Bad timing in Santa Cruz: Builder, lender, tenants hurt after p...

gdp wrote:

"Would the rent payments cover the cost of the loan payments? If not, then the rent is too low and the tenants got a sweet deal. At least until their lease runs out."
I really disagree with this. The rental market is driven by prevailing wages and local employment. If people purchase houses to use as rentals, they should take this into account, and shouldn't bid so high if there is a shortage of high income renters. Secondly, the owner gets to keep the value of the house after it is paid off. It is irrational for renters to rent if a mortgage+insurance-tax deductions is the same or cheaper.

Thoughtful comment. I have a different take on it though. You are right, the rental market is largely driven by prevailing wages. But rents and wages are not in lockstep. Some areas like Santa Cruz will demand a higher portion renters' wages due to the tight supply and high demand.

There are always some high wage earners that choose to rent. I don't know how big a portion of renters that represents here, but I can imagine a mobile population of newly minted high-tech workers who might be able to afford the higher rents.

As for not paying too high a price for a house that you plan to rent out, you are correct, but not exactly. It's the size of the loan that is the most important aspect here. Rental property investments usually don't pencil out unless a hefty amount of equity is put in the deal by the buyer to reduce the loan size. Insurance and taxes play a role as you noted, but the dominating factor is the size of the loan.

You are absolutely right when you say it is silly to rent if you could buy the same property for the same monthly payment or less. It usually comes down to how much money you can put in for the down payment. The landlord may have to put in a couple of million bucks of his own money to be able to buy the property with payments that can be covered by rent. The renters may not have that much cash to put in yet.

It used to be the case where investors would buy a rental property and expect to loose money on it every year, counting on a big increase in value when the property is resold. I think that time might be over. I don't think it is reasonable to expect to loose money on a property and continue to hold it until it is paid off.

These arguments probably don't represent what is going on with this property. I'll bet that the owners got big loans to build these four condos and expected to sell them quickly at a good profit. I'm sure they never intended to rent them out. Whenever they started this project, that seemed reasonable, even common. But the bottom fell out and they couldn't find buyers. They needed some income so they rented the condos out for whatever they could get.

I don't know anything about them or the property other than what was in the paper, but I'll bet that's what happened.

Frankly I'm truly sorry for the owners, the renters, and the subcontractors. The bank, not so much

Does it match up with the % of the population that is the majority in Watsonville? Shocking! I'll bet in other towns you'll that the largest ethnic group of choice had the highest default rates. If you want to be a racist, then by all means just be a racist, but don't try to be a smart guy, it doesn't suit you.

Duh wrote:

<quoted text>
Go ask your local realtor to tell you what ethnic group has the highest number of short sales, defaults and bankruptcy sales in Watsonville! Then ask him to tell you which mortgage companies are listed!

what a stupid idea building on this city was and always will be, this is a small poor surfer town that came from a small poor fishing town...you all want to act to big city and it always fails, always.

Greed Greed Greed!!!

local wrote:

what a stupid idea building on this city was and always will be, this is a small poor surfer town that came from a small poor fishing town...you all want to act to big city and it always fails, always.

There are lots of really rich people who made a ton of money building in this town. Wavecrest, Brooks Properties, and Swenson come to mind. Good for them!

wildman wrote:

The goverment wanted everyone to be able to own a home. Therefore the government let banks know it is OK to loan 100% of the value. This of course created huge demand for housing and thereby drove up the prices. Now that prices are more afforadable there's no money to buy them.

Now that prices are more affordable ? What planet are you from ? Prices for real estate in Santa Cruz county haven't been affordable since the mid 1980's before the silicon valley epidemic . Your crazy if you think a median price for a two bed one bath house should be 675,000 !!!!!!!!!!

Duh wrote:

<quoted text>
Go ask your local realtor to tell you what ethnic group has the highest number of short sales, defaults and bankruptcy sales in Watsonville! Then ask him to tell you which mortgage companies are listed!

Hoping you stay in Palmdale . The kind of mentality you have just plain isnt needed here in Santa Cruz . prejudice

Duh wrote:
<quoted text>
Go ask your local realtor to tell you what ethnic group has the highest number of short sales, defaults and bankruptcy sales in Watsonville! Then ask him to tell you which mortgage companies are listed!

turdblossom wrote:

Does it match up with the % of the population that is the majority in Watsonville? Shocking! I'll bet in other towns you'll that the largest ethnic group of choice had the highest default rates. If you want to be a racist, then by all means just be a racist, but don't try to be a smart guy, it doesn't suit you.
<quoted text>

Good call on this comment , Rasict and predgudice fool that he or she is ! At least their name fits properly ,<<Uh Duh>> as in , Does'nt know diddly crud about real life .

Corralitos Resident wrote:

<quoted text>
This attitude is why you'll always be poor.
Santa Cruz was never really very poor, at least not compared to most of the state.
And the fishermen mostly moved into restaurants and did quite well. And after the campus opened, a lot of professors and a lot of good student rentals.
Then, in the 1970s, there began waves of "over the hill" drivers from the nascent Silicon Valley. I was one of them, arriving in Santa Cruz as a resident in 1982.(I had been here many times prior.)
Three houses later, and with investments, I am lording it over you skanks and bums who whimper about "capitalism."
Bow down to our landlord!

Alpha particles?

Corralitos Resident wrote:

<quoted text>
This attitude is why you'll always be poor.
Santa Cruz was never really very poor, at least not compared to most of the state.
And the fishermen mostly moved into restaurants and did quite well. And after the campus opened, a lot of professors and a lot of good student rentals.
Then, in the 1970s, there began waves of "over the hill" drivers from the nascent Silicon Valley. I was one of them, arriving in Santa Cruz as a resident in 1982.(I had been here many times prior.)
Three houses later, and with investments, I am lording it over you skanks and bums who whimper about "capitalism."
Bow down to our landlord!

__________

Thank you for describing yourself to all of us simpletons ,,, We actually have a couple of better and much shorter way to describe people like you ,,,,,

Tourist trash
Silicon valley "A" holes
Yuppie scum

Hope that helps ya next time your putting the locals down and reciting your own perspective of what Santa Cruz was like before you even knew where it was or lived here !