Blah, blah, blah. That's all I hear when the National Association of Realtors ads come on the radio. They talk about the generalities of high selection, low lending rates, and my favorite euphemism: “favorable prices.” The fact is, every person and every market is different – very different – and you need specifics, not generalities. So we searched our local market, right here in Orange County, and asked ourselves: “What's the best opportunity out there, and is it something worth getting excited about?”

Something Spectacular
Not only did we find a great opportunity, we discovered something spectacular. Under some scenarios, it is now cheaper to own then to rent. I'm going to repeat it because I think it's that big of a deal:

Does this apply to all properties: no. Does it apply to very many properties: no. Have we found which properties it does apply to: YES. We have discovered that many one bedroom condos, in good complexes with close proximity to employment centers now make more financial sense than renting.

The Numbers
We understand you're a bit skeptical (you should be, it's a pretty heady claim). Just to be clear, this is for a $0 down payment buyer. In the complex of our sample property, market rent is $1250/mo.

There it is, nearly $100 less per month. And by the way, this doesn't even account for any future appreciation that may occur. If you want the full skinny, download it here.

The Upside
Predicting market movements is not only difficult, some say it's impossible. But that doesn't mean you can't analyze potential risks, rewards, and volatility. Historically, one bedroom condos are the tech stocks of real estate. When times are good they zoom for the skies; when times are bad they head straight for the basement. The median home price in Orange County has slid over 10%. But you'll find higher-end, more established areas have experienced less of a loss. Conversely, one bedroom condos have slipped (crashed?) a bit more: around 30% over the last year in some complexes. The upside is a great opportunity. Which property value has more room to grow, the one that has slipped 5-10% off its peak, or the one which has fallen around 30%?

The Downside
As with any opportunity, it's important to analyze the risks. Despite best laid plans, you may very well find yourself needing to move. Family requirements, a job change, it can come out of nowhere. And the market may not be hospitable to a sale. Here's what you're looking at, cashflow-wise, if you must rent it out. Your basic cashflow will be negative by about $244/mo. However, there are some tax benefits you may be able to claim. Our estimate of after-tax cashflow is only negative by about $91/mo.

This Isn't for Everyone (so who is it for?)
This isn't the right opportunity for everyone, but it's a great opportunity for many. If you feel unstable in your job, the best homeownership opportunity in the world could be a recipe for disaster. If you are very particular and simply “must” live in a certain type of place, this may not be the opportunity for you. However, if you are able to possess a little flexibility, and meet some financial qualifications, this could be the best opportunity for first-time homebuyers like you in many years. Here are some financial requirements:

• Credit - Perfect credit is not required, but you should not have any outstanding collections, chargeoffs, or judgments.
• Income - You don't need to have a six-figure job to become a homeowner in Orange County. Someone with minimal consumer debt needs to make at least $45,000 per year.
• Assets - You should have access to at least $4000 for closing costs and approximately $3600 in payment reserves (can be retirement funds). Gifts from immediate family are acceptable.

Conclusion
This is one of the most favorable opportunities for first-time homebuyers in years. We are seeing a lot of recent activity on investors from these properties since the numbers look so good (they make great rentals) so this opportunity may not last very long. We haven't been this excited about a market opportunity in a long-time. As usual, everyone's situation is different and we do pride ourselves on helping clients individually. If you have any questions at all, don't be afraid to contact us.

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