Help Me Anylayze This Deal

[Scott Katz]

Interested to hear thoughts on this deal on a 1bd/1.5ba 930 sq ft Spanish colonial condo in sunny Santa Barbara listed for 658k.  Located one block from the hospital, one block to State Street and ten blocks to the hub of the city.  Unit is architect designed, freestanding, and appears as a neighborhood home.  At 650k it’s near the bottom of the market.  One car garage and parking on the street.  This unit is in the hotel zoning district and can be leased short term.  No shorter than 7 day leases per association restriction.  Monthly rent is currently 2,300.  Rental occupancy in the city is 99.5% and rents are steadily increasing.

I have a 625k 30 yr VA loan @ 4.25% with zero down and zero funding fee.

I am selling a rental property with 300k equity which I will put toward the new property via 1031exchange and restructure the loan @ 4% either before or shortly after the deal closes. Fees for a VA streamline refinance are minimal. A refinance also removes the requirement of the unit to be owner occupied.

I will receive 2,610 per month in housing stipend while attending school for 32 months and staying in this unit.  This will equate to 83k in “free” housing stipend.

When I vacate I will lease long or short term.  

Purchase price 640k

Balance to finance 340k @4% 15yr

Taxes 6k yr

Insurance 1250 yr

HOA 290 month

Monthly payment on 15 yr note approx 3,241

Anticipated rental income 2,500/ month.  As a furnished short term rental possibly more. 

Property has potential for appreciation as the block it is on has larger condos at 1.5mil and small fixer houses for 1 mil. CA has plateaued.  Hard to know future direction.  Silicon Beach could take off and prices skyrocket or prices could pull back.  

Will occupy for at least the first three years.  Afterward, rent and pay it off and use part or full time, or possibly trade up.  Plan would be to pay it off in five years.

With the stipend money it seems like a decent deal to get myself into some nice weather.

Good idea?  Bad idea?

Thanks for reading, I’ll be interested to hear your thoughts.

Scott