All Forum Posts by: Brian Tremaine

Minh

Very good point on the tax savings. I thought about that as I was doing the calculations but left it off thinking it was not consequential.. it is :) I end up calculating about a $2100/mo effective expenses. For homeowners who can afford the monthly cash flow it is well worth it if they plan to stay there for than ~7 years. 

I agree on the topping out in 2017 given our recent run-up and the upcoming election cycle. The timing is about right. I do think though the fundamentals indicate a plateau in prices and not a crash like 2007.

This link is from Aug 2014 but it is interesting looking at median household incomes in the Bay Area and where the economy fits relative to the rest of the US. Bay Area highest GDP per capita

Hi Dhiren

Welcome to BP! There is so much info here it is hard not to stay glued to the screen :)

I have lived in the Bay Area my whole life and in San Jose for 45 years. If you want to talk about real estate feel free to contact me. I work in high-tech but have invested in SFR with a buy & hold strategy for years.

I started a discussion this morning on the Bay Area RE market RE forecast? There are already a lot of good comments & perspectives.

In the South Bay Area a modest SFR costs $700K and at 4.1% interest with 20% down a buyers monthly PITI would be $3563. The same home could rent for $3000. It seems like this is a disincentive for renters to buy. Also, that $3563 is 56% of the median household income. So if they do buy they are house rich / cash poor. If rates go to 4.5% the expense goes to 58% of median household income. It seems like we are in a condition where renters can't afford to buy yet are already spending a high 47% of their income on rent. This is why I see a plateau until wages start increasing.

I'd be very interested in everyone's thoughts on where the RE market is heading in the next 10 years, primarily in current hot markets.

The SF Bay Area, as well as others, have shown a dramatic increase in both market value and rents in the last 5 years (2x?). With interest rates forecast to raise slowly in the next 10 years & the government GPD forecast to not hit 3% for 10 years I don't think wages are going to be climbing very fast. If this is the case then in areas such as the Bay Area I think SFR rents should probably plateau. Likewise I think SFR market values will plateau.

I think in the long run, since the job growth is still okay in this area I think both rents & MV won't decline but also will not be seeing the record increases of the last 5 years. 

Does this scenario seem plausible?

Given the current high values of the area I would then think it is better to hold onto property and bring the rents up to market rather than take on debt to buy additional property.

Thoughts?

Thanks all !

If it is 3000 square ft then I'd be paying about $2100/year in San Jose CA using Farmers.

There is another active discussion on this, insurance

Just make sure it is for the building & appliances and not personal property. Tenants need to have there own renters insurance. I pay about $0.72/sqr-ft/year using Farmers. I have been thinking about shopping around though.

Brian

How many square feet is the house? I have multiple SFR in SJ and I'm paying about $0.70/sqr-ft per year.

Replacement value should just be the going rate $/sqr-ft in your area X # sqr-ft. For example a 2500 sqrft house X $200/sqr-ft = $500,000. 

The fact that the house is functionally obsolete and the market value is $50k (house + land) does not effect the replacement value.

Arlen

Daniella

Jim

Thanks for all your inputs and advice. I will investigate the different areas in SD but I am leaning towards keeping my properties and gradually bring the rents up. I have 5 SFR with 3 paid off. The taxes are 1980's level and the 2 mortgages small and <3.75%. On the one hand I feel I have a lot of equity tied up, but on the other-hand the cash flow is good.

Another option I have is to scale-down my personal residence ( 0 mortgage) and use the cash I pull out to pay off the 2 mortgages on the rentals.

Hi,

I'm trying to decide if I need to change my strategy with a SFR I own in SJ clear & free. The market value is $675K and the rent is $2400 (below market but includes a recent increase). My NOI as a % of equity is 3.5%. I have owned it for 25+ years so taxes are low. I have taken 100% depreciation on my taxes.

I'm considering a MF Triplex in San Diego. If I assume a 700K purchase with 590K down in a 1031 exchange and I can get $3300/mo total rents my NOI is 2.6%. Cash flow is $1525/mo compared to $1943/mo for the SFR.

The numbers seem to indicate I should continue to hold and not move up to a MF. I own 3 other similar SFR in the same scenario. The only advantage might be getting a newer building.

Also, I am in my mid 60's and plan to semi-retire in 5 years so these properties are needed for cash-flow.

Thanks in advance for your help,

Brian