Profile picture for scrubbo

If it rents out for 2000 a month and the renter stays on, why buy it?

Seriously, if it rents out for under 2000 and ignoring the renovation, you're getting 24,000 a year max return on a nearly one million dollar investment. That means you're making 2.4% return on the investment. Why would anybody pay that? Even assuming you could rent it for 3000, you still shouldn't pay more that about 460,000 -500,000 for that kind of income stream. (Remember, repairs, taxes, etc.)
  • Question refers to 1914 Bishop Rd, Belmont, CA 94002
  • June 06 2007
  • 0
    0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

Be a Good Neighbor. Be respectful and on-topic. No spam or self-promotion! See our Good Neighbor Policy.

 
 

Answers (10)

Profile picture for scrubbo
Ah, memories!  I doubt very much that Realtors like BelmontRealEstate and the other mindless cheerleaders who claim to be "professionals" despite not being able to see the giant housing bubble ever go back and see themselves saying there's no way bay area housing prices are going down.

Nope, it's always a good time to buy if you ask them.  Because it's always a good time to get a commission.  It's like asking Ronald McDonald if it's a good time to buy a hamburger.

The zestimate is almost down to the purchase price from 2007, which means the house would probably sell for 700k today, maybe a little less, maybe a little more.  I've yet to see a zestimate paired with a sales price that wasn't off by at least 10% in the bay area.  (And not in an 'underestimating' sort of way!)
  • March 26 2010
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

Profile picture for scrubbo
grataballi, notice that the house finally managed to sell at just over 800k, and I think the starting asking price was close on to a million. Renting for 2k, it's still 4 times what a 'good buy' would be.

I wonder how much people are enjoying their 'sweet sweet DEpreciation' this year.
  • October 03 2008
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

Profile picture for grataballi
Hey scarecrow.bike, here's your requested break, I'll help you pull your feet out of your mouth.

Belmont values have dipped a nice 10-15%, according to recent sales, and Zillow's estimates. Looking back at my comments nearly one year ago, I'd say anyone that was stretched making the payment then that jumped in on an ARM, (if they're still in the home), is headed for some extremely painful times given the value has headed south.

So, scarecrow.bike, "Sacramento prices have little to do with Belmont prices. Give me a break".... any more brilliant comments?
  • October 03 2008
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

Profile picture for scarecrow.bike
Sacratomato prices have little to do with Belmont prices. Give me a break.
  • September 27 2007
  • 1Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

Profile picture for grataballi
"And in the Bay Area, if I had to take an interest only loan in order to afford a home Iâ??d take that in a heart beat. Any principle you pay is just rewarded dollar for dollar when you sell."

Spoken like a true Realtor, "Let's get someone into a house that can't really afford it". That's what you're doing by pushing someone into one of those loans.

Take a quick peek at the Sacramento market, which can now be considered part of the "Greater Bay Area" - hundreds upon hundreds of foreclosures right now, the poor souls that were so certain that their "investment" would go up...so said the Realtor. (I believe that they're in the -20% recently in value)

"Just refinance in 5 years or before the loan is reset" - great advice. Yes, for a person that didn't have the means to finance properly in the first place, they get the opportunity to pay more for a home that may have not gained in value. Oops

It's not an ATM folks - it's a home.
  • September 06 2007
  • 1Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

Actually, if you don’t own a home, you are taking that bet.

We are talking about the Bay Area right—not the national market?

Examining past real estate performance in the Bay Area there is no evidence that I know of to suggest the sort of drastic downturn in home values you predict; I assume you are therefore predicating a new model for future Bay Area real estate. It would take something more than a typical business cycle to bring home values down the 37% you are projecting in the next five years. There is of course room to disagree about the future of Bay Area real estate. Some people are banking on in going up and others are banking on it going down; just like the stock market, there are winners and losers and you have to decide for yourself where to invest.

I addressed the paying of principle in my earlier post. I have a home in Ohio and it’s on a 15 year fully amortized loan. Why? Because for investment property in Ohio, you do want to pay off your home since the value is in eventually owning the home, not appreciation. The reverse is true in the Bay Area where it’s more important to have a home A) to live in and B) to be gaining the equity that the Bay Area supports. Don’t get me wrong, 30 year fully amortized mortgages are great for some people and in some situations. But if insisting on only a 30 year mortgage prevents you from affording a home, you’d be foolish not to consider other financing options. For example, a first time buyer—single person purchasing their first condo—realistically is not going to be living there the full 30 years and paying off the loan. Why not entertain a mortgage fixed for five or seven years—more appropriate to the time they’d no doubt be actually living there.

In your scenario my friend’s home would be worth $500,000 in five years instead of $800,000? Which means he only made $170,000? Not bad either.

Regards,

Drew
  • July 28 2007
  • 1Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

Profile picture for scrubbo
I'm willing to bet a house bought in the Bay Area for 800k right now will be worth 500k in a few short years. Subprime Loans are disappearing, Alt-As are tightening up shockingly fast, Freddie and Fannie are adopting stricter policies, and the only thing propping up housing prices was the easy loan money. Nobody could afford the houses based strictly on their actual salaries. 10-20% price growth for 5+ years with salary growth in the 2-5% range is completely unsustainable.

Also, if you take an interest only loan, you're not paying an principle.
  • July 19 2007
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

Yes but you’re calculating the 2.4% on the $1,000,000, not what the actual investment was; which in real estate is typically substantially less (highly leveraged). And there's no accounting for appreciation?

A good friend of mine bought his home in San Carlos ten years ago and argued at length with me about the cost or buying vs. renting. We worked out a pretty neat spread sheet together and he was absolutely right--so long as we did not apply any appreciation (and there wasn't much back then)--renting came out ahead. But as I recall even if we plugged in 1% the numbers shifted towards home ownership. He's one of the few people I know who has done relatively nothing to their home in terms of improvements. He bought it for $330,000 and it's now worth around $800,000. That works out to around $47,000 per year in equity and his house payment is only $24,000 per year including taxes.

And in the Bay Area, if I had to take an interest only loan in order to afford a home I’d take that in a heart beat. Any principle you pay is just rewarded dollar for dollar when you sell. On my first house I put that principle to work and fixed up the place. For every dollar I saved on principle and put into improvements I figured I got about a buck twenty-five.

Just some thoughts.
  • July 19 2007
  • 1Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

Profile picture for scrubbo
Yep. It's that kind of 'cost of owning' vs. 'cost of renting' calculation that keeps my wife and I from buying a house. Even owner occupied with a 20% down, 6% 30yr fixed, you're paying 4600ish in mortgage and 1000k a month in taxes, and say 500 a month in repairs/insurance/etc, making a total payment of about 6k. Compare that to the 2k rental price, or even the 3k rental price, and it makes very little sense to buy right now.

If your renter winds up moving, my wife and I are looking for a belmont rental. :)
  • June 06 2007
  • 1Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

you're right and i would never recommend that anyone buy that prop as a spec house-however as an owner occupy it is a great home in a great area, i only mentioned that the tenant WANTED to stay
  • June 06 2007
  • 1Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.