost	Cost	Gain	Owning
1	20,394	33,555	-21,474	-34,635
2	41,400	67,205	-15,607	-41,412
3	63,036	100,957	-9,378	-47,299
4	85,321	134,816	-2,765	-52,260
5	108,275	168,789	4,255	-56,259
6	131,917	202,884	11,709	-59,258
7	156,268	237,107	19,623	-61,216
8	181,350	271,467	28,024	-62,092
9	207,185	305,972	36,944	-61,843
10	233,794	340,631	46,414	-60,423
11	261,202	375,454	56,468	-57,783
12	289,432	410,450	67,143	-53,875
13	318,509	445,631	78,475	-48,647
14	348,458	481,007	90,507	-42,042
15	379,306	516,591	103,280	-34,005
16	411,079	552,396	116,842	-24,475
17	443,806	588,435	131,240	-13,390
18	477,514	624,723	146,525	-683
19	512,233	661,274	162,754	13,713

Me, I'm not sure I'll live that long.