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I am frequently asked by San Jose real estate investors, both veteran and new, what is best for San Jose rental investments, multi- family homes, single family homes, or condos.

My first answer has been the same for decades: “Are you most concerned with appreciation or cash flow?”

The answer to this question depends on a variety of individual goals. What has changed over the years is what is best for cash flow.

Historically San Jose rental property appreciation has been best in this order:

1.      Single family home
2.      Condo
3.      Multi family home

Historically San Jose rental property cash flow has been best in this order

1.      Multi family home
2.      Condo
3.      Single family home

This long held wisdom that a multi- family home is the best San Jose rental for cash flow is being disrupted by the latest market forces. Right now, CAP rates are better on newer condos than older multi- family homes, and are much easier to take care of.

The CAP rate on a San Jose rental property is a measure of cash flow. To figure it out you take the income minus expenses (assuming no loan) and see what percentage of the price of the property the expenses are. 4% is on the high end of what you can expect in this market, and many investments are in the 2% range for single family homes and 3% for multi family homes.

Let’s take a sale of a duplex in Japan town as an example of a San Jose multi- family sale in 2016.

Sales price was $1,000,000

Expenses including property tax, utilities, garbage, repairs, insurance total $15,200

Income is $43,200

Cash flow:  $43,200-15,200 is $28,000

Cap rate is the what percentage of $1,000,000 is 28000 or 2.8%

At this time duplexes are not covered by rent control, but that may happen in the future,

This duplex, like many of the homes in downtown San Jose, is very old. This one was built in 1930. While charming, they need a lot of repair and in many years repairs will be over $2000 a year which was this years estimate.

Now take that same $1,000,000 and apply it to two studio condos in a beautiful downtown San Jose building called Axis. I have a client who does own 2 studio condos at Axis that are rentals so these are real numbers.

Market value: $500,000 each $1,000,000 for both

Expenses including HOA, HO6 insurance, property tax and repairs is $24,000 for both

Income: $

Cash Flow: 57200- $24,000 = $33,200

Cap rate: 3.3%

In this case this new building needed very few repairs, there will never be rent control per California state law, and the HOA covers most of the insurance, water and garbage, and the repairs of the common area.

Here is another example of a clients cash flow at The Brickyard, a less expensive building than Axis San Jose, but a great downtown San Jose rental with the best HOA management company I have ever experieinced.

2 condos worth $370,000 each or $740,000

Expenses including property tax, HOA, HO6 insurance, repairs $19,400

Income: $48000

Cash flow: 3.9 % 

Things to watch out for as the building ages is making sure there is enough in the building reserve fund to cover expenses as the building ages.

When the reserves are healthy the future looks brighter for the condos because:

1.      There is no fear of rent control
2.      There will be no needed foundation repairs, earthquake upgrades, termite issues etc for the individual San Jose rental investor to deal with in the future as the building is new and the HOA covers these issues.

Of course every case of San Jose rental properties is different, but if you are thinking about buying a San Jose rental property a condo can be a great investment for cash flow, not just appreciation.

If you have any questions about buying a rental property in San Jose please feel free to contact me.

Marcy Moyer

Keller Williams Realty

Specializing in Probate and Trust Sales

650-619-9285

marcy@marcymoyer.com

www.marcymoyer.com

Finding that Elusive Starter Home

The past few years have brought several changes in the real estate industry. The housing bust of 2006-08 led many people to either sell or walk away from their home. As the market is continuing to rebound, many investors have scooped up homes at affordable prices and are offering them as rental properties. In addition, other investors have bought homes at discounted prices with the sole intention of selling them at near-full value for a profit. So the question remains; how does a first time homebuyer find an affordable starter home?

Consider a Different Location

Too many times a young person or couple will buy a home in hopes of expanding their family. That leads to choosing a home that is convenient to good schools, nearby shopping and plenty of entertainment activities. However, for people that may be a few years away from starting a family, the location should be different. Buying a home within the city limits, for example, where the owners can be extremely close to work, could be a better fit.

Consider an Older Property

Younger people often get caught up in the dream of buying a new home and settling in with the smell of fresh paint and recently rolled carpet. However, new homes usually have a much higher price than older homes.

While it is true that an older home may either need a bit of repair before purchase or more maintenance compared to a newer home, the savings in purchase price can often offset the repairs and maintenance expense. In addition, young ambitious people may be able to tackle some, or all, of the maintenance and repairs on their own which can save them more money in the long run.

Tone Down Expectations

A starter home is simply a way for most people to get experience with the entire home buying process. This means that potential buyers should look at the home as a learning experience. Most individuals can get by with far fewer amenities than what they are accustomed to. Or, instead of giving up nice amenities, it is possible to buy a much smaller home and save up for a bigger home in the future.

Have Financing in Order

Since there seems to be a bit of competition for starter homes it is wise to have the financing in place before looking for a home. Putting an offer on a home with a firm pre-approval letter from a local mortgage lender will make the whole process smoother and give you a better chance of getting your offer accepted.

It may take some time, but with a little patience and realistic expectations a qualified borrower can find that starter home that will set them on the path to achieving their financial dreams.

↓↓Start your home search today!↓↓

[Janesville Area]

http://www.JanesvilleRealtor.com

[Madison Area]

http://www.MadisonWIForSale.com

How to properly evaluate a potential investment property

Life is full of sayings that seem contradictory at first.  Expressions like “a chain is only as strong as its weakest link” and a “team is only as good as its worst player” seem to make no sense until they have been analyzed and understood.  In flipping homes, you make your money when you buy.  Quite simply, if you buy a home at the proper discount then you have a much better chance of selling at a profit.  Here is a general outline to help you evaluate a potential home for investment.

First, Take a Casual Drive

It is a good idea to only consider homes that you can actually inspect.  Being able to drive by the home gives you a firsthand perspective. On your way to the home pay attention to the little details such as

• condition of the roads; are there large potholes, pavement patches, adequate street signs?
• local area; are there any schools, shopping, offices, or factories nearby?
• Appearance of the actual street; how do the other homes on the block look?
• The prospective home; what is your first impression when you see the place?

Second, take a Casual Stroll

Now that you have had the time to look at the home and surrounding area from the road, it is time to actually look at the property up close.  When you are in the home ignore things like carpeting and paint.  Take time to look over the roof, the foundation, the electrical box, the HVAC unit and any plumbing pipe that is easy to access.   Walk outside and see if the septic tank or well has any problem.  These are the areas that can cost major money to fix.  If there are any noticeable problems with these primary parts of the home you can use that to negotiate with the seller.

Third, crunch some numbers

Now that you have looked over the home and determined that it is a possible investment, it is time to do the math.  You need to have an idea of what the total repairs will cost along with how much the home should be worth after the repairs are completed.  Once you have these numbers you can make an offer to the seller.

When putting together your repair estimates it is always better to over price.  Trying to cut corners and dream that the kitchen can be remodeled for $2,000, or some other wishful hope, will cause you tremendous grief later on.

After you have looked at a few homes and talked with the same contractor a number of times you can start to get a feel for how much repairs will cost.  This one skill takes some time to master for those that are new to real estate investment.   Once you are comfortable estimating repair costs you will be much better at spotting a deal when it pops up.

Search for: Madison, WI Foreclosures for Sale

How to Pick Profitable Rental Properties

(Investment Properties: Part 4 of 5)

From looking at various homes to actually making a profit, investing in rental properties takes many steps. A person that is new to the process may feel a bit overwhelmed. In order to reduce risk and increase your chances of making positive cash flow with real estate, here are some tips on picking a home.

Good School Zone

A good school zone will always attract families. Many families will be able to purchase homes in the area but some will have to rent a while in order to get their finances in order. These are the types of people who will stay in a home for 2 or 3 years and be potential good tenants. Focus on schools that have high standardized test scores and achieve well in the areas of math and science.

Avoid High Crime Areas

This may seem obvious, but it needs to be pointed out. Homes in areas that are subject to more than average rates of crime will be tough to rent out. Furthermore, the crime rate will drop the rental rate. This can cause a breakeven or even net loss on the monthly cash flow.

Demographic of Neighborhood

Each neighborhood will have its own miniature set of demographics. A community next to a college or university will likely be made up of homes rented almost exclusively to students. An older neighborhood with higher priced homes will likely have couples that are middle aged and higher. Study the neighborhood carefully to make sure there is an available market of tenants that fit the demographic.

Employment Opportunities

Another factor that can heavily influence the profitability of a rental property is the number of available jobs in the nearby area. A new factory, expanding hospital or growing university are places that will add on more people and need them for full time work. Many times people will obtain a job first and then start looking for nearby homes to rent. Sometimes these people can be short term renters but it is possible to find someone that locks in a home for 2 or 3 years.

Check for Vacancies and Homes for Sale

For a new subdivision that is under construction it is common to see multiple signs indicating new homes for sale. However, for an established neighborhood, a high number of for sale signs is a kiss of death. This typically indicates that the area is on the decline. An even worse condition is the presence of several vacant homes. These are homes that have been abandoned for various reasons. Steer clear of these areas in your own best interest.

Be on the Lookout for Problems from Mother Nature

Some areas are more prone to natural problems than others. Issues like flooding, mud slides and tornadoes seem to be attracted to certain areas. The insurance for properties in these areas can be quite high and chip away at the monthly cash flow for the property.

Finding a good property based on these guidelines does not automatically mean that your home will be a cash cow. However, it should increase your chance for success in a very lucrative type of investment.

Investment/Rental Properties (5 Part Series)

• Preparing to Purchase that First Rental Home (Part 1 of 5)
• Adding the Title of Landlord Behind your Name (Part 2 0f 5)
• Rental Property is Still a Safe Investment (Part 3 of 5)
• How to Pick Profitable Rental Properties (Part 4 of 5)
• Success Plan for Investing in Rental Property (Part 5 of 5)

Advice About Purchasing Your First Rental Home/Property
(Investment Properties: Part 1 of 5)

Before buying that first piece of rental property it is important that you answer a single question. This question has nothing to do with your credit score, your experience with real estate or how much money you can gather for the purchase. The question is quite simple: WHY are you buying an investment home?

The answer to this question will guide you towards the right kind of property and the right type of financing. Let’s look at some examples to get a better idea of reasons people use to start investing in homes.

Saving for College Tuition

This type of goal usually involves a term over a few years. Couples with young children will buy a home in an area that has shown signs of appreciating. A year or two before the child enters college the family will sell the home and use the profit to pay for tuition, books and other expenses.

In this particular scenario the couple is not concerned with making a large profit each month on the rent. They simply want to break even while keeping the home in tip-top shape to maximize the potential appreciation.

Using Cash Flow to Increase Monthly Income

Some individuals invest in rental homes because they want to earn a profit each month from the rent. In these cases it is extremely important to buy a home either for all cash or at a deep discount from the market price. Foreclosures and vacant homes are common for this example. Buying the home for cash or at a deep discount allows the landlord to charge a fair rent based on the current market conditions and pocket most of the money each month as profit.

Speculation about Future Values

Sometimes people simply buy a property at a slightly discounted price in hopes that the property value will escalate quickly due to a future event. For instance, a new shopping mall, new school or a new factory can greatly improve the value of homes in the immediate area. Buying a home in such a location and holding on to it for a few months to a year can yield a high profit.

Career Change

Some people want to begin their property investment as a means to escape their current full time job and start a new career. It is possible for people to invest in real estate as their main source of income. However, it is not a get rich quick scheme.

The most successful investors have clear goals and follow a proven formula. They buy homes in particular areas that exhibit desirable qualities. They only buy when the price is discounted heavily and they have favorable financing for the transaction. They also understand the rental rates for the area in comparison to the financing costs.

Buying a rental home can be lucrative and lead to good fortune. However, it must be approached with diligence and hard work, not pie-in-the-sky dreams.

Investment/Rental Properties (5 Part Series)

• Preparing to Purchase that First Rental Home (Part 1 of 5)
• Adding the Title of Landlord Behind your Name (Part 2 0f 5)
• Rental Property is Still a Safe Investment (Part 3 of 5)
• How to Pick Profitable Rental Properties (Part 4 of 5)
• Success Plan for Investing in Rental Property (Part 5 of 5)

Silicon Valley Home Prices are on the rise. Inventory is low, and there are plenty of buyers out there making multiple offers the norm, not the exception. Investors have been a big factor in the market since the crash, but now it may be time for a change if you are an investor.

For the last few years investors were gobbling up foreclosed homes, short sales, and other bargain priced properties. These were often rehabbed and resold quickly. While there was often competition from other investors, it was manageable for many investors.

The landscape has changed. The inventory is so low, and the interest rates are not only low, but loans are a little easier to get than right after the crash. This along with a very high employment rate, and skyrocketing rents, has sent first time home buyers flocking back into the market.

As a result, the chance to buy a home for a low enough price to rehab and resell while making a 30% profit is not working in the investor's favor. It may happen occasionally, but not often.

However, there is still plenty of money to be made investing in real estate. Maybe it is time to look into a buy and hold strategy. It will not make you money overnight, but in the long run will bring in more money than being able to snare the occasional flip.

So if you have $500,000 to spend, why not look for 2-3 homes you can purchase, get a positive cash flow, and sell in 5 years for a great profit if the market has appreciated, or keep holding until your profits are at an acceptable level. With a buy and hold strategy the investor should be looking more at appreciation potential than getting the best price or not buying. It is still number crunching, but the set of numbers being crunched is different.

If you have any questions about buyer or selling investment properties in San Mateo or Santa Clara counties please feel free to contact me.

Marcy Moyer

Keller Williams Realty

www.marcymoyer.com

marcy@marcymoyer.com

650-619-9285

DRE 01191194

It's the beginning of the year so time for the round-up of last year's distressed property sales in the Blossom Valley Neighborhood of San Jose. So here's what happened:

Single family and condo townhomes :

Total sales:  1141

Short Sales: 412

REO:            271

Distressed sales as a percentage of total sales: 59.8%

Compare to 2010

Total sales:   1125

Short Sales:   366

REO:            271

Distressed sales as a percentage of total sales:  56.6%

My conclusion:

The percentage of distressed properties in Blossom Valley is a little higher in 2011 over 2010. A   59% distressed property sale percentage is enough to affect values significantly.  This may be one of the reasons home prices in San Jose are predicted to fall a little in 2012 while other parts of the Silicon Valley are appreciating.

If you have any questions about short sales or bank owned homes please feel free to contact me.

Marcy Moyer

Keller Williams Realty

www.marcymoyer.com

marcy@marcymoyer.com

650-619-9285

D.R.E.  01191194

It's the beginning of the year so time for the round-up of last year's distressed property sales in the Almaden Neighborhood of San Jose. So here's what happened:

Single family and condo townhomes :

Total sales:  355

Short Sales: 39

REO:            20

Distressed sales as a percentage of total sales: 16.6%

Compare to 2010

Total sales:   384

Short Sales:   28

REO:            14

Distressed sales as a percentage of total sales:  10.9%

My conclusion:

The percentage of distressed properties in Almaden is higher in 2011 over 2010. While a 16.6% distressed property sale percentage is probably not enough to affect values, i think the increase may be indicative of a nationwide trend of higher priced homes being the fastest growing distressed segment. Many of these higher priced homes were purchased with no down payment and interest only loans. When the interest only loan period is up the payments can double. With no equity refinancing is not possible, and some of these home owners are in trouble.

If you have any questions about short sales or bank owned homes please feel free to contact me.

Marcy Moyer

Keller Williams Realty

www.marcymoyer.com

marcy@marcymoyer.com

650-619-9285

D.R.E.  01191194

It's the beginning of the year so time for the round-up of last year's distressed property sales in the Cambrian Neighborhood of San Jose. So here's what happened:

Single family and condo townhomes :

Total sales:  656

Short Sales: 130

REO:            89

Distressed sales as a percentage of total sales: 33.45

Compare to 2010

Total sales:   750

Short Sales:   114

REO:            104

Distressed sales as a percentage of total sales:  29%

My conclusion:

The percentage of distressed properties in Cambrian is higher in 2011 over 2010. Also a 34% distressed property sale percentage is absolutely probably not enough to affect values. What is interesting is the the number of short sales in 2011 went up as the number of REOs went down from 2010 as banks have been more wiiling to approve short sales. This is being seen all over the bay area.

If you have any questions about short sales or bank owned homes please feel free to contact me.

Marcy Moyer

Keller Williams Realty

www.marcymoyer.com

marcy@marcymoyer.com

650-619-9285

D.R.E.  01191194

It's the beginning of the year so time for the round-up of last year's distressed property sales in Milpitas. So here's what happened:

Single family and condo townhomes :

Total sales:  513

Short Sales: 150

REO:            112

Distressed sales as a percentage of total sales: 51.1%

Compare to 2010

Total sales:   535

Short Sales:   131

REO:            140

Distressed sales as a percentage of total sales:  50.1%

My conclusion:

The percentage of distressed properties in Milpitas is virtually the same  between 2011 and 2010. Also a 50% distressed property sale percentage is absolutely large enough to affect values. What is interesting is the the number of short sales in 2011 went up as the number of REOs went down from 2010 as banks have been more wiiling to approve short sales.

If you have any questions about short sales or bank owned homes please feel free to contact me.

Marcy Moyer

Keller Williams Realty

www.marcymoyer.com

marcy@marcymoyer.com

650-619-9285

D.R.E.  01191194

It's the beginning of the year so time for the round-up of last year's distressed property sales in Los Altos Hills. So here's what happened:

Single family and condo townhomes :

Total sales:  97

Short Sales: 4

REO:            6

Distressed sales as a percentage of total sales: 10.3%

Compare to 2010

Total sales:   81

Short Sales:   5

REO:            1

Distressed sales as a percentage of total sales:  7.4%

My conclusion:

The percentage of distressed properties in Los Altos is higher  2011 over 2010. 7-10% distressed property sale percentage is just beginning to affect values but I think there are other reason Los Altos Hills values are decreasing that are more important than short sales and foreclosures. The area is just not as popular these days as Atherton and Palo Alto are for the high end buyer.

If you have any questions about short sales or bank owned homes please feel free to contact me.

Marcy Moyer

Keller Williams Realty

www.marcymoyer.com

marcy@marcymoyer.com

650-619-9285

D.R.E.  01191194

It's the beginning of the year so time for the round-up of last year's distressed property sales in Cupertino. So here's what happened:

Single family and condo townhomes :

Total sales:  453

Short Sales: 21

REO:            11

Distressed sales as a percentage of total sales: 6.8%

Compare to 2010

Total sales:   844

Short Sales:   31

REO:            33

Distressed sales as a percentage of total sales:  7.6%

My conclusion:

The percentage of distressed properties in Cupertino is virtually the same  between 2011 and 2010. Also a 6-7% distressed property sale percentage is not large enough to affect values. What is interesting is the number of total sales in Cupertino is significantly lower in 2012 than 2011.

If you have any questions about short sales or bank owned homes please feel free to contact me.

Marcy Moyer

Keller Williams Realty

www.marcymoyer.com

marcy@marcymoyer.com

650-619-9285

D.R.E.  01191194

It's the end of the year so time for the round-up of distressed property sales in Mountain View. So here's what happened:

Single family and condo townhomes :

Total sales:  563

Short Sales: 62

REO:           34

Distressed sales as a percentage of total sales: 17%

Compare to 2010

Total sales:   572

Short Sales:   50

REO:            34

Distressed sales as a percentage of total sales:  15.5%

My conclusion:

The percentage of distressed properties in Mountain View is a higher in 2011, 17% as compared to 2010, 15.5% but the majority of these distressed properties are in the lower price range of Mountain View sales so are being purchased by investors and first time home buyers. West of El Camino is not seeing much distressed property activity.

If you have any questions about short sales or bank owned homes please feel free to contact me.

Marcy Moyer

Keller Williams Realty

www.marcymoyer.com

marcy@marcymoyer.com

650-619-9285

D.R.E.  01191194

It's the end of the year so time for the round-up of distressed property sales in Palo Alto. So here's what happened:

Single family and condo townhomes 2011:

Total sales:  590

Short Sales: 13

REO:           9

Distressed sales as a percentage of total sales: 3.73%

Compare to 2010

Total sales:   563

Short Sales:   8

REO:            6

Distressed sales as a percentage of total sales:  2.5

My conclusion:

The percentage of distressed properties in Palo Alto are not enough to make a difference in the market value of homes. There was an increase in both short sales and REO in 2010 over 2011, but again, not enough to make a big difference. Palo Alto has so far managed to escape the trauma of very many people losing their homes. The same can not be said about many surrounding neighborhoods.

If you have any questions about short sales or bank owned homes please feel free to contact me.

Marcy Moyer

Keller Williams Realty

www.marcymoyer.com

marcy@marcymoyer.com

650-619-9285

D.R.E.  01191194

I've been using QuickBooks since its inception back in the 80s. In fact, as I was reorganizing my library of software programs and toys, I sorta drifted back to the beginning of my program collection such as my old versions of SuperCalc 4 and 5, MS Office DOS Version (1988 and 89 Copy), QuickBooks 1988 - 2006, Quicken Invoice DOS and Windows (initial Copies), and more. Ok, back to the topic.

I prefer the method below because it allows me to accurately track each property expense, I can apply the property to the vendor job, and when the reimbursement arrives, I can easily retrieve a list of all reimbursements submitted when I begin to type in the property address. NO MORE SEARCHING THE INVOICE SECTION!!!!!

How to setup you REO properties as projects:

• Create each REO Bank as a Customer in QuickBooks.
• Right click on the Customer name (Bank) located in the left margin.
• Select "Add Job".
• Input the property information as follows: property address-asset number (999 Mockingbird Lane - ALS123456789.
• Complete as much of the page info as possible.
• Save the setup.

TIPS!

• Us the Custom Field in the "Additional Info" tab to add your commission information.
• As you create new jobs for each project, list it under the "Job Info" tab, this includes the utility deposit, connection fee, membership fee, account number information.
• Always include the street address and asset number. Most if not all banks require the address and asset number on each invoice.
• You can easily create multiple jobs under each Project (Property file) for easy tracing of work in progress, pending, completed, cancelled, etc.

Carolyn Nelson
Online Real Estate Assistant

There is a vacant house in my neighborhood that is driving all the neighbors crazy, it has been vacant since October of last year, I am sure if it hasn't foreclose yet it is about to. grass is 5 feet tall, weeds are growing very tall, ivy wraps around the house. broken fence etc.

I was driving home last night and I saw a hand written sign on the front lawn, I stop to read it and was very surprised to read " Froclosure $55K Needs work and the phone number"

It makes me wonder if the listing agent ran out of signs and decided to do this sign, forgetting the broker's information, equal housing  and realtor logo, or it is one of those investors trying to sell an assignment.