May 09, 2007

Real Homes of Genius: Today we Salute you Compton. 3 Bedrooms on 806 Square Feet!


Today we salute Compton yet again with another Real Homes of Genius Award. This beautiful starter home is 3 bedrooms and sprawls out over a breathtaking 806 square feet. If you are wondering how 3 bedrooms can fit on 800 square feet I have two words for you, garage conversion. Yes, this is an architectural masterpiece of space efficiency. And get this, you can have all of this for only $289,100! Who said homes in Southern California were expensive? With Real Homes of Genius we are providing you with an array of affordable options provided you want to put your families life and education at risk. As you can notice we care about your safety and have a high rise security fence to protect you.


Now what does the sales history show us about this home? Let us take a look:


Sale History

08/10/2006: $270,439

08/22/2005: $325,000

11/06/2002: $29,000

Did someone leave off a zero in 2002? We purchase cars that cost more than that. Yet this is most likely someone jumping on the home ATM machine and riding it for all it is worth. And wait! This home is being flipped for the third time in two years. The first person took a massive 16 percent hit in one year. Now at the current price this current seller is trying to break even. I suppose it is hard to cover a monthly nut running about $2,400 on rent coming in at $900. But again this is a wonderful investment property and a perfect starter home.


What does our good friend Zillow estimate on this home? Let us take a garner:

Did we just open a Latin dictionary or stepped upon the undiscovered Calculus algorithm of Sir Isaac Newton? Because this calculation makes no damn sense, not even close. We get a pie in the sky estimate of $413,963 on this place and a “value range” of $372,567 and $476,057. Honestly, do you wonder why no housing bulls post on this site? And just so you know, as I’ve mentioned before I own investment properties out of state and a prerequisite for investing in properties is that you make money! Either via appreciation or cash flow. Now that we have massive negative cash flow and no appreciation do you think this is a good deal?

Today we Salute you Compton with the Real Homes of Genius Award.

10 Comments:

lendingmaestro said...

not only is this home over-valued, so is the land. I rather live in Arkansas or Alaska than Compton......I think Lex Luthor was on to something in the first Superman Movie

In the cittyyyyy........city of compton!!!!!

Dr Housing Bubble said...

Hard to believe isn't it lendingmaestro? It is as if this is a deal at $289,000. Again, the rent on this place would be $900 a month and appreciation is not happening and won't be happening for a long time.

Can you imagine 3 bedrooms in 800 square feet? Like squeezing 20 people into a Pinto.

Adam Smith said...

Can you imagine 3 bedrooms in 800 square feet? Like squeezing 20 people into a Pinto.

At least the Pinto is a moving target, once the gangsta' gun-play commences. :)

Dr Housing Bubble said...

Adam Smith,

Let us run the numbers on this place if you were to use it as an investment property:

20% down - $57,800
PI: $1,423.54 at 6.25% 30 year fixed
Taxes: approximately $240 per month

So you are paying out $1,663 a month on a property that will rent at $900. In addition, with negative savings rates who will have $57,800 as a down payment?

Each month you will run a $763 deficit. Maybe they're taking a page out of the nation's play book; running deficits equals making money.

Positive Cash Flow said...

I'm sure if you look close enough at the MLS listing, it will mention something about rents being below market. Because in the world where real estate prices appreciate 30% per year, rents grow just as fast.

Rental Upside!! Nothing quite like haivng an empty apartment for two months w/ P&I payments of $1,663 while you try to find that new tenant who is going to pay $25 more per month.

Dr Housing Bubble said...

Positive Cash Flow,

Good point. Most people don't realize that raising rents isn't an exact science. Plus, rents need to reflect the income of those in the immediate area and not that of outside property owners.

You think they can jack rents up to $1,500 a month? No way, this thing will sit empty for a long time.

Most investors don't factor in things such as vacancy cost, repairs, taxes, and insurance. At the end of the day you are bringing in about 55% of your rental income. That is if you rent a house for $1,000 a month after payments toward the mortgage and other expenses you have an operating income of 55% that you can count as true rental income. That is why even rentals in other parts of this country are hard to cash flow even with 10% down. Most late night infomercials would like you to believe that it is easy to cash flow but real estate investing for the long-term is no easy work, but it is worth it with good deals in solid areas that reflect real estate market fundamentals (aka you aren't living in bubbleland).

This property is negative cash flowing so bad you might end up in 1970 and find yourself in platform shoes.

Anonymous said...

Why are you guys being so negetive? Who ever bought that dump for 29,000 and sold it for 325,000 is probably the most succesful house flipper ever. They sold for 325,000 more than they bought it for. I thought that was what house flipping was all about. Duane in MT

Anonymous said...

This, in an area on the wrong side of the tracks, is actually worth the $29000 it sold for 5 years ago, and will be worth that again.

A good candidate for getting the Japanese experience of falling property prices for 14 consecutive years.

Dump now, before it falls further. I'll be a buyer again, in about 15 years.

IrvineRenter said...

Let's see...

Ugly,
very tiny,
cage bars,
horrible neighborhood,
$289,000.

Hmmmm....

No there is no bubble.

rogersmith8080 said...

“All housing is Local” more like “All Housing is Loco”.

That garage conversion is probably not even legal, not many are especially in "economically disadvantage" cities. Besides a two families of illegal’s who would want to live there? Even illegal’s will figure out they could rent just as much for half that?