Owner Occupancy Rates for Condos (San Diego, Vista: foreclosures, leasing, HOA fees)

[snpdragr]

My wife and I have been looking at condos in downtown san diego and noticed that many buildings have low owner occupancy rates. Found some ranging anywhere from 30-70%, many hovering around the 50% mark. Obviously we'd prefer building with higher rates, but at what point would a low owner occ. rate start to be a concern? Would you try to avoid buildings with less than 50%? I'm not sure what to realistically expect (or what is normal) for a downtown environment like san diego as previously we lived in a SFH in san jose.

This is for a condo that we would live in and we don't have any intention of renting it out. I know there are lending requirements that kick in at 50% but we'll probably pay cash. Is there anything else we should know about the downtown area that a newcomer might be aware (we know about the charger's stadium issues and homeless problem)?

Thanks

[hkbruin]

hi snpdragr,

Few questions.
Sounds like you may be considering putting less than 20% down? If not, the loan restriction won't matter.
Secondly, are you with an agent? Where are you getting this info? Or are you dealing with hoa directly, somehow. Often, that can be tricky. And also, what are you being told? A good agent should be giving you this basic info. (Mostly it revolves around the fact that the industry isn't working off guesses. The lenders have done their research and 51% is a good barrier for what amounts to a safer bet versus not. Obviously this is subjective, but it's not like this isn't backchecked (and a good agent should advise you on this or at least point you in some direction).
What sort of complex are you looking for? Obviously higher pricepoints/condos are less risky for homeowners if the people are keeping the building in better shape.

What's your pricepoint, btw?

[snpdragr]

I probably could have been clearer in my initial post. Here are my three concerns with low owner occupancy rates: (1) Impact on the culture of building residents. My thought is that renters will not be as careful or considerate as owners. Maybe this is an incorrect assumption in a market where rents are over $2k/month. (2) Impact on HOA voting. For example, as an owner/resident, I would probably be fine with raising the HOA fees to build up reserves. However as an investor, I wouldn't want that due to reducing cash flow and potentially lowering market value. (3) Impact on HOA financial health during a downturn. Owners will be less likely to let a primary residence default as opposed to an investment property.

We would be paying cash for the entire purchase amount. So lending considerations only indirectly affect us (through who can buy in the building). We are looking at 1/1 units around 400k.

I am getting this information from a variety of sources but generally either verbally from the listing agent or from an agent's website. Here are some examples: Icon - 51%, La Vita - 58%, Acqua Vista - 40% (building not under consideration), Metrome - 34%.

I guess i'm just looking for feedback on how others have factored in the owner occupancy rate when making a purchase for a primary residence. Did you eliminate any buildings because the rate was too low? did you buy into a complex with a low o.o. rate and had a good/bad experience.

[hkbruin]

So this is your primary residence I'm assuming?
OO rate matters less and less at the higher leasing rates, imo, but generally, owners will still keep better environment for the complex than leasers. My brother, for example, is head of HOA in his complex and it's all owner occupied, if i'm not mistaken. But he is also on top of his job. He took over for a less-committed HOA leader. So the diligence of HOA matters, and unless you do some investigation work, it's hard to know. But always consider OO but equally important is appreciation potential and where the market is going (for me at least). Like East Village is a much better buyer's bet than Little Italy right now.

Are you moving to SD? Are you okay with the HOA at 500? That's a bigger question. For San Diego property, OO matters less because in your situation, because a) We have so little inventory and b) You're discussing a rising area. there are better areas, I'd say for IP, but that's another matter.

[oddstray]

We bought our condo around the time of the 'fall of the wall' recession. They had wanted to go with 60% OO. But quickly realized they'd only wind up getting stuck with a bunch of foreclosures. So, no OO limits. I don't notice any particular difference between owners and renters. But, we're in a bedroom suburb, so we're less likely to get inconsiderate youngsters who haven't learned condo etiquette.

[1AngryTaxPayer]

I too would be concerned if it was mostly renters. Granted, it's not cheap living there but just because someone's Daddy shelled out the rent doesn't mean they aren't going to be lousy neighbors and loud.

[snpdragr]

hkbruin -- yes this is for our primary residence. A strong, well run HOA is important to us and we're definitely planning on doing our due diligence here. We're considering appreciation potential but it's only a secondary factor as we're mainly looking for a place to live and we don't intend on trading up later. Ideally we'd like to be in Little Italy but I think we're more likely to end up in East Village.

We're already living in san diego -- currently renting in north park. We've been here for about 6 months and have spent quite a bit of time checking out the various communities. The lack of inventory sucks but we're used to that having moved from san jose.


Oddstray/1AngryTaxPayer -- it seems like in the price range we are looking at, buildings seem to top out at about 70% owner occupied. I'm guessing this is probably the best we can hope for in downtown. A few buildings seem to have a less than stellar reputation - we'll definitely avoid those.