Would you buy a crap-shack $1.3M in Lakewood Village 94089 right behind Plaza Del Rey mobile home park? Would tech expansion make houses in the area appreciate much more in the next 3-5 years?
could you rent it for $13,000/month?
No, Bay Area is very different so 1% rule doesn't apply. I can almost cover PITI which is very good for this area.
Hoping to hear more about appreciation aspect of this area
I agree, the 1% rule won’t help you in the Bay Area. The only word of caution is you are buying now when prices have run up close to 30% over the past 12 months and more than doubled over the last 5 years. I personally have my doubts if there will be much appreciation moving forward over the next 3 - 5 years. So run your numbers at 20% redux in value and rents and see if they still work for you. Basically make sure you have a good margin of safety.
Long term (10 - 20 years), your investment in this area is safe and will be worth more. How much?
Who knows. I bought my first in Sunnyvale in 2004 for 700k, little did I know it would be worth 600k in 2009 and 2m in 2018. As for mobile homes, mine was close to one but those homes have disappeared and new development has taken over.
Thanks Sam, what part of Sunnyvale did you buy? What replaced the mobile homes next to your house?
I'm aware of the crazy appreciation in the last few years. Fb, Google, Apple are moving into North Sunnyvale in 3 years. I'm banking on that for the appreciation but at the same time as you said concerned that it has run up so much, a downturn is bound to happen at some point first. When that happens, this area will get hit hard.
If i rent out all the rooms, I'd cover PITI. Rental demand seems good in that area nearby many tech companies. I have multiple interests from my make up ad on Craiglist.
My zip is 94086. It’s done well given proximity to downtown and the new Apple buildings. The mobile homes in the area have made way for new single family homes. The rental market is robust so pulling 5k on a 4br home is not out of the realm. Sunnyvale is booming.
Just know they are refreshing some condo development work in downtown which was on hold for 5 years because of legal issues. But not anymore. So supply is coming in as well. The downtown development project info is online, so check it out. It’s an interesting project.
Overall your fortunes will 100% be tied to the tech companies. Good news is all the biggies play in Sunnyvale. Apple, Google, Microsoft (via LinkedIn) and many others like Amazon, AMD, nVidia, PayPal, Cisco etc are in the vicinity.
If there is tech slowdown, it might dampen your returns but long term it’s very hard to bet against this area.
I think it’s best to run numbers assuming a drop in value and rents and see if you can still hit the PITI.