Potential Bargain Home July 12, 2006
General: East County, 4 Bedroom 2 bath, asking price range in range of $500,000 to $525,000.
Why you should be interested: This home is on the edge of the urban area. Suburban street, but I felt I was out in the country. Lots of room in the home. Less than 5 minutes to freeway, though, and Mission Valley should only be 20-25 minutes, downtown roughly the same.
Selling Points: kitchen is in excellent shape and the patio area is nice also.
Why I think it's a potential bargain: Over four months on the market, and it's been vacant. There is a loft that really makes the place feel cramped, hampering it's appeal to buyers. It's more square footage, but I think the property would be much more attractive to buyers with it removed, which doesn't look to be difficult. There's also a storage shed which is frankly an eyesore.
Obvious caveats: Backyard is on the small side. One neighbor a couple doors down proved himself to me as the sort of neighbor you wouldn't want to have.
Why it hasn't sold already: Mostly because of the loft. It really makes the living room feel "closed in", but if it was removed, it'd be a beautifully airy place. The storage shed doesn't help, but the loft is the main reason.
IF put zero down and if you pay full asking price (which you won't), your payments (Principal & Interest) would be $3192 with a fully amortized loan (Assumptions: $412,000 1st at 5.75% 30 year amortization fixed for 5 years APR 5.975, 2nd mortgage $103,000 at 8.45% 30 year fixed amortization with a 15 year balloon APR 8.470, on approved credit, not all borrowers will qualify). Right now, I have the five years interest only on the first with the same APR and rate, payment $1974 which means the total loan payments would be $2762)
With a 20% down payment, even if you pay full asking price, payment drops to $2404. ($412,000 1st mortgage at 5.75% rate 30 year amortization fixed for 5 years, APR 5.975, no second. On approved credit, not all borrowers will qualify, and I also have the interest only option above)
If you keep it ten years and it averages only 5% annual average appreciation per year: It would be worth approximately $835,000. Your equity, using the zero down payment scenario described above, would be approximately $405,000. As opposed to a $2400 per month comparable current rental and investing the difference at 10% per year tax free, you would be approximately $255,000 ahead of the renter after the expenses of selling.
Fact you should be aware of: That loft is frightening away buyers, so if you don't remove it, be prepared to deal with people writing this sort of article when you go to sell.
Call me. Action Realty 619-449-0723, ask for Dan.
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