All Forum Posts by: Marcy Moyer

James,

My situation is different than yours, but I rent my apartment and own 4 rental properties, 3 in Santa Cruz and one in Maryland.  It sounds weird to many people but seriously, 1.5 million does not go far in the bay area. You can rent a really nice home for less than you can spend buying something that is equivalent. The savings can be used to buy another investment property that will give you at least neutral cash flow and you can still totally deduct the mortgage interest and state taxes on your investment properties instead of having those deductions limited in your single family home. You get the appreciation on your rental just like you would if you lived there, the one big draw back is that if you rent a home rather than an apartment the owner could end up selling at some point and disrupting your plans.

Naina,

If I understand this correctly you qualify for a 1.5 mil loan, and have 750K for a down payment for a total purchase price of 2.25 million dollar property. At the moment the market is appreciating so homes are selling 20% or more over list. This happens frequently at this time of year. By the summer most of the yearly appreciation has happened and it is easy to determine what a home will actually sell for which make home buying far easier. Not cheaper, just easier to deal with.

There is nothing on the horizon which leads me to believe we are in for a market correction in the immediate future. The change in interest write off from 1 mil down to 750K and the lack of deductibility of more than 10K in State and property taxes did not put a damper on the demand and tick up in home prices this year. As long as the tech companies are hiring the home prices are going to expensive.

So waiting for a drop in prices is not a great idea in my opinion.

You have several choices:

1. You can buy a home for 2.2 million or less. In Sunnyvale or Mountain View that will get you a 3 bedroom nice town home but a single family home west of central expressway is no longer an option. I am sure you saw the press about the 800 sq foot home that sold for 2 mil in the Cherry Chase neighborhood. The average price in West San Jose is currently 2.2 million so that is an option. You could afford a nice home in the west part of Santa Clara, including in the Cupertino School Distract area.

2. You can continue to rent and buy an investment property in the bay area in a place where you may not want to live. With your down payment you should be able to be cash flow neutral at a purchase price of about 1.75 mil to 2 mil. The advantage to that is that you would be able to take advantage of the still available deduction of of the full interest on the mortgage and the property taxes and the appreciation can be added to your equity when you do buy a home to live in. You would not fall behind in down payment with the appreciation that we historically have here.

3. You can buy an out of state investment. You would have better cash flow but not likely to get anywhere near the same appreciation. You will have to pay taxes on the cash flow that you do get.

4. You could buy a multifamily home and live in one of the units. There are few places in Silicon Valley where multi family homes are in neighborhoods that are as well kept as in single family home neighborhoods. These duplexes are often above 2.2 million.

5. You can buy a single family home and reserve 100-150K of your capital. Then you can convert an existing structure or add a new Accessory dwelling unit on the property which can be rented for additional cash.

All the choices have their pros and cons. Nothing is simple, but in the long run owning property is a great way to expand your wealth.

If you have none of your own money in the deal an investor would not need you as a partner. If you find a deal like this I imagine the best you can hope for is to find someone who wants the deal and give you some money as a referral, like a wholesale deal. Or you can get your real estate license and get a commission which makes the most sense to me. Then, when you have built up enough money to own your own you can have the whole deal.

Real estate agents do not have W-2 income and buy investment properties all the time. So do self employed contractors, self employed doctors, lawyers, etc.

As everyone says, it depends.

In high priced areas like the Silicon Valley it is often less expensive to rent your primary home than to buy it. I often suggest to my clients if they can not buy a home they want to live in they should instead buy a rental property that they do not want as a primary residence and take advantage of the appreciation, tax benefits, and long term wealth accumulation. 

Many tech companies are expanding into San Jose including Google, Facebook, Apple, and Samsung. the prices have jumped 20% since the Google announcement. The average price in San Jose is so far above what many people can afford that rentals are going to be strong for the foreseeable future. However, there is no cash flow without at least 40% down and I do not believe that will improve. I have a a stronger sense that prices will rise rather than CAP rate rising.

With that said I think that the south county, Morgan Hill and Gilroy, is a good place to invest now as it is much more affordable and rental vacancies still under 3%.

Fernando

There are no condos in Fremont, Union City, or Newark for sale, or that have sold this year in the 350K price range. There are currently 3 for sale in the east Bay under $350K. One is in Oakland, one in San Leandro, and one I forget. 3 have sold this year under 350K. One in San Leandro, one in Hayward, and one in Oakland. Have you ever thought about buying in a mobile home park? For $350,000 you could get a 3 bedroom in one of the cities where you are targeting and rent out 2 rooms so you may even be able to live for free. They are becoming more and more attractive for younger buyers who have limited budgets for this area.

Bill 

You should start by contacting the Real Estate Board: There is a recovery fund for consumers who have been damaged by Brokers. http://www.dre.ca.gov/consumers/consumerrecoveryaccount.html  One of the most common reasons for Brokers to get in trouble with the board is for this kind of thing. Sorry it happened to you. There are very strict rules for property management which obviously your broker did not follow. I don't know if they can help you with finding a lawyer but if not you can call the Bakersfield law association and get a referral from there if no one on this forum knows one in Bakersfield. Best of luck!

@Kamal Sharma. Probably the easiest way if you are going to keep the condo is to have a rental agreement with a tenant written up showing that you have at least neutral cash flow, if not positive from the rental income and then have lender who will count that income. Since the rules change all the time once you get closer to the time of buying the SFH you can look for a lender who will do the loan. SOFI is pretty liberal about what they consider income but only lend on owner occupied so if the home is for you to live in they might be a good choice for a lender, unless they change rules between now and then.

Kamal

Different lenders have different ways of valuing rental income. If your lender will not give you credit for your rental income there will be others who will. As far as the condo goes, the market is so wild right now, and the inventory so low in the bay area you can probably sell your condo now for a profit, despite the upcoming repairs. Buyers are overlooking all kinds of things just to get a home. If it is advantageous for you to sell the condo there will be a buyer.