Mothers don't let your babies grow up to be flippers

1711 Hornblend St, Unit C
San Diego, Ca. 92109

2bdrm, 2.5 bath, 1266 sqft condo
Year Built: 2000
HOA: $150
1 garage parking, 1 spot
Sales Status: Unsold

Purchase Price (03/04): $500,000
Asking Price: $495,000

This is actually a unit I would classify as "desirable". It's pretty new, the location doesn't suck, the HOA is very reasonable, it has 2 parking spaces (gasp), and it is a good size for a 2bdrm condo. Still, for $500,000, that's just stupid. Your mortgage payment on this sucker would run about $3200 a month for a 30-year fixed. Using the 28% calculation, a couple moving into this place would need to make a combined income of over $11,000/month to afford this. It just seems that if you are pulling in a combined income of that level, you should be living in something better than a 2bdrm condo.

Anyway, it appears that the flipper held onto the place for the 2 years to avoid paying tax on the "profit", and has had to ratchet down the price to get this thing off his hands. I doubt it will sell at this price because you can get a much better deal out of a few other overpriced places in PB.

Purchase Price	$500,000.00
Sale Price	$495,000.00
Association Dues	$150.00
Holding Period(mo)	32
Mortgage Paid	$93,333.33
Closing Costs	$4,000.00
Property Tax	$16,666.67
Estimated Monthly Rent	$1,750.00
Estimated Monthly Loss	$870.83	(if rented)
Estimated Monthly Tax Savings	$816.67	(using 28% tax rate)
Sales Commission	$29,700.00
Total Loss	$71,366.67

Those Holding Costs will Kill ya!

I'm back. I hope everyone had a wonderful Thanksgiving. Here is a almost million dollar house that sold at the same price from 2 years ago. I don't have a picture for this guy, but this just goes to show that all the appreciation of 2005 is gone, and we are looking at a fast track to 2003 levels. This flipper appears to be jumping ship before he loses any more money. I expect this characteristic to become a little more contagious. Because the fundamentals are all out of whack, this flipper is getting hit hard on the carrying costs. Suddenly, renting seems like a much better idea.

5355 Castle Hills Dr.
San Diego, Ca. 92109

4 bdrm, 2 bath, 2058 sqft house
9,900 sqft lot
Year Built: 1963

Sale Price (07/06): $950,000
Purchase Price (07/04): $950,000

Purchase Price	$950,000.00
Sale Price	$950,000.00
Association Dues	$0.00
Holding Period(mo)	24
Mortgage Paid	$133,000.00
Closing Costs	$4,000.00
Property Tax	$23,750.00
Estimated Monthly Rent	$2,500.00
Estimated Monthly Loss	$2,479.58	(if rented)
Estimated Monthly Tax Savings	$1,551.67	(using 28% tax rate)
Sales Commission	$57,000.00
Total Loss	$120,510.00

The three "not-so-wise" men who purchased 3 1-bdrm condos in 2004

"These three flippers of Pacific Beach are...." (see if you can fill in the rest of the song)

All purchased in 2004, and all of them are losing money. Not only that, I would be stunned if any of these units sells for the outrageous price they are asking. Folks, one bedroom apartments just aren't worth this much in PB...
5051 La Jolla Blvd #110
San Diego, CA. 92109
1 bdrm, 1 bath, 731 Sqft Condo
Year Built: 1973
HOA: $250, 1 car garage


Purchase Price (11/04): $365,000
Asking Price: $380,000
Sales Status: Unsold

Purchase Price	$365,000.00
Sale Price	$380,000.00
Association Dues	$250.00
Holding Period(mo)	24
Mortgage Paid	$51,100.00
Closing Costs	$4,000.00
Property Tax	$9,125.00
Estimated Monthly Rent	$900.00
Estimated Monthly Loss	$1,013.21	(if rented)
Estimated Monthly Tax Savings	$596.17	(using 28% tax rate)
Sales Commission	$22,800.00
Total Loss	$42,117.00

2266 Grand Ave #12
San Diego, CA. 92109
1 bdrm, 1 bath, 714 sqft condo
Year Built: 1970
HOA: $177, 1 carport parking


Purchase Price (05/04): $300,000
Asking Price: $319,000
Sales Status: Unsold

Purchase Price	$300,000.00
Sale Price	$319,000.00
Association Dues	$177.00
Holding Period(mo)	30
Mortgage Paid	$52,500.00
Closing Costs	$4,000.00
Property Tax	$9,375.00
Estimated Monthly Rent	$900.00
Estimated Monthly Loss	$672.50	(if rented)
Estimated Monthly Tax Savings	$490.00	(using 28% tax rate)
Sales Commission	$19,140.00
Total Loss	$29,625.00

4600 Lamont St #228
San Diego, Ca. 92109
1 bdrm, 1 bath, N/A sqft condo
Year Built: 1975
HOA: $237, 1 garage parking



Purchase Price (08/04): $291,000
Asking Price: $299,000
Sales Status: Unsold

Purchase Price	$291,000.00
Sale Price	$299,000.00
Association Dues	$237.00
Holding Period(mo)	27
Mortgage Paid	$45,832.50
Closing Costs	$4,000.00
Property Tax	$8,184.38
Estimated Monthly Rent	$900.00
Estimated Monthly Loss	$625.33	(if rented)
Estimated Monthly Tax Savings	$475.30	(using 28% tax rate)
Sales Commission	$17,940.00
Total Loss	$37,222.78

Anyway guys, I'm going to be too busy with the holidays to make another post till next week. So, you probably won't hear from me till the monday after Thanksgiving. Happy Holidays and don't eat too much turkey.

Nation of Flippers

Read about Tulip flipping: http://www.businessweek.com/2000/00_17/b3678084.htm
I'd like to thank jb for this link. (great find)

Note: this is not a housing related post, offtopic warning!

I guess the concept is nothing new. People have been scalping tickets for a long time. Anywhere that demand is expected to exceed supply, there is always someone there trying to make some money. What's the new craze? console flipping (for these initial releases)

The video game industry is huge. It is so big that the revenues have surpassed hollywood. That's right, there is more money in video games than movies now. When the major suppliers release a new console, there is an issue with trying to produce enough units when you have such a large audience. Several years ago, this was a huge issue when the playstation 2 was first released. Sony produced several million units, but they completely sold out. What happened afterward was better press than money could buy. People literally got in fist fights to get one. UPS drivers were stealing them from boxes to be delivered. It was crazy, and it made everyone want one more. You could sell one on ebay for over $1000. It was crazy, and it was all over in a few months. Sony has sold over 100 million units of the PS2 to this date.

Microsoft, trying to capitalize on this as well, cut the number of units they shipped with their next product (the xbox 360), and only sent out 400,000 units in the first month. Over 40,000 of these were immedietly flipped on ebay. To get one of these units, people camped out in a line in chairs, tents, and sleeping bags waiting for the store to open up. It worked, the flippers made money, and Microsoft sold over 6 million units.

Enter Playstation 3 and Nintendo Wii.
Now, in general, most people aren't too excited about the PS3. It costs $600, and it doesn't really offer anything that innovative. Sony's reaction was to promise to ship out 500,000 units worldwide and then cut the supply to only about 200,000 units. Considering that they shipped several million of their previous platform, they are either horribly pessimistic about sales, or this is just a marketting ploy taken to an extreme. The consoles have been released, and it looks like most of them are being flipped on ebay. (some for over $5,000)

Now the Nintendo Wii comes out Sunday. Most stores sold out on their pre-orders a long time ago, but some stores don't do pre-orders (best-buy for one). Nintendo is shipping out 4 million units to the world, but this console is even more highly anticipated than the PS3. (although the PS3 is getting a lot of press because of the mania they are generating) If you want to get one of these things, you may want to show up extra early at Best-Buy (they open at 9), and see if you can be one of the first 100 people in line. You can probably flip it on ebay for more than double what you paid for it that day. (console costs about $250, if I had to guess, you might be able to ebay one the same day for $1000) Chances are that everyone else in line will be there to drop their console on ebay as well.


Any thoughts on what people plan to flip next?

A new way to get your property noticed in Pacific Beach

Here's another Bubble Boy award, with an extra award for ingenuity.


A lot (shown) and a house in one transaction:

Doing a search for lots, you will find the following listing:

821 Portsmouth Ct
San Diego, Ca. 92109

1250 sqft lot for 1.4 million dollars!!!!!!!!


As if asking for 1.4 million wasn't enough, Also note that this lot was originally listed for 1.3 million dollars.... why it was increased may have to do with the following piece of information..

As an additional benefit for paying about 3 times 2005 housing peak comps for this lot, you get 825 Portsmouth ct (tiny 1bdrm next door) as part of the deal.

Now, 825 Portsmouth ct is another 1250 sqft lot with a tiny 766 sqft cottage built in 1924 on it. (in the picture, it's that building left of the fenced in lot). This is likely a subdivision of a 2500 sqft lot.

You would think that selling the lot and the house individually would be the best way to go, but this appears to be a classic example of having to repackage something to be noticed. The house and the extra lot combined are not worth $1.4 million, not even a year ago, but, by getting noticed as one of the few empty lots left in PB, you might be able to attract one of the few people left who aren't savy enough to shop around for a better deal. It's an interesting strategy, and I'm very curious to see if it works for them.



Just a quick comp to show how outrageous this price is:

To show one comp, 1760 La Playa Ave is a 2bdrm, 868 sqft house on a 2500 sqft lot that sold for $685k in 06/06. This place is also right on the bay. Using this comp, you could have the same amount (2500 counting both lots) of land, an extra bedroom, a newer house, a bigger house, and it would cost you 60% less than buying this place.

I could probably find 100 more comps that would continue to make fun of this listing. This seller is going to have a very lonely time sitting on that listing.

Over 38,000 reasons why you shouldn't pay this much for a 2bdrm

1801 Diamond St #118
San Diego, Ca. 92109

2 bdrm, 2 bath, 1032 sqft condo
Year Built: 1975
HOA: $275

Asking Price: $408,000
Purchase Price: (08/05) $405,000
Sales Status: Unsold




I almost didn't bother adding this unit to the tracker even though the seller is obviously losing money. I have a bunch of places just like this that I have my eye on, but I like to wait for the loss to get really bad first. The reason I like this unit is because it's important to note that this is the highest priced 2bdrm unit in this complex, and it's on the ground floor. Unit #311 (top floor) in the same building is a 2 bdrm upstairs unit with almost the same size for $375k and unit #320 in the 1775 building is on sale for $390k. Both of these units are cheaper and more desirable. They are still overpriced though. Unit 320 in particular has had an open house almost every single weekend for at least the last 4 months. I can't believe the agent is still doing the open houses on it. I would have told the seller to get real months ago.

To make a long story short, no-one is going to pay $408k for this place. Even in a fictional NAR world where prices flatline for a bit, people will buy the cheaper and more desirable units in the same complex first. If he dropped it to $350k, he might get a sale before prices drop even more, but I doubt the seller is even capable of doing that.

This is the breakdown at the current asking prices, but if you based the actual sale price on competing units in the complex, you need to add at least about 45k to his loss.

Purchase Price	$405,000.00
Sale Price	$408,000.00
Association Dues	$274.00
Holding Period(mo)	15
Mortgage Paid	$35,437.50
Closing Costs	$4,000.00
Property Tax	$6,328.13
Estimated Monthly Rent	$1,500.00
Estimated Monthly Loss	$622.88	(if rented)
Estimated Monthly Tax Savings	$661.50	(using 28% tax rate)
Sales Commission	$24,480.00
Total Loss	$38,933.13

That's a fancy complex to take a loss in

4205 Lamont St #21
San Diego, Ca. 92109

2 bdrm, 2 bath, 1241 sqft condo
Year Built: 1973
HOA: $240

Asking Price: $749,900
Purchase Price (04/05): $768,000
Sales Status: Unsold
2 garage parking spots

Here's another apartment conversion where the flipper is having to drop below the investor's price. The entire complex was sold to an investor for $5.5 mil in 2004 and then all 21 units of the complex were sold off in a price range of 200k to 768k (so this one was the most expensive unit in the place). I calculate that the investor probably made about $3 million off of the conversion, but I don't know what he had to invest to bring things up to code or sell the units. This makes this investor one of the lucky ones. A lot of people who were doing conversions especially in the UTC area got screwed by the collapsing housing market and are faced with either taking a loss or renting the units for now.

It's a nice looking complex, but the price is completely outrageous for a 2 bdrm. For that kind of money, you could buy one of the run down houses in PB, tear it down, and rebuild a place all your own. Hell, if all you want is a 2 bdrm condo, there are a lot of them for sale in the 300's right now, and that price is very likely to drop into the 200's soon.

Purchase Price	$768,000.00
Sale Price	$749,900.00
Association Dues	$240.00
Holding Period(mo)	19
Mortgage Paid	$85,120.00
Closing Costs	$4,000.00
Property Tax	$15,200.00
Estimated Monthly Rent	$1,800.00
Estimated Monthly Loss	$2,225.60	(if rented)
Estimated Monthly Tax Savings	$1,254.40	(using 28% tax rate)
Sales Commission	$44,994.00
Total Loss	$113,940.40

Granite countertops, check. Stainless steel appliances, check.. Buyers.....?

853 Thomas Ave #14
San Diego, CA. 92109

1bdrm 1 bath, 547 sqft condo (tiny)
Year Built 2005
HOA: $202
1 Garage parking

Asking Price: $409,000 (for a one bedroom???)
Purchase Price (07/05): $423,900
Sales Status: Unsold


Another story of the developer making money off of some flipper.

At least it's close to the beach. Paying this much for a tiny 1 bdrm is just crazy though. You can buy a nice 1bdrm in the mid 200's at several places in PB, and the prices are still going down. That's a hefty HOA fee as well. If you ever rented this out, you would lose a big chunk of the rent every month just to pay the HOA.

Also, for a new development, I'd have to say I'm shocked that it only has one parking spot. It seems that the new model to live in San Diego is to live like a DINK (dual income, no kids), and you would end up having to street park in one of the worst areas of PB for parking.

Purchase Price	$423,900.00
Sale Price	$409,000.00
Association Dues	$202.00
Holding Period(mo)	16
Mortgage Paid	$39,564.00
Closing Costs	$4,000.00
Property Tax	$7,065.00
Estimated Monthly Rent	$1,000.00
Estimated Monthly Loss	$1,221.94	(if rented)
Estimated Monthly Tax Savings	$692.37	(using 28% tax rate)
Sales Commission	$24,540.00
Total Loss	$66,223.08

Also, remember to get your estimates in for the median sale prices in PB. Click here to see that post.

Bubble Boy Award!

It's no mystery that the real estate market right now is pretty bad for sellers. That is, if you bought in the last 3 years. If you bought before that, you can set your property at a relative steal and still walk away with a tidy profit. Prices are down everywhere. Nearly all of the units I find for sale that were purchased in the last 3 years are priced to break even. Those properties never make it to this blog because it just doesn't seem very newsworthy. The truth is, many of the people who tried to flip in the last year or two are borrowing money from friends and family to make their payments in hopes that someone will come by and save them from foreclosure. This might take a while before all those resources are exhausted and the true speculator impact of the housing market is felt.

Right now, you can buy a house or a condo for 2003 prices, and there's a reasonably good selection of places at that price point. My opinion is that it will go lower... Of course, if you have any ideas on how far or if you disagree, please leave a comment and discuss.

Anyway, we have those "special" sellers..... The ones that believe they don't have to follow the rules of supply and demand. The ones like....


629 Chalcedony St
San Diego, CA. 92109
4 bdrm, 4 bath, townhouse/condo

Purchase price (03/04): $749,000
Asking price: $1,400,000
Expected appreciation: 87% in 20 months


I will begin bestowing awards on these most optimistic sellers. This is because it is obvious that these people either have been living under a rock or in a plastic "bubble". Another member of the small number of people whoe are still sticking to the mindset that if they just leave something on the MLS long enough, it will eventually sell.




Now, I can't just leave a place like this by itself without showing you how much better you could spend 1.4 mil.

How about:
5024 Foothill
San Diego, Ca. 92109
4 bdrm, 5 bath house 2211 sqft house
on a 1/4 acre lot

$975,000 (still too expensive, but a night and day bargain compared to that crappy condo)

You get a private swimming pool, no pesky HOA fees, and you can do whatever you want with your land. (plus you get to save almost half a million dollars) Not only that, the owner purchased this place for $352k in 1999, so he has the freedom to be more flexible with his price.

note: don't take this as an example of a place to buy, it's waaaay too soon for that yet. We have 2 years and over 2 trillion dollars worth of arms resetting to go... (agree, disagree, leave a comment)

Monumental loss on a PB house

I don't know if this is a REO or not. Either way the house is definitely taking a huge hit.


4789 Dawes
San Diego, Ca. 92109
3 bdrm, 1.5 bath, 1161 sqft house (4000 sqft lot)
Year Built: 1933
1 car garage

Asking Price: $695,000
Purchase Price (05/04): $790,000
Sale Status: Unsold

Purchase Price	$790,000.00
Sale Price	$695,000.00
Association Dues	$0.00
Holding Period(mo)	30
Mortgage Paid	$138,250.00
Closing Costs	$4,000.00
Property Tax	$24,687.50
Estimated Monthly Rent	$1,800.00
Estimated Monthly Loss	$2,340.92	(if rented)
Estimated Monthly Tax Savings	$1,290.33	(using 28% tax rate)
Sales Commission	$41,700.00
Total Loss	$210,927.50

I'll have to double check, but I think that is the largest loss on any property yet. Just the price difference is a 6 figure loss, but the holding fees for 30 months make it just ugly. You still have to look at the logic in buying a house for 700k (7/10th's of a million dollars) that is over 70 years old and doesn't have much parking.


Something I always wonder about. How many of the properties that I feature would you think are examples of fraud? I make the assumption that each purchase was legit, and they owners were just making a bad investment. You can never be sure though, and, just by the nature of the properties I feature, it's likely that many of the fraud candidates will end up on my blog at some point. (Example, crown point villas)

Believe it or not, a house, purchased in 2003, taking a loss

I've been watching this listing for a while. At one point, I figured I could calculate a loss with holding fees, but I waited until just the commission was enough to put this place on the edge. What's key about this house is that it was purchased 2003, and we had 2 stellar years of appreciation after that. So, if this is an indication of price points, we are looking at prices being back at mid 2003 levels pretty soon.

In all likelyhood, I see this house dropping quite a bit more before it actually sells. The location is horrible. There is a big discount to anything east of the stinky ravine (which this place is right next to). Basically moving the price range into the clairemont price range instead of the PB price range.

I can't be sure if this is an intentional flipper or not. I've seen this house for sale for a while, and I'm pretty sure the owner listed it right after the 2 years to get the tax break.

2676 Hornblend St
San Diego, CA 92109

2bdrm, 1 bath, 802 sqft house, (2000 sqft lot)
Year Built: 1953
1 car garage

Asking Price: $425,000
Purchase Price (09/03): $390,000

Purchase Price	$390,000.00
Sale Price	$425,000.00
Association Dues	$0.00
Holding Period(mo)	38
Mortgage Paid	$86,450.00
Closing Costs	$4,000.00
Property Tax	$15,437.50
Estimated Monthly Rent	$1,400.00
Estimated Monthly Loss	$644.25	(if rented)
Estimated Monthly Tax Savings	$637.00	(using 28% tax rate)
Sales Commission	$25,500.00
Total Loss	$18,981.50

I bet someone could offer him his original purchase price and walk away with the house. I suspect that in a year, we'll be seeing this house or houses like it for sale for the mid to low 300's. It pays to be patient.

Post your housing estimates

First off, I'll start with a chart that put together of # of properties in all of San Diego that have been listed for each month and how many have actually been sold. Granted, some of the statistic is skewed because listings expire and then get re-listed, but this is an interesting chart to look at anyway. (source of data was Sandicor)



This brings me to the next thing I wanted to discuss. People's estimates for housing price movement. As of the end of September 2006, the median sale price of attached properties in Pacific Beach was $439,000. Do note that this is not the median asking price (which was $569,000. big difference). For detached properties, the median sale price was $810,000. This is where you guys come in. I'd like to get a prediction going for what the median sale price is going to be at the end of January 2007. (which is only like 3 months away) As an incentive to post, the person that comments with the closest prediction will get posting privledges on this blog. (reserve the right to revoke this if I have to ;) This offer even extends to people who are bullish on real estate (cough cough, real estate agents). If you can make a better prediction than everyone else, I think you deserve to be heard, and I think we could all benefit from your perspective on the local real estate. (note, I'll be playing too) Simply post a comment to this entry with your prediction for each of the markets (Attached and Detached, just for Pacific Beach). I'd like to get some activity on the comment section of this blog. I know I have a lot of readers, but most people don't leave any comments.

No comments submitted after the end of November will be accepted as entries in this little contest. Posts that you make can advertise sites, services, businesses, etc... You are welcome to express you viewpoint no matter what it is, but please don't put anything really out of line on here. Also, all "entries" have to be non-anonymous to count.

Here's some data to help out (all data is from Sandicor, great site):
Pacific Beach, San Diego, 2006 Median Sale Prices
January - Attached = $434,000 - Detached = $875,000
February - Attached = $565,000 - Detached = $1,000,000
March - Attached = $675,000 - Detached = $670,000
April - Attached = $550,000 - Detached = $970,000
May - Attached = $528,500 - Detached = $860,000
June - Attached = $422,000 - Detached = $851,960
July - Attached = $499,000 - Detached = $820,000
August - Attached = $445,000 - Detached = $786,000
September - Attached = $439,000 - Detached = $810,000
October - Attached = ????? - Detached = ?????
November - Attached = ????? - Detached = ?????
December - Attached = ????? - Detached = ?????
January - Attached = ????? - Detached = ????? <--- This is the one you are predicting

2 losses at Fort Knox... er I mean the Plaza

The Plaza (aka Fort Knox) in Pacific Beach is a gigantic 4 block apartment complex. The complex looks very pretty cosmetically, and it's located in a nice location, but it has been plagued by a lot of plumbing problems and the security there spends most of their time writing up the owners for stupid things. If you don't mind the stifling HOA fees, it's not a bad complex. It is my understanding that the HOA charges such large fees because they are trying to build up a reserve to prevent assessments. Just don't get caught without your master key in any of the many "jail cells" that they have in the complex or you may find yourself spending the night on a patch of concrete. Honestly, trapping people that are already inside the complex just for making a wrong turn is a really retarded way to set this place up, but hey, no-one asked me. Like the rest of PB, it has been feeling the price crunch.

Here is a studio condo that was flipped in a mere 4 months for a loss.

1885 Diamond St #310
San Diego, Ca. 92109

0 bdrm, 1 bath, 420 sqft
Year Built: 1975
HOA: $250
Sales Status: Sold

Purchase Price (12/05): $222,000
Sale Price (03/06): $202,000 (note that prices have gone down since March... Anyone venture to guess what this unit is worth now?)

Purchase Price	$222,000.00
Sale Price	$202,000.00
Association Dues	$250.00
Holding Period(mo)	4
Mortgage Paid	$5,180.00
Closing Costs	$4,000.00
Property Tax	$925.00
Estimated Monthly Rent	$800.00
Estimated Monthly Loss	$363.65	(if rented)
Estimated Monthly Tax Savings	$362.60	(using 28% tax rate)
Sales Commission	$12,120.00
Total Loss	$38,574.60

Then we have unit which barely sold for more than it cost... but once again, you have to look at the big picture and holding fees. This is more proof that prices have dropped to at least early 2004 levels.

1885 Diamond St #118
San Diego, Ca. 92109
2 bdrm, 2 bath, 1033 sqft condo
HOA: N/A (I think it's $300 for the 2bdrms)
Year Built: 1975
Sales Status: Sold

Purchase Price (03/04): $365,000
Sale Price (01/06): $376,000

Purchase Price	$365,000.00
Sale Price	$376,000.00
Association Dues	$250.00
Holding Period(mo)	22
Mortgage Paid	$46,841.67
Closing Costs	$4,000.00
Property Tax	$8,364.58
Estimated Monthly Rent	$1,500.00
Estimated Monthly Loss	$413.21	(if rented)
Estimated Monthly Tax Savings	$596.17	(using 28% tax rate)
Sales Commission	$22,560.00
Total Loss	$30,150.58