Bay Area Deal Analysis - North San Jose

[Patrick Long]

Hi all, 

I'm a newbie real estate investor. I just graduated about a year and a half from Cal and have been working since graduation. I've been saving hard for a down payment and now I think I might've stumbled across a deal and wanted to hear BP's opinion! 

Details: North SJ, near the future BART station, town home, 2BD/2.5BA - 2 master bed rooms, low HOA and well maintained, near future developments and another town home complex to be built nearby, ~1100 sq. feet, decent school district (Piedmont High School, 4/5, 10/10 on Redfin), 1 car garage and 1 carport w/a private patio, close to Target and other shopping areas, laundry downstairs and in the building. I went to the complex with my realtor and everything seems to be in good shape. The property is currently being rented out to Section 8 for $1750/month; however, market rates on CL are $2400-2500/mo.

Price: Town homes in the same complex were listed around $460K and selling around $20-30K above listing price; however, they were remolded prior to selling and staged. This property is off market and the seller is motivated (lost his job), so I hope to negotiate the price lower.

Here's the big catch on this property. The seller recently lost his job and wants to sell it dual agency so that he can save on commission costs. Because this property is off market and the seller is motivated, I think I may be able to get a good deal out of this one. I plan to live in it for a while and perhaps in a year or so rent out the entire town home to working professionals in SJ. 

I'm slightly worried because I'd be buying in a seller's market and property prices in the Bay Area have been rising so quickly the past few years (so, they might fall?). Furthermore, the property is cash flow break even, thus any gains will be in the appreciation, small rent increases in future years, and principal pay down. However, because I'm not as experienced and still young, I want my first property to be one I could potentially live in as well as have tenants that are high quality professionals that won't give me much trouble. 

It seems like the seller wants to sell this thing ASAP, since he lost his job and I want to see what BP thinks before I make a decision. If you want to see a more detailed financial breakdown of property, PM me and I can send you my Excel with all the specifics. 

Thanks, all. I really appreciated the help! 

Patrick