Is It A Good Time To Purchase Investment Property in Silicon Valley?

Is This Is A Good Time To Purchase Investment Real Estate in The Silicon Valley?

YES!!!!!!

Next question? But seriously.

I previously talked about the effect of increased interest rates on Silicon Valley Real Estate.  For my analysis of that situation please click here.

The upshot is that higher the interest rates will decrease prices, but maybe not in proportion to the cost of ownership, especially in higher priced/more popular areas of Silicon Valley.

This will keep the affordability of home ownership out of reach of many Silicon Valley residents. That means there will be a greater number of potential renters in the area which is good news for real estate investors.

Currently, the CAP rate on rental real estate has not been great, especially in high end properties. It is not uncommon to see 2% cap rates in multi- family homes in Palo Alto or Mountain View. The value was in appreciation.

No one is predicting much appreciation in this market in the next year or two, and rents are already ridiculously high. I am not convinced they are going to increase much in the next 2 years either.

Where I see opportunity in the Silicon Valley real estate investment market is in areas near the tech expansion in San Jose, or in those easy commuting distance but still affordable like Newark and Union City.

I believe that investing in rental property in these areas of the Silicon Valley have the potential for increased rental values as well as appreciation. They are more affordable than buying in higher priced cities like Mountain View, Palo Alto, Menlo Park, Saratoga, or Los Gatos, and they offer relatively easy commutes to the major employers, so they are good for attracting the demographics most likely to rent.

Of course you need to keep in mind rent restrictions in San Jose, so multi -family homes may not be your best option.  Additionally the multifamilyhomes in San Jose tend to be extremely old and need a lot of repairs and upkeep.

I like the newer buildings in downtown San Jose as rental units. They are relatively affordable, don’t need a lot of upkeep, popular with the tech force so easy to rent out, and can give a pretty good return.

There are also many condos/townhomes in Newark and Union City as well as a lot of new construction there that is in the works. If the interest rates get too high and the newer construction becomes more difficult to sell, the builders MAY ease up on the rental restrictions and that would be a good opportunity.

If you are going to purchase a Silicon Valley investment property with a loan, then it is best to do so as soon as possible, because the increasing rates will not be working in your favor.

If you are purchasing a Silicon Valley investment property with cash then I think the first half of 2017 will be a great time to do that, as the pool of renters increases and the pool of buyers decrease.

If you have any questions about buying or selling investment property in Silicon Valley 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

https://www.facebook.com/marcy.r.moyer

@marcyagent 

Is West Oakland The West Coast's Brooklyn?

In 2004 my son left to go to college at New York University which is in the Village. At the time, the Village was The place to be for not only NYU students, but young professionals as well as the artists struggling in NY. When he graduated in 2008 the financial market was in crisis so rents were dropping, and young graduates could still afford (although barely) to live there.

However, by 2010 Village rents were up again, and by 2012 most young people not working on Wall Street had left for Brooklyn. Brooklyn is now the center of the universe for 20 somethings (as evidenced by Girls and everyone I know under 30) The investors who own rental properties in Brooklyn are now blessed with an endless stream of ready and willing renters.

I see the same thing happening in West Oakland. San Francisco is so overwhelmed with start up companies and techies making pretty high salaries, that finding an affordable rental in San Francisco is very difficult, even with rent control in homes built before 1978. Many young people who simply cannot afford the sky high rents of most of SF are moving to West Oakland. This is especially popular for young artists and others in non tech-related fields.

So my advice to Silicon Valley investors looking for rental properties, maybe it is time to look at West Oakland for your long term rental property portfolio. There are plenty of 20 somethings looking for rentals, and your return on investment is better than in many other cities in the Bay Area.

If you have any questions about buying investment properties please feel free to contact me.

Marcy Moyer
Keller Williams Realty
www.marcymoyer.com
marcy@marcymoyer.com
650-619-9285
D.R.E. 01191194

Silicon Valley Investors, Buy and Hold or Buy and Flip?

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