Potential Bargain Home July 13th 2006

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General: San Diego, 4 Bedroom 2 bath, asking price range in range of $500,000 to $525,000.

Why you should be interested: This is a FOUR bedroom home in an excellent neighborhood, priced to move. I previewed a roughly comparable property priced $100,000 higher. Suburban street, about 5 minutes to the freeway. Downtown, Mission Valley, and Sorrento Valley are all straight shots taking well under half an hour.

Selling Points: Place is well taken care of. Garage has finished indoor walls.

Why I think it's a potential bargain: Over three months on the market, and the owners want to do a 1031 exchange. Not only is it priced to move, they've got to be hearing the footsteps of the tax man. There are a few cosmetic things that would make the property more attractive, but the property is basically solid. The area has quite a few upscale properties, so improvements have the potential to be worthwhile.

Obvious caveats: Usable backyard is perhaps a little small due to an embankment. Master bedroom is a later addition, and does not have a private bathroom. Patio has crack, but I think it's a later pour, not connected to foundation. Building inspector needed to confirm this.

Why it hasn't sold already: Good question. Perhaps because it feels smaller than it is; there's an obvious alteration that would make it feel larger. There has been a major price reduction; I'd move fast if I were you.

IF put zero down and if you pay full asking price (which you won't), your payments (Principal & Interest) would be $3174 with a fully amortized loan (Assumptions: $409,600 1st at 5.75% 30 year amortization fixed for 5 years APR 5.976, 2nd mortgage $102,400 at 8.45% 30 year fixed amortization with a 15 year balloon APR 8.470, on approved credit, not all borrowers will qualify).

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 $830,000. Your equity, using the zero down payment scenario described above, would be approximately $400,000. As opposed to a $2100 per month comparable current rental and investing the difference at 10% per year tax free, you would be approximately $185,000 ahead of the renter, after the expenses of selling.

Fact you should be aware of: You do want a building inspector to confirm that patio crack doesn't affect the foundation.

Call me. Action Realty 619-449-0723, ask for Dan.

(I probably won't have another one of these until Monday)

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This page contains a single entry by Dan Melson published on July 13, 2006 1:01 PM.

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