Saturday, June 03, 2006

The Mills #524

The loft units at the Mills are quite possibly the most overpriced real estate in all of downtown San Diego. The Mills was built to be a rental community which was converted into condos at the end of the construction of the building so the quality just isn't there.

While this unit shows a loss of $46,840 the unit looks to be highly upgraded with pretty good looking wood floors and stainless appliances so the loss is probably close to $75,000.

Current Price: $549,000

Purchase Price: $562,900

Loss @6% Sales Expenses: $46,840

Purchase Date: 4/1/2005

MLS#: 066001168

Purchase Details: view

8 comments:

ronw said...

What about HOA fees?

I can see making a case for including them in the "loss" total. I can also see making a case for not doing so.

I think, if the condo is unoccupied, perhaps the HOA fee should be included.

Your thoughts?

Mr. Brightside said...

I'm trying to be conservative and just use a dollars in dollars out approach from sales prices on each end of the ownership cycle.

Clearly there are other expenses not to mention the hassle of owning real estate that are you aren't using or need to sell.

Farley said...

Great work!

ocrenter said...

Great blog, good job!!!

I think the HOA needs to be included, especially since it is costing $316/month!

Here's the description on this listing: "Seller wants this sold! Priced below market! Bring offers now!"

and here's the price reductions:
Price Reduced: 01/14/06 -- $599,000 to $589,600
Price Reduced: 06/02/06 -- $589,600 to $549,000

Anonymous said...

A few things you're forgetting...

They were able to deduct their interest payments while they owned the property.

If they didn't own during this period, they would have had to have been paying rent.

Even though losses suck, they do get to claim them on their taxes, so this will offset other income.

All in all, this owner came out ahead of a renter during the same time period.

Mr. Brightside said...

anon 4:50

There is no chance that buying was better than renting for this unit. The holding period is 14 months and the estimated loss if $75,000. The cost per month of $5,300 is way more than what renting would have cost.

And besides all that this unit is very unlikely to sell for the listing amount which makes the numbers even more negative.

To get the point of the blog I'm mainly looking at sales prices that are lower than what was paid in the past. I'm really not here to argue that real estate or San Diego is bad. I do think the real estate market here is overpriced and in trouble and I also love living in San Diego.

ronw said...

I agree with Mr. Brightside.

With my last kid is just leaving home, I'd like to live in a downtown highrise.

I currently rent a huge home in the suburbs for a fraction of what it would cost to buy a tiny 2 br condo at this time.


I take into accout:

- mortgage interest
- mortgage interest tax deduction
- hoa fees
- property taxes
- loss of interest on my down payment

Since I plan to stay put for decades, I don't count loan points, or other one-time fees.

But the main thing is that property values are already on their way down in San Diego. I figure we're about to see a housing price collapse of historic proportions.

I don't want to risk losing hundreds of thousands of dollars by purchasing now.

I have a nice, comfortable place in a familiar neighborhood in the meantime. I can afford to wait.

Anonymous said...

A few things you're forgetting...

They were able to deduct their interest payments while they owned the property.

If they didn't own during this period, they would have had to have been paying rent.


So you're assuming that this is the owner's primary residence, in which case:

Even though losses suck, they do get to claim them on their taxes, so this will offset other income.

is not true. You cannot deduct a loss on the sale of your primary residence.

All in all, this owner came out ahead of a renter during the same time period.

That's by no means certain. You have to take all costs involved, including commissions paid to realtor (6% of value), HOA fees, property tax, maintenance if any, mortgage interest (after tax deduction), and so on. Then compare that with whatever it would have cost to rent a similar place over the same time period.

If the difference is a positive number (i.e., owning cost more), which at these prices it certainly will have been, then unless the owner saw appreciation at least as great as the difference, he lost money compared with renting. Period.