Thursday, January 4, 2018

Selling A Palo Alto Home In Probate or Trust With or Without Tenants

BY 
Real Estate Agent with eXp Realty of California Silicon Valley Probate, Trust, and Investment Sales B.R.E. 01191194
January 05, 2017 07:58 AM
This is a question I get asked all the time. When an owner has passed and has rental property should the heirs sell the Palo Alto probate or trust home with the tenants in place, or wait until the lease is up?

While most years I would say wait until the tenants are gone but with the uncertainty of how interest rates will affect prices and what will happen to a Palo Alto market that has already shown signs of slowing, even with very tight inventory, the answer is not clear cut.


  1.      Palo Alto school Priority 1 Registration goes from Jan 12 thru Feb 15th. That is the best chance of getting your child in the school closest to you. There is always a space in a Palo Alto school for a resident, but getting the one closest to you is best obtained if you are a resident during this period. Selling with tenants in a  Palo Alto probate rental may allow the buyer to get a leg up on school registration for the next year.
  2.      Interest rates are lower now than they will be next summer, or even in March and maybe Feb. A 3 million dollar Palo Alto probate home has a very good chance of having a loan on it so the less a buyer has to pay for the mortgage the more they can afford for the home. For every 1 point increase in interest rates there is a 10 % increase in payment.
  3.      The inventory is very low and the Palo Alto housing is market still active. It is unknown what will happen as the year goes on. The market could go down as interest rates go up, or if there is a natural disaster, a world event, or terrorist attack.
  4.      Some people who buy Palo Alto homes in Probate or Trust early are happy to rent the house out until the end of the school year because they do not want to move until school is out if they are relocating.

http://www.marcymoyer.com/trustandprobatesaleshttp://www.marcymoyer.com/trustandprobatesales With a Tenant Cons:

  1.      Harder to show house
  2.      You will not be able to make interior upgrades or stage with a tenant in place so it may depress the price somewhat
  3.      The tenant may be messy or say inappropriate things to potential buyers which could depress the price.
  4.      If the tenant does not have beautiful furniture the professional pictures will not look as good.

Sell Palo Alto Probate or Trust Home After Tenant Lleaves Pros:

  1.      You can have the interior painted, wood floors refinished, new carpet, and any other cosmetic upgrades you want that will help bring in more money.
  2.      You can professionally stage the property and the photos will look much better.
  3.      Much easier to show the house and have open houses which bring in more people and help bring in a better price.

Sell Palo Alto Home in Probate or Trust After tenant leaves Cons:

  1.      Interest rates will be higher which will depress the price. It is unknown by how much because it also depends on how the stock market is doing, most likely for Apple, Google, Facebook, and Linkedin.
  2.      If there is a trade war with China tech stocks could be hurt more than other sectors. This would make less money available for down payments for most of the buyers in the area.
  3.      If the dollar continues to be strong foreign investors will be much less likely to be buying homes in Palo Alto.
  4.      The best time to sell a home in Palo Alto in from Jan thru early June. The second best is the fall. If the tenants are out in June and the home is prepared in July and Aug and on the market in Sept you have missed the best time, but may get the second best time, but only by waiting until Sept to put home on market.

So as you can see the answer is not clear. No one can say for sure what will happen to the real estate market in 2017. If you are in this situation now it is probably a good idea to add your own Pros and Cons to this list to get a feel for what may work best in your situation.

If you have any questions about selling a home in Probate or Trust please feel free to contact me.
Marcy Moyer
Keller Williams Realty
650-619-9285
www.marcymoyer.com

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Marcy Moyer eXp Realty of California  Specializing in Probate and Trust Sales, and Rental Investment Properties
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Selling A House In Palo Alto With A Lot Of Equity And Deferring Taxes

Many owners of homes in higher priced areas like Palo Alto are living in homes that are larger than they need or just have so much equity in them that if they sell there would be a huge tax bite. At this moment in time, if the Palo Alto home is kept until the owners pass then the heirs can inherit the Palo Alto house tax free in many cases.

Many retired couples are faced with this dilemma and are at a loss as to what is the best thing to do, keep or sell their Palo Alto home. Right now there are 5 main choices.

  1.      Sell your Palo Alto home outright and pay the tax about 47.1% in federal and state taxes for 2106.
  2.      Wait to sell your Palo Alto home see what tax changes the next administration brings to long term capital gains tax and the add on tax for the ACA. There are no changes expected to the state 13.3% top tax rate for over 1.05288 million earners. This would include most homes in Palo Alto owned by long time owners.
  3.      Take out a reverse mortgage and stay in your Palo Alto home. You will have to stay in the home with less than 3 months breaks or the bank will force you to sell.
  4.      Rent out your Palo Alto  home and use the net income to live somewhere else. Depending on the size, location, and condition of your home you can expect to bring in $4,000 to $8,000 a month. You still have to pay property taxes, insurance, gardening, and repairs. If you are renting in another part of the country it may be enough, but if you need assisted living or nursing care you will need additional income.
  5.      Do a deferred trust sale. This a complicated subject that I will explain in detail in a future blog, but the executive summary is you sell your Palo Alto home to a trust who then sells to a third party you have found. You are paid back over time with a note and you pay taxes based on the income you get over time rather than all at once.

Your individual circumstances will determine what makes the most sense for you and your family. There is no one right way to deal with a Palo Alto home that is highly appreciated. You should speak to your financial planner &/or accountant, as well as an estate planner and then make the decision that makes you the most comfortable.
If you have any questions about your options for selling or renting a home in Palo Alto please feel free to contact me.
Marcy Moyer
Keller Williams Realty
650-619-9285
www.marcymoyer.com
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Metrics Help Us Understand Real Estate Market In Downtown San Jose


While it may seem as if it is hard to determine what is happening in the downtown San Jose condo real estate market, there are some majors metrics that are quantifiable that can help you see where the market is going. These markers include:

  1.      Sales to list price ratio
  2.      Days on Market
  3.      Months of inventory
  4.      Number of active listings vs number of pending listings.

We can learn something from each of these metrics.

  1.      Sales to list price ratio: When the San Jose condo market is appreciating, the sales price will be higher than the list price. In Jan of 2017 the sales price of Downtown San Jose condos is 101% of the list price. This is obviously very healthy, but in Feb 2015 the sales price on average was 105% of the list price which was a much hotter market.
  2. San Jose Condo market
  3.      Days on market is a very good way to look at how the market is doing. The stronger the market the shorter the days on market. In Feb 2016 the average days on market was 15 and it increased to 28 in Jan 2017. Things are obviously slowing, but the San Jose condo market has not tanked.
  4. San Jose condo market
  5.      Months of inventory: Months of inventory tells you how long it would take to sell all the homes currently on the market at the current pace of sales. When months of inventory goes up it means the market is slowing, most of time.  The months of inventory in downtown San Jose has been less than 2 all through 2016 and into Jan 2017. It has gone up to 7 months in Feb., but there have only been 2 days so we can not count that yet.
  6. San Jose condo market
  7.      Number of active listings vs number of pending listings: this one is my favorite. You look at the number of active sales and compare to pending sales. When inventory is low and sales are brisk there will be more pending sales than active sales. When there are 4 or more times as many pending sales as listings it is a really hot market. When there are more active listings than pending sales it is a buyer’s market, or trending that way. There are currently 21 active listings and 32 pending  sales of downtown San Jose condos.

So how is the market of downtown San Jose condos?

Looking at all the metrics I would say it is good, but slower than in the first part of 2017.

If you have any questions about buying or selling a condo in downtown San Jose please feel free to call me.
Marcy Moyer
Keller Williams Realty
650-619-9285
www.marcymoyer.com

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Renting To Students in Santa Cruz, CA: Pros and Cons

BY 
Real Estate Agent with eXp Realty of California Silicon Valley Probate, Trust, and Investment Sales B.R.E. 01191194
October 01, 2017 12:01 PM



I am a realtor and a Santa Cruz rental property investor since 2000. There are many reasons to invest in Santa Cruz rental properties, some of which I have discussed in this article. Today I want to talk about what the pros and cons are in renting to UCSC students. 

Here are the pros that I have experienced.
1. Vacancies are virtually non existent: There are almost $18,000 UCSC students and in any given year there is only room to house about 8,000 of them on campus. There are always many thousands of students looking for a place to rent, so the potential pool leaves no vacancies in your Santa Cruz investment rental properties.

2. Students pay more money:  They frequently will pay more per bedroom and sleep 2-3 in a room just to have a place to stay. Here is a link to what students expect to pay from the UCSC community housing page. https://communityrentals.ucsc.edu/cost/index.html

3. The rent money is very secure: The students get financial aid and/or are supported by their parents. In 17 years and 4 rental properties as a Santa Cruz rental home investor I have only had a problem getting paid once.

4. UCSC makes the rental process very easy for a Santa Cruz rental investor: They give workshops to the students on what they need to do to look attractive to a Santa Cruz rental investor. They come to you with complete rental applications, credit reports, references, and certificates saying they understand what it takes to be a good renter. The university posts your rental for free so you have a large pool of possible renters.

5. Students replicate themselves making the rental process even easier: My experience has been when one student moves out they have another take their place making the process seamless for the Santa Cruz rental investor.

6. Santa Cruz students are often long term renter: If you get the students early, in their sophomore or junior year they often stay for 3-4 years or more. making the cost of turnover very low.

7. Santa Cruz students can vacate in the summer if you want a summer beach home that is rented for 9 or 10 months: If you are a Santa Cruz rental property investor who wants a place in the summer for yourself you can rent to students during the school year and keep it for yourself in the summers. Many students go home in the summers, and the ones who don't can always find a sublet from another student who is going home. It is a way to have a vacation home that more than pays for itself.

Cons of renting to UCSC students:

1. Insurance on the house can be tricky: Recently many insurance companies, including the one I have always used, State Farm have decided they do not want to insure homes that are filled to the brim with students in college towns. They see them as Frat houses and won't write new policies. You can get commercial insurance, which is more expensive than residential or find the rare insurer who will do it. I found that CIG insurance out of Monterrey was willing to write a residential policy at competitive prices.

2. Large homes can be a hot bed of petty emotional issues for the Santa Cruz rental property investor.: If you are the owner of a large home with 6-10 students they may turn to you when there is a spat between the tenants. It is a time and emotional drain. I put one person in charge and have that person deal with issues like who is going to clean the house, noise complaints, bullying, etc. They have the final say. It works pretty well.

3. Students are often unaware of what it takes to take care of a house: Students do not always understand what it takes to care of a home and things can be damaged by mistake, even without large parties or Frat behavior. The way to ameliorate this is to buy a house that does not have delicate finishes and educate the students on basic home maintenance. My tenants know they need to call me right away if something is wrong and not let a small problem get out of hand. I would rather be over called than under called, and they know it.
So as a long time owner of Santa Cruz rental property I can enthusiastically say that renting to Santa Cruz students is a good thing from an investor perspective and not something to be afraid of.

If you have any questions about becoming a Santa Cruz rental property investor please feel free to contact me.
Marcy Moyer
eXp Realty of California
650-619-9285
Specializing in Probate, Trust, and Investment Properties

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How Much Can An Investor Get For Rent In Santa Cruz, CA

BY 
Real Estate Agent with eXp Realty of California Silicon Valley Probate, Trust, and Investment Sales B.R.E. 01191194
October 05, 2017 09:27 AM



Many of my Silicon Valley Investors are finding that the price it costs to purchase an investment rental property  in someplace like Palo Alto, Mountain View, or even downtown San Jose has gone up much faster that the rental market value has.  It is not unusual to see CAP rates of 1 or 2 % which is the return on your investment after expenses are paid, but before any costs for a mortgage. So if your mortgage is 4.25% for an investment rental property and you only make 2% after expenses and before a mortgage you will lose 2.25% in cash flow over the year. What that means is that on a million dollar property with a $700,000 loan you will have a negative cash flow of about $17,500 every year. When the market appreciates you make up for the loss in appreciation, but when the market goes down, you lose the negative cash flow as well as the decreased value in the property.
In order to keep your cash flow, at least neutral, you need to have a CAP rate closer to your mortgage, which you can do by becoming a Santa Cruz rental property owner.
If a Santa Cruz rental property owner buys a million dollar property at a 4% CAP rate and a loan of $700,000 at 4.5% the difference between profit and loan payments will only be about $3500.
These numbers are not exact as loan rates change daily and amortization schedules are different, but the bottom line is the lower the CAP rate the worse the cash flow.
Due to the prices in Santa Cruz being so much lower than the prices in the Silicon Valley and the rents being fairly equivalent, the cash flow and CAP rate are just better for Santa Cruz rental property owners.
UC Santa Cruz posts average rental rates every year.

July 1 2016 - June 30, 2017

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Keeping Tenants In Place When Buying A Santa Cruz Rental Property

BY 
Real Estate Agent with eXp Realty of California Silicon Valley Probate, Trust, and Investment Sales B.R.E. 01191194
November 05, 2017 01:33 PM


Keeping Tenants In Place When Buying a Santa Cruz Rental Property 

BY 
Real Estate Agent with eXp Realty of California Silicon Valley Probate, Trust, and Investment Sales B.R.E. 01191194
 
REPORT
Santa Cruz investment property

If you are one of smart Silicon Valley investors who is buying a rental property in Santa Cruz you may be buying one that has tenants in place. If that is the case it is very possible that the current tenants are not paying Santa Cruz market rental rates. 
Current Santa Cruz rental market rates are at a very high level. It is common to get at least $1200 a bedroom and not unheard of to get $1600 a bedroom. 
So what is the best thing to do if you are a Silicon Valley inverstor and have Santa Cruz tenants paying $1000 a bedroom, or less?
In my opinion, as a long term Silicon Valley/Santa Cruz real estate agent and Santa Cruz rental property investor myself it is sometimes better to keep the tenants in place with gradual rent increases than to give them a huge rental increase and risk having them move out.
The reason for this opinion is based on numbers, not just my hesitancy to put a good Santa Cruz tenant out onto the street. 
When a Santa Cruz tenant moves out, especially if they have been there for 3 years or longer you will have to at a  minimum paint and replace carpet. You may have to replace window coverings. You will have at best 2 weeks, and possibly a month of vacancy.
So let's take a scenario of a 2 bedroom rental property renting for $2000 a month that you think you can get $2800 a month for with Santa Cruz market rents.
If the current Santa Cruz tenants can't or don't want to pay $2800 a month here is what can happen:
1. 4 week vacancy: Lose $2000
2. New carpet: Spend $1500
3. New paint: Spend $3000
4. Replace old appliances: $3000
5. New window coverings: $1000
Money lost: $10,500
Increase rent by $800 a month for 1 year
Money gained: $9,600
So the first year you lose $900 if you did not raise the Santa Cruz rent at all. If the Santa Cruz tenant leaves after 1 year and no repairs are needed you can probably look at a 2 week vacancy. So you only lose $1900. You are in the hole. If the tenant stays the second year you will make an additional $9600 in rent so total gain is $8600 over 2 years and $18,200 over 3 years.
If you raise the Santa Cruz rent $100 a month every year for 3 years and you do not have to paint, carpet, or replace old appliance over 3 years you make an additional $7200 over 3 years plus the $10,500 you did not spend so $17,700 over 3 years.  So, if this is a long term Santa Cruz tenant you are only $500 ahead in 3 years by removing the original tenant and replacing them at market rate.
In my opinion it is probably not worth it.
What if you are only $300 a month under Santa Cruz market rate? then it is really not worth it.
So my fellow Silicon Valley investors who are buying in Santa Cruz, be sure and run the numbers before you replace a below market rent paying Santa Cruz tenant for a new one
Marcy Moyer
eXp Realty of California
650-619-9285
Specializing in Probate, Trust, and Investment Properties

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Even More Reasons To Become A Real Estate Investor

BY 
Real Estate Agent with eXp Realty of California Silicon Valley Probate, Trust, and Investment Sales B.R.E. 01191194

December 26, 2017 08:11 AM



First I want to make it clear that I am not an accountant and I do not play one on TV. Anything I say should be verified with you tax and financial planners.
That being said, after the passage of the latest tax bill, owning Silicon Valley rental property has become an even better investment for Silicon Valley real estate investors.
Here is why I say this:
1. The tax bill restricts property tax deductions to a combination of 10K for both primary and second home property tax and state tax. For many Silicon Valley Real Estate investors this 10K limit is taken up completely just by state income tax.
2. This 10K limit does not apply to Silicon Valley rental properties owned by Silicon Valley Real Estate investors. Property tax is an expense that is subtracted from rental income before you owe any tax.
3. The tax bill restricts interest deductions on new mortgages, those initiated after Dec 15th, 2017, or before Dec 15th 2017 but not closed before April of 2018 to $750,000.
4. This restriction does not apply to Silicon Valley rental properties. If you are buying a Silicon Valley rental property over a million dollars, which many of them are, and want to get a loan, the interest on that mortgage is still considered an expense, no matter what the amount. The interest payment is subtracted from the rental income and excluded from Federal taxes.
So, maybe it is time to think about investing in a Silicon Valley rental property as part of your financial plan.
The trick is to find a Silicon Valley rental property that makes sense as far as your cash flow needs go. That is a discussion we can have on another day.
Marcy Moyer
eXp Realty of California
650-619-9285
Specializing in Probate, Trust, and Investment Properties
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Santa Cruz, CA, Is A Great Place For Real Estate Investors

BY 
Real Estate Agent with eXp Realty of California Silicon Valley Probate, Trust, and Investment Sales B.R.E. 01191194
September 28, 2017 09:25 AM



Santa Cruz, known for the beach, the boardwalk, Pacific Ave, hippies, and organic food, along with University of California Santa Cruz is also probably the best place for investors looking for rental properties right now. Here are some reasons why.

  • 62% of Santa Cruz residents live in rentals, compared to a ntional average of 43%
  • Average sale price of Santa Cruz homes has doubled in the last 5 years
  • Cap rates for Santa Cruz rental properties are between 3.5-4% very easy to obtain, as opposed to 2.5-3% in The Silicon Valley
  • No rent control but there is a one year moratorium on Santa Cruz short term rental permits so Air B&B investments not the way to go now.
  • While the market is apprectiating the competition for investment homes in Santa Cruz is not as great as in Silicon Valley
  • There are still Santa Cruz home sales contingent on the sale of another property, making 1031 exchanges much easier.
  • Accepted offers almost always have contingnecies so you have time to figure out if the property makes sense for your portfolio.
  • Would you rather visit your rental property in Santa Cruz or Milpitas? I would pick Santa Cruz any day.
  • UCSC only guarentees housing for students for 2 years. They have over 18,000 students. The housing shortage is so acute that students are living 3 to a room or in their cars, not because they don't have the money for housing, but because there is such a shortage.

Smart Silicon Valley investors should look at Santa Cruz as a place where your money goes further and the cash flow is so much better. 
I have put my money where my mouth is and own 3 Santa Cruz rental properties myself.
I encourage you to contact me if you have any questions about how and why to buy a rental property in Santa Cruz.
Marcy Moyer
eXp Realty of California
650-619-9285
Specializing in Probate, Trust, and Investment Properties


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Marcy Moyer eXp Realty of California  Specializing in Probate and Trust Sales, and Rental Investment Properties
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