Happy Halloween!
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| As a reminder, I’m always here if you or your friends and family need any home financing advice. My clients are important to me and I’m happy to help anyone you know that might need advice in any way I can. |
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© 2011 W.J. Bradley Mortgage Capital Corp., 201 Columbine Street Suite 300, Denver, CO 80206. Phone #303-825-5670. NMLS ID 3233. Trade/service marks are the property of W.J. Bradley Mortgage Capital Corp. This is not a commitment to lend. Restrictions apply. All rights reserved. Some products may not be available in all states. WJB is not acting on behalf of or at the direction of HUD/FHA or the federal government.
What makes San Bruno unique and why is it a great place to buy a home?
San Bruno is a city that offers the perfect balance for a home buyer, especially for new home buyers looking for their starter home. The location, the downtown scene, and the weather are all high points that recommend it!
The location of San Bruno, between San Francisco and Silicon Valley, gives any home buyer a convenient compromise for those couples who may be working areas, as many couples in the area do. Also, getting to downtown San Francisco is faster from San Bruno than from the Sunset District of SF because of the easy access to the 101 and 280 freeways!
San Bruno is also very close to SFO and has a friendly business climate. The class “A” office spaces have attracted companies such as Walmart.com, YouTube and United Airlines! Lastly, the northern part of San Bruno is considered the “end of the fog line” meaning you will have more warm and sunny days while living in San Bruno, as compared to many parts of San Francisco.
All of these things and more make San Bruno an amazing city to live in and a great place to buy a home, raise a family and work!
The Rental Market is HOT!
Investors who purchase apartments are seeing better deals now than at anytime in the past. In contrast to housing, where prices are low, inventory is growing, and loans are difficult to get, apartment vacancies are down, rents are near all times high again, and cash flow can be positive from day one.
Why is it a good time to invest in apartments? Rents nationwide now average $991, which is up from $930 in 2006. In the San Francisco Bay Area, the average rent has gone from $1,025 in 2006 to $1,200 in 2011. This is partly due to fewer rental units available as well as less new building being done over the last few years. This is evidenced by the national vacancy dropping to 6.2% in the first quarter 2011 from 8% a year ago. Additionally, demographic trends are also favorable:
- 3 million young adults now living at home will equal about 1/3 of rental demand going forward
- 2.8 million homes and another 5 million homes will have been in foreclosure by 2012, which
means 2-3 million families will have to rent for up to 7 years
If you are looking at purchasing an apartment, here is what to consider:
- You want a property that produces at least 6% return on cash investment in the first year
- If the property requires a property manager, plan on a 2-4% fee
- Repairs, etc. run about 5-6%
- Expenses should not exceed 40% of income
And, if you don’t want to be an owner, consider a real estate investment trust (REIT), which are popular again. They typically pass along on average 90% of their income to their investors and currently some are returning 20%+ on the initial investment.
The Magic and Frustration of Real Estate
The real estate market can be both magical and frustrating all at the same time. In many parts of the Bay Area, such as PaloAlto, the Sunset, Burlingame, or Mill Valley, it’s as if we are back in the 2004 real estate market where every property hadmultiple offers and lots of them were all cash offers. In other parts of the Bay Area, however, like Oakland, Novato, Vallejo, and parts of San Jose, the market is much softer and has not yet rebounded. Sales still happen in these areas, but only if the property is priced right. Additionally, much of the inventory is still made up of foreclosures and short sales. Even if these areas may not be hot, they still present a great opportunity for investors and first time homebuyers. It is amazing how locations a few miles apart can see diverging trends.
While markets like Palo Alto can bear price increases, multiple offers, and a healthy pace of sales, there are several other markets throughout the Bay Area that cannot. In real estate, it is all relative. Each sale needs just one seller and one buyer. The value is determined by who is the seller, the profile and capability of the buyer, the support of the lender, the type of real estate you are buying or selling, inventory, days on the market of the competition, list / sales price of past sales, and whether you are in a negotiating situation or a competitive world fighting against all cash multiple offers.
The key to navigating all of this is education. You need to know what market you are selling or buying in and what will it take to get the house sold or to buy one. The rules are not only different in different areas, but they can also change daily based on what is selling and at what price point. Additionally, the media confuses us even more. ZIllow will tell us that home prices fell 3% in the first quarter, the steepest decline since 2008, and Fiserv Inc. is predicting home values still have 5-10% more to decline. Yet, this is not what homebuyers who are trying to buy a home in Palo Alto or the Sunset are experiencing.
So, what does all of this mean? What we can say is that what should be is sometimes, what seems logical is sometimes, and what can be often is just because it can be. That’s the magic and frustration of real estate. There are no set rules and the journey is often not the one we expected. In the end, buy in a good location, take out a conservative loan, and wait 5 years. From Palo Alto to Novato, real estate will reward you.
Why should I buy instead of rent?
The long term financial benefits of buying are pretty clear to most people. You gain equity in your home, you have an asset rather than just giving money to your landlord each month. You also have free reign of your space to do with as you want, home improvement projects, painting, etc!
But beyond the obvious financial benefits you also have the security of your own home, pride of ownership and community that comes along with it! Now is a time that many people are being cautious and staying on the sidelines. Interestingly, it is times like these that people often look back at and say, “I should have done it then”.
The Mortgage Lender/REALTOR® Relationship
As a mortgage lender, I have worked with both REALTORS® and Real Estate Agents, but I prefer and always recommend working with REALTORS®, as they adhere to a very strict set of guidelines and code of ethics. But do you know the difference between the two? This article explains the difference in detail, read on for more information!
What’s Hot in Real Estate – The Rental Market
Investors who purchase apartment houses see better deals now than in the last four years. In contrast to housing, where prices are low, inventory high, loans are difficult to get, and 40% of the market is foreclosures or short sales, the rental market (especially apartments) have rents growing, vacancies declining, and can produce cash flow that is positive from day one. In fact, rents nationwide now average $991, which is up from $930 in 2006. Here in the San Francisco Bay Area, the average is $ 1,025 to $1,200, because there are less units available here and there has been very little building in the last few years.
So, if you are thinking about investing in a rental property, think apartments and here is what you should look for:
- A property that produces at least 6% return on your cash investment in the first year.
- Expenses that do not exceed 40% of the gross income
- A cap rate percentage the higher the better and a debt service coverage ratio that is the lower the better
- A property that gets you to break even or cash flow positive day one
And, if you don’t want to be an owner, consider Real Estate REITS– they are hot again. They pass along on average 90% of their income to their investors each year and are returning in some cases 20% percent.
The Right Professionals Makes the Difference!
Property type: Two-bedroom, two bath in Burlingame
Appraised value: $480,000
Loan amount: $369,000
Loan type: 30yr fixed
Rate: 4.5%
Back story:
This one, while ending with happy clients, was a lesson in working with the right professionals to get the job done. This client and their realtor had troubles with their appraiser and actually had to have a few different discussions with them to get them to reconsider comps in the area in the overall home value. Being sure that your Realtor, Mortgage Lender, Appraiser, Insurance Agent, and every other person involved in the process is on top of their job and able to troubleshoot situations is so important!
And, as always, it closed in less than 30 days!
Refinance and change your financial outlook.
Property type: Four-bedroom, two bath in Stinson Beach
Appraised value: $795,000
Loan amount: $270,000
Loan type: 30yr fixed
Rate: 4.5%
Back story:
This client was working on a fixed income and had many loans and investments. They needed to refinance to get cash out to put in a new septic system on their home and consolidate some of their consumer debt. We were able to do both and increase their cash flow by $450/mo.!
And, as always, it closed in less than 30 days!
