Potential Bargain Property July 8th 2006
General: El Cajon, 3 Bedroom 2 bath, asking price range $475,000 to $500,000.
Why you should be interested: Large 3 bedroom home close to everything - two right turns to freeway, 15 minutes to Mission Valley. Walk to shopping, but on a quiet street.
Selling Points: Nice solid home in area with some upscale.
Why I think it's a potential bargain: They've got some nice features, but the tenants leave clutter everywhere. It's hard to walk around the home, it's so cluttered. This is an emotional push away for buyers. Been on the market six months through a discount listing service. It's like every major push away for potential buyers going. Once the tenants are out, however, that's a different story. The appliances could use an update, but they're basically solid.
Obvious caveats: Outside, I could hear the freeway. Inside, I couldn't. I'd also say that the current owners are likely too greedy, but after it's been on the market this long, they may be ready to see reason.
Why it hasn't sold already: Because of the clutter and the fact that the discount listing service doesn't do anything for sellers. Just getting the tenants out would increase the value. It's also small for the area, and the asking price is too high given the comps. Also, since you can just barely hear freeway noise outside, that's a real push away for some folks.
IF you put zero down and if you pay full asking price (which you won't), your payments would be (Principal & Interest) would be $3031 with a fully amortized loan (Assumptions: $391,200 1st at 5.75% 30 year amortization fixed for 5 years APR 5.976, 2nd mortgage $97,800 at 8.45% 30 year fixed amortization with a 15 year balloon APR 8.471, on approved credit, not all borrowers will qualify).
With a 20% down payment, even if you pay full asking price, payment drops to $2251. ($391,200 1st mortgage at 5.625% rate 30 year amortization fixed for 5 years, APR 5.849, no second. On approved credit, not all borrowers will qualify)
If you keep it ten years and it averages only 5% annual average appreciation per year: It would be worth approximately $796,000. Your equity, using the zero down payment scenario described above, would be approximately $385,000. As opposed to a $2200 per month current rental and investing the difference at 10% per year tax free, you would be approximately $220,000 ahead of the renter after the expenses of selling.
Fact you should be aware of: The reason it's a bargain is because most people will see only the clutter. This is an area with some upscale, and this is one of the smallest most basic homes in the area, so there is potential for improvements to be worthwhile.
Call me. Action Realty 619-449-0723, ask for Dan.
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