For those of you not in California, Manhattan, and perhaps Boston or Chicago, this post is going to sound completely absurd. There's a condo that my Fiancee and I took a look at this weekend. Now, it's way to small for her taste, but I'm intrigued by it. Here are the details:
Address: 181 S. Marengo Ave. Unit #12, Pasadena, CA 91101
Bedrooms: 0 (it's a studio condo), Bathrooms: 1
Square Feet: 312
List Price: $239,000
HOA: $113, includes water, gas and electric
You can find it easily on ziprealty.com if you have a login. Otherwise, you can find it on Realtor.com without having to register. Ziprealty.com has more info.
So, what on Earth can be intriguing about $766 per square foot? Not to sound like a Realtor(tm), but location, location, location. This condo is in a prime spot one block from the Paseo Colorado shopping center, and just a couple of blocks from Old Town Pasadena. You can walk to the shops, dining, and nightlife.
But how much is that all really worth? Well, let's break down some of the numbers.
At full asking price, $239,000, with a 20% down payment ($47,800), mortgage payements using a 30 year fixed rate loan at 5.75% would be $1,115. Add on the HOA and you're at $1,228. Property taxes are about $200/month, and what another $50 for insurance? Okay, so that makes your total monthly nut around $1,478. Yes, that's way too much. And, no, I would never consider paying $239,000 for it.
But then there this. It was listed on October 11, 2006 for $269,000. Two and a half weeks later, the price was reduced to $259,000. Another two and a half weeks, and another $10,000 reduction to $249,000. "We'll wait out the holiday season and see if we get any bites when the spring season comes." Well, with spring aroud the corner and no activity, our seller takes another $10,000 off on March 22, 2007 for the current price of $239,000.
I was thinking that an offer of around $199,000 would be a lowball, but not an insult. The problem is that a quick check with zillow.com tells us that the seller paid $206,000 on 11/7/05. This means that he would be very unlikely to entertain any offers under $219k or so, unless forced to do so.
Let's do some math at $199,000. All of a sudden our down payment is only $39,800, and the mortgage payment is $929. Although property taxes would be less, let's assume all other expenses are the same. Now you're at $1,292. When you consider that another studio unit in the same building is currently for rent with an asking price of $1,100 per month, it's almost even. Yes, I haven't taken the opportunity cost of the $39,800 into account. But include your interest deduction, assuming you are already itemizing, and you come out ahead to buy. That last statement is not an insignificant one. On a cash flow basis, you can come out ahead (almost) by buying over renting. That is an extreme rarity in California.
But that's based on 20% below the current asking price. So, in the real world, despite its phenomenal location, it's not a very good deal. On the other hand, if I were still single, I would strongly consider making an offer on this place.
Other photos:
It does look like it sold on 11/7/2005 for $206,000.
http://www.propertyshark.com/mason/california/Reports/showsection.html?propkey=16746835
Also, #16 sold for $185,000 on 11/7/2003 for 647sq ft. Different times though...
http://www.propertyshark.com/mason/california/Reports/showsection.html?propkey=16746839
Interestingly, very few of the 16 units have turned over in the last 10 years. People must be pretty happy with them!
Posted by: Tim Jansen | April 03, 2007 at 11:14 AM
Wow, propertyshark is cool. Thanks for introducing me to it.
Posted by: lamoneyguy | April 03, 2007 at 12:15 PM
I live in Boston so I don't think it's that expensive. I actually think an apartment like that can serve in the short term as a good residence and in the long term as great investment property. Location really is everything. Do you think you'll remain in the area?
I do think 199k would be lowball offer, I don't think the owner will respond to anything less than what he or she paid so they would be insulted. Most owners (and people dead set on buying because they thinks it's a great investment) are relunctant to admit times have changed.
Posted by: dong | April 03, 2007 at 05:12 PM
312 sq ft, I'd hope you are really close...
Posted by: Deborah | April 03, 2007 at 10:00 PM
312 sq ft, I'd hope you are really close...
Posted by: Deborah | April 03, 2007 at 10:01 PM
My god...$200K for a 312 sq foot "condo"....my bathroom is bigger than that.
Remind me again what is so great about living in Cali?
Posted by: Joey | April 04, 2007 at 05:50 AM
Having looked at a place in Bethesda, MD that was 290-ish sq feet for $190K with no private parking, I don't know that 312 is doable. I live in 500 sq ft with private parking and that seems just right. (And though not as nice of a place as Bethesda, cheaper, with less taxes.)
If I was single in LA/Pasadena, I think I'd consider it. I like Old Town Pasadena a lot and given how crazy expensive it is to buy anything out there. This might be a good starter home and eventual rental property. That was the plan with my wee studio, but since it's a bit bigger, I could see myself living a lean life and staying for a while, using my resources to live life rather than acquire possessions.
Posted by: mapgirl | April 04, 2007 at 10:46 AM
i live in california. that's a steal. jump on it ;)
Posted by: tanyetta | April 04, 2007 at 10:56 PM
Close to the Yard House and Lucky Baldwins and the Gold Line, as long as it had parking and if I was single and still living in CA, I'd make an offer. I agree that it's all about the location.
Posted by: MoneyFwd | April 05, 2007 at 07:12 AM
Make sure you find out the last time the HOA had a special assessment, and how beefy their reserves are. Otherwise a year after you buy it, you could get hit with $15k for a new roof or something similarly large. Or the HOA could have some emergency, and there's not enough in reserves.
Find out who the president of the HOA is and go buy them a cup of coffee for the scoop.
We just bought a condo a little farther east of this one (nr. Lake st., 1000 sq ft, 2 car private garage), and it was a steal for us because the roof and siding was all done in the last 7 years.
Posted by: Pas Girl | April 05, 2007 at 12:31 PM
Interesting comments. Thanks for that advice, Pas Girl, I hadn't thought of that. MoneyFwd, if I were single I think I would be offering on it. It doesn't have parking. You can get a monthly parking pass at Paseo Colorado (a block away) for $100.
Posted by: lamoneyguy | April 05, 2007 at 03:41 PM
Awesome deal. I lived in West LA renting a bachelor (studio without a kitchen) and paid $800/month no parking included. Got my car towed on the stupid LA street cleaning/work day. Sigh.
Not a bad deal and walking to downtown Pasadena is a prime location. Unbelievable.
When we bought in SD our mortgage was about the same as renting, so this is a good deal. Rents in LA are not cheap depending on location.
Posted by: LivingAlmostLarge | April 05, 2007 at 08:53 PM
I would hold off. Things are getting cheaper and cheaper and loan options are becoming more scarce. There will always be a desire to live in Southern California, but when you take away ability to buy, true demand(including ability) will fall. Especially since you won't be in a studio long term. Don't want to pay realtors fee (5%) to sell the place in a couple years.
Posted by: AlmostDebtFreeLA | April 10, 2007 at 01:46 PM