Saturday, July 01, 2006

Anatomy of an "Investment" - La Vita #1802

Speculators have not left the San Diego real estate market.

La Vita is a 23 story condo building in downtown's Little Italy neighborhood.

Unit #1802 was for sale for several months and finally went into and closed escrow at $725,000 this June.

This unit has hit the rental market for a whopping $3000 per month. Even if this investor gets this amount of money the negative cash flow is frankly stunning given what the market is doing. Note that water view La Vita two bedroom units are actually renting more in the $2300-2500 range so this over-priced rental will likley lag on the market for some time before finding a tenant.

Assuming a cost of funds of 6%, $400 HOA and standard taxes that monthly carrying cost of this unit is over $4000 resulting in a solid $1,000 negative cash flow. All this in a declining market.

Note that La Vita #2003 same floor plan, sold at the high in the market for $810,000.

Rental Listing:

http://sandiego.craigslist.org/apa/176430165.html
OR
http://www.tonytannouri.com/lavita

Finally the rental listing and the now expired for sale listing both talked about "permanent bay views", this is quite debatable as there is no known reason why the property in front of this unit cannot be developed. If you have any information pro or con to this effect by all means post a reply. I'd love to know the facts.

7 comments:

Anonymous said...

Oh, that $1,000/mo negative cash flow (NCF) is nothing in comparison to what the "investor" who owns my home is getting. I'm long-term renting a wonderful home in La Jolla Shores that would honestly sell today for about $2.5m for $4k/mo. Using today's ~7% cost of funds plus 1.25% taxes plus yard maintenance plus ... this house is really costing him almost $20k/mo to own. So he's subsidizing my living here to the tune of at least $15k/mo NCF. Sweet!

Anonymous said...

Seems they rented this La Vita unit yesterday, so at least it wasn't vacant for long. Still negative monthly, but not as bad a picture as previously thought.

Mr. Brightside said...

What makes you think they rented it?

Anonymous said...

A friend has access to the mls, it shows being rented as of 7/10. Or at least, it appears that they found someone and they are awaiting approval.

citydude said...

I believe there is a height restriction in Little Italy. The building in front of La Vita is the Keller Williams building, which doesn't appear to be going anywhere anytime soon, particularly not with the gloomy real estate environment in dw. And the building in front of that is Village Walk, which was built in 2001 or 2002.

Mr. Brightside said...

To my knowledge there is a restriction on India Street, the Keller Williams building is part airport noise zone but that only seems to drive height closer to the airport and also requires more sound proofing.

I'd really enjoy hearing from someone who knows exactly what the rules are.

That said whatever the rules are they can change so unless you have a view that's got natural protection you should accept that you could lose the view.

Anonymous said...

Fantastic blog BTW. Just had to comment on this b/c I know the owners. Possibly you might think the investment wasn't so crazy if they made a 3% commission on the sale, a 15K closing cost credit and a significant commission on the loan after putting a large down payment using 1031 exchange money. Unit was rented at $3000/mo for more than a year, then buyers moved in. As far as the bay views -they said an employee at the Centre City Development Corporation gave them the inside scoop.

"And now you know... the rest of the story." Hope that helps.

Was it really on the market for months? It was only a few days on the MLS, I saw. Oh well. Ciao all!