All Forum Posts by: Dan Garrigus

Nice to finally be introducing myself to the BP community since becoming a member earlier this year. I joined BP after hearing about how much value is exchanged between it's members and wanted to be part of it. I've always had an interest in real estate but never realized it until my wife and I sold our house in Connecticut before moving to San Diego. Since moving to SD, I've been active in real estate since day 1. I started out as an agent and then decided to switch over to the dark side and become a Mortgage Advisor with my preferred lender @KennySimpson with The Simpson Team at C2 Financial. NMLS 2152469 DRE 02103914. I am here to answer any questions and help anyone looking for financing for their primary or investment 1-4 unit property purchases here in CA and FL. The team can also assist with 5+ unit commercial properties. 

Thanks for taking the time to read and I'm always here to help!

Quote from @Dan H.:

Quote from @Dan Garrigus:

Quote from @Dan H.:

Quote from @Kenny Simpson:

All 1 to 4 unit Active listings, including condo when you look at the data from the last 10 years are down 60% from the norm.  In San Diego active listings in a normal market are about 10 to 12K, currently today we are about 5K and that will drop off when the slower winter months approach.  When you top that with higher interest rates, less buyer demand and sellers have to sell for a reason this is creating opportunity for buyers.  We are seeing our buyers pay $100K less plus seller credits on on $1MM properties.  We ran the scenario that even with higher rates and paying a $100K + less your payment is very close and with a refinance in the future you will be winning.

What are you guys seeing out there with sellers and buyers?  

$1m, 90% LTV, 3%, 30yr is ~$3.8k

$900k, 90% LTV, 6%, 30 year is ~$4.85

To me that is a very significant difference and definitely not “very close” to the same.  It would have to be priced at just above $700k to have same P&I Payment   

 Hi Dan,

Kenny and I ran a scenario based on actual numbers this morning with 2 very comparable properties that were sold in Del Cerro to come up with this determination. See below for the scenario.

Property A: SFR Del Cerro, 3/2, 1975sqft, DOM 3, Listed for $1.099MM and Sold on 5/13/2022 for $1.2MM. At 80% LTV and Rate at 4.750%, PITI is $6,407/mo. **Note buyer paid over $100K over list.

Property B: SFR Del Cerro, 4/2, 1995sqft, DOM 7, Listed for $1.1MM and Sold on 10/21/2022 for $956K. At 80% LTV and Rate at 6.375%. PITI is $5,891/mo **Note buyer paid $144K under list.

We're not saying every scenario will play out like this. However, it certainly is happening out there today and all in mortgage payments are beginning to level off with buyer demand diminishing due to the higher rates. As I'm sure you're very aware there is more than just the rate that goes into a mortgage payment. Taxes on the property will be a factor on the overall mortgage payment. In this example alone we are seeing an estimated $255 less/month for Property B at a purchase price of $956K.

Always here to answer any questions.

The difference in the price of those 2 properties is over $200k (in your initial post you indicated $100k). The interest rate on property A (4.75%) is significantly higher than the recent low interest rate that was below 3% for Owner Occupied SFH.

My prices match what you initially indicated and was not as low an interest rate as could have been achieved with ideal timing and probably did not use as high an interest as the current rates.  My numbers are therefore conservative in showing that your scenario does not depict near the same payment.  Using the interest rates I used (3% for the low (the low was really below 3%), 6% for current (likely optimistic)) the new property would need to be just above $700k to have similar payment to a $1m property purchased 10 months ago.  

You are correct they may be able to refi into better terms, but I would not rely on this and I do not think the interest rate is falling significantly any time soon.  

In the original post from Kenny, the scenario that he had referenced noted that there was a $100K+ less in purchase price currently for a similar property. If we were to base these numbers off the bottom we would need to go back to 2021 in order to use a 3% or less mortgage rate. This post was to enlighten buyers that were saying they would wait to buy until housing prices came down. Now that prices have come down a bit with less buyer demand, the current issue becomes rate for buyers. The solution to this is issue would be to evaluate the overall monthly payment to see if it's affordable and makes sense to the buyer(s). 

In this scenario, we used real pricing and sold values for each time period to come to our conclusion. What wasn't stated was the dollars saved on the closing costs and lifetime dollars needed to own based on PITI. Buying the similar property would cost the buyer of Property B at least $49K less in down payment funds. I say at least because we do not know if Property A's appraised at value or if the buyer needed to come in with additional funds to close because of a low appraisal. Even though interest rates are higher today, the buyer for Property B would spend less per month and $85K less PITI over the life of the loan. To take this one step further any qualified buyer at today's rates can negotiate a 2/1 buydown into the deal saving even more money monthly making now an even more affordable than back in May 2022.

Dan, I don't want you to think I'm going tit for tat with you, I mean we share the same first name so you must be a good dude. These figures and scenarios are all data driven with very real buying scenarios. Will this play out for every home purchase, of course not, that would be very unrealistic to assume. 

Quote from @Dan H.:

Quote from @Kenny Simpson:

All 1 to 4 unit Active listings, including condo when you look at the data from the last 10 years are down 60% from the norm.  In San Diego active listings in a normal market are about 10 to 12K, currently today we are about 5K and that will drop off when the slower winter months approach.  When you top that with higher interest rates, less buyer demand and sellers have to sell for a reason this is creating opportunity for buyers.  We are seeing our buyers pay $100K less plus seller credits on on $1MM properties.  We ran the scenario that even with higher rates and paying a $100K + less your payment is very close and with a refinance in the future you will be winning.

What are you guys seeing out there with sellers and buyers?  

$1m, 90% LTV, 3%, 30yr is ~$3.8k

$900k, 90% LTV, 6%, 30 year is ~$4.85

To me that is a very significant difference and definitely not “very close” to the same.  It would have to be priced at just above $700k to have same P&I Payment   

 Hi Dan,

Kenny and I ran a scenario based on actual numbers this morning with 2 very comparable properties that were sold in Del Cerro to come up with this determination. See below for the scenario.

Property A: SFR Del Cerro, 3/2, 1975sqft, DOM 3, Listed for $1.099MM and Sold on 5/13/2022 for $1.2MM. At 80% LTV and Rate at 4.750%, PITI is $6,407/mo. **Note buyer paid over $100K over list.

Property B: SFR Del Cerro, 4/2, 1995sqft, DOM 7, Listed for $1.1MM and Sold on 10/21/2022 for $956K. At 80% LTV and Rate at 6.375%. PITI is $5,891/mo **Note buyer paid $144K under list.

We're not saying every scenario will play out like this. However, it certainly is happening out there today and all in mortgage payments are beginning to level off with buyer demand diminishing due to the higher rates. As I'm sure you're very aware there is more than just the rate that goes into a mortgage payment. Taxes on the property will be a factor on the overall mortgage payment. In this example alone we are seeing an estimated $255 less/month for Property B at a purchase price of $956K.

Always here to answer any questions.

Hi Jake! Awesome to hear that you bought your first home in 2020 and are ready to get in the game. One that I have been to is Meet Up SD Opportunity Knocks on Rosecrans. My team leader Kenny Simpson at The Simpson Team and his wife Krystle with Pacific Shore Capital have presented there as well pertaining to purchasing investment properties and how they finance their properties. Great group of people and lasting relationship can be made there.