Tuesday, July 31, 2007

The Real Estate Bubble

I see this as an opportunity to buy. Why does everyone rush on the bandwagon and buy when everyone else is buying? Does this make any sense? Merril Lynch's defunct ads with the herds of bulls running gave way to their ads with one loan bull confident in his strategy - or his peice of turf. Real estate is a great asset to own. Ask anyone with a memory. The rougher times are better for buying. Rents are up too. Find a way to buy a house and rent it out. You'll be amazed what that one move will do to your fortunes 10 years from now.

Sunday, July 29, 2007

Cupertino Real Estate Homes for Sale

Address City Zip Price Beds Baths Square Feet
22031 RAE LN Cupertino 95014 $2,350,000 5 4+ 4727
10670 LARRY WY Cupertino 95014 $1,700,000 6+ 4+ 3200
1031 CRAIG DR San Jose 95129 $1,598,000 5 3 1/2 3022
10200 BYERLY CT Cupertino 95014 $1,495,000 3 2 1/2 2252
10895 DRYDEN AV Cupertino 95014 $1,450,000 3 2 2480
11171 BUBB RD Cupertino 95014 $1,399,000 4 3 2248
18650 CRABTREE AV Cupertino 95014 $1,395,000 4 2 1/2 2600
10620 S TANTAU AV Cupertino 95014 $1,268,888 4 3 1/2 2400
1779 LARK LN Cupertino 94087 $1,100,000 4 2 2168
10205 PASADENA AV Cupertino 95014 $998,000 3 1 1092
1141 FAIRFORD WY San Jose 95129 $998,000 4 2 1540
1168 SCOTLAND DR Cupertino 95014 $988,000 3 2 1190
17300 STEVENS CANYON RD Cupertino 95014 $950,000 1 1 786
807 SPRINGWOOD DR San Jose 95129 $889,000 3 2 1456
922 BROOKGROVE LN Cupertino 95014 $879,000 4 2 1432
18868 HUNTER WY Cupertino 95014 $799,000 3 1 1/2 932

These single family homes just came on the market in West San Jose and Cupertino. If you want any help with these or the rest of the market, please call or email me.

Trulia.com vs. Zillow.com

The head to head real estate titan clash of the year is about to erupt! Inman is having their annual conference on real estate in San Francisco this Wednesday. The real battle is the night before in SOMA (South of Market Area). In the first corner is Zillow with "Beer with Bloggers" at Thirsty Bear at 5pm - 7pm. This is the official Inman drink-a-thon sponsored by Zillow. Then Trulia answers from the second corner with "Tinis with Trulia" from 7pm to 9pm at John Collins just a short stumble away. My early odds are on Trulia. Martini's - come on man, that's way more hip than beer AND I heard the swag at Trulia will be very cool. Want an evite...?

Friday, July 27, 2007

Starbucks, Panda Express & Verizon

I just taught a real estate practices class at De Anza College and the above example came up. On the corner of Stelling and Stevens Creek Blvd in Cupertino there stood a Warehouse Records store of approximately 5,000 sqft. Nice hard corner, great demographics. Unfortunately for the owner Warehouse succumbed to technology and declared bankruptcy. The building owner then tried in vain to lease the space to another tenant although no one was biting on the 5,000 square feet. Along came an investor group that offered to buy the building for approximately $200 per foot. She agreed to the sale. They then demised the space into three and brought in Starbucks, Panda Express and Verizon. Then were able to sell the building for approximately $700 per foot within a year. Nice profit! Lesson to be learned - hire competent Realtors to advise you on what your best strategy is. In my humble opinion!

Thursday, July 26, 2007

One Rincon Hill Condos - Prices Rising

All the two bedroom units in the first tower are in escrow. Only units left are junior one bedrooms and a three bedroom unit. There will be some fall out - and there is a waiting list forming - though the project is a financial success. 2 bedroom units - if they come back on the market will be from $1.1M - $1.5M with decent views. This is a few hundred thousand more than when they were released. The second tower will be priced 15% higher due to demand and also higher construction costs. The fear of a glut of condos in San Francisco is unwarranted. Developments like this will spur demand and quality. Waiting list for the 2nd tower in early 2008.

Wednesday, July 25, 2007

Capital Gains

The capital gains exclusion for a married couple is $500,000 ($250,000 for a single person)if they have lived in the home two out of the last five years. In many expensive neighborhoods of the San Francisco Bay Area, this still leaves someone with a large capital gains bill. A solution is to convert the property into a rental for at least a year. Then, sell the property, take the exclusion and 1031 exchange the rest. This shelters all of the capital gains that remain and with the right planning, you can avoid the gains in the future too.

FICO credit scores and how to improve them

I just answered a question on Trulia.com about FICO credit scores:

"There are many ways to raise your credit score if you know what the formulas are that calculate FICO. One valuation is based on what your total debt is compared to your total credit lines on credit cards. If her aggregate credit line is $10,000 and she owes $10,000 then she's at 100% debt - which does not rate well. If she can request a credit line increase to $20,000. She quickly goes to 50% debt - which is a much more favorable FICO score."

My guru on credit scores and how to improve them is Robert Childs in the city of Walnut Creek in the San Francisco Bay Area. His website is www.ProFamilyFinancial.com
For some reason the link is not going through tonight. He can also be reached at 925-551-4990.

Stunning Duplex Sunnyvale Just Listed

Perfect owner occupant quality duplex just listed in Sunnyvale at 382 S Bernardo Avenue, Sunnyvale, CA 94086. Offered at $955,000. The building includes a 3 bedroom, 2 bath owner unit and a 2 bedroom, 2 bath 2nd unit. The larger unit is vacant and shows incredibly well. Location is excellent. North Sunnyvale on the Mountain View border. Great access to 85. Close to both Castro Street in Mt View and Murphy Street in Sunnyvale. Check it out.

1031 Exchange Strategies

45 days is not 45 days. Prior to putting your investment property on the market, please see what is realistic to trade in to. I educate my sellers on what is available with their sales proceeds in the investment market they are trading to. If they want a NNN property, then I provide them a list of conservative, good quality properties. These may not available when they come to write offers in the future, but similar properties will be. This base line confidence of what they can purchase, helps them move forward with the marketing and sale of their relinquished property. Once we have a buyer in escrow, and let's assume a 45 day close of escrow, we start making offers on replacement 1031 exchange properties. This gives my clients approximately 90 days to be in escrow. More so, it allows multiple offers to be made and due diligence to be accomplished way before anyone starts sweating. When you fill out the identification form for your intermediary, I want you to have one rock solid property in escrow with contingencies removed and two available back ups - just in case. That's how to manage an exchange.

Commercial Real Estate & Cheap Dollar

The Euro just hit $1.40!!!! This trend is not going to change for a while. That makes US real estate very attractive to those with Euros. Read Pat Kitano's blog for more info on how this affects commercial and high end residential real estate (transparentre.com). On a personal note, I bought a Spain condo back in 2001 when the Euro was $.85!!!! I should have bought a whole block. Oh well, next cycle.

Saturday, July 21, 2007

Conduit Commercial Lenders - Rate Changes

Beware the final loan committee review when wanting to close your commercial real estate financing. The resale/secondary market for the conduit lenders is less attractive than what it was months ago. Recent last minute issues coming out of the final review have been less loan dollars and higher spreads. This even after giving a loan commitment with specific spreads weeks ago. This is a very unethical and crappy way to conduct their business. Buyers are stuck in this situation when they have deposits in jeopardy and exchange clocks ticking. Consumers (even shopping center buyers) have memories - as do real estate brokers..like an elephant.

Friday, July 20, 2007

Just Listed Homes for Sale in Cupertino

The following homes, townhouses & condos just hit the market in the Cupertino and West San Jose areas. If you need any help on any of these homes, please call me at 408-342-3155. Thanks!

10280 PHAR LAP DR Cupertino 95014 $2,399,000 5 4+ 4000
10411 BEARDON DR Cupertino 95014 $2,098,000 5 3 1/2 3500
15595 SWISS CREEK LN Cupertino 95014 $1,825,000 5 4+ 3641
10913 LEAVESLEY PL Cupertino 95014 $1,799,000 5 4+ 2700
10145 CAMINO VISTA DR Cupertino 95014 $1,198,000 3 2 1790
5521 CASTLE GLEN AV San Jose 95129 $1,150,000 4 2 1720
1151 CORDELIA AV San Jose 95129 $1,150,000 3 3 2009
10514 ORANGE TREE LN Cupertino 95014 $1,098,000 3 2 1/2 1740
5091 MITTY WY San Jose 95129 $899,000 4 2 1655
1205 MARILLA AV San Jose 95129 $898,888 3 3 1659
8061 PARK VILLA CI Cupertino 95014 $828,000 3 2 1224
10618 N BLANEY AV Cupertino 95014 $828,000 3 2 1/2 1564
5162 PARKFIELD AV San Jose 95129 $769,000 3 2 1323
10720 CULBERTSON DR Cupertino 95014 $768,000 3 1 932
21053 RED FIR CT Cupertino 95014 $699,950 3 1 1/2 1265
19960 BRENDA CT Cupertino 95014 $698,000 2 2 1/2 1343
4800 LA FIESTA PL San Jose 95129 $698,000 3 2 1/2 1496
20488 STEVENS CREEK BL #1102 Cupertino 95014 $650,000 2 2 1177
4425 NORWALK DR #00010 San Jose 95129 $390,000 2 1 924

Thursday, July 19, 2007

Stock Market or Real Estate

...which to invest in? People make money in real estate investments every day AND people make money in the stock market every day. Also true is the opposite. Real estate took a long rise up over the last few years and people made a lot of money. The real estate market that most people talk about is single family residential. In growth areas, these new homes kept rising in value. Now the pendulum is swinging back. The stock market also has made huge increases this year. Does it keep going forever - please know the answer is no. Divercity is tauted as the answer. I say quality is a better answer - both in property and in stocks. Google, Yahoo, HP - all strong performers which will weather the storms. San Francisco, Phoenix, Denver, Los Angeles - also strong metros that will stay healthy long term. Not necessarily their suburbs - those areas are like the front and the back of the roller coaster - more excitement - more green faces. Same goes for growth stocks, small cap stocks, emerging markets, etc. Stay in the middle, stay in quality - do better.

Wednesday, July 18, 2007

Santa Cruz Apartment Building for Sale

This is a very nice, renovated building near the world famous Santa Cruz Beach Boardwalk. Nine units, all one story, on a decent sized lot. $1,395,000 which is a 12.9 GRM! Very good gross rent multiplier for the area and for the relatively low price point. I'm a big fan of one story apartment buildings. Leaks don't disrupt two units, tenants don't bang on their ceilings and railings cannot be fallen over. There tends to be a better chance of a land play in the future too.

San Jose Shopping Center for Sale

This is a very well price strip center in San Jose's North Valley. Fully occupied by local tenants (which I believe provides very good stability) and two name brand tenants plus a cell tower. This is a good deal. $3,950,000 at a 6.6% cap rate!!! The land alone at that price is $110 per foot - not bad for long term development.

Shopping Center Investments

Article I just posted on Inmanwiki.com:

I have been helping investors either purchase shopping centers or exchange into them. My client base typically has built equity in a rental house or a small apartment building and are interested to ease management and increase cash flow. Multi tenant shopping centers are the best choice to preserve equity, lessen management and provide cash flow with stability. A fully occupied center in a strong market such as the Phoenix metro will cost $2-5M with an approximate 7% cap rate. This tends to be a fully occupied center with local, regional and national tenants. All tenants on NNN leases so the risk of expense fluctuations is borne by the tenants. Management fees are paid in the NNN charges also. This stable and strong situation is coupled with the cost of financing which may be 6.25% or lower for conduit 10 year money, some of which may have a couple years of interest only payments. Internal rates of return may be as high as 12% after tax. With housing growth continued to grow in that market (and many others), this is a great trade or purchase.

Silicon Valley and Rents

I just spoke to a Tax Accountant who commutes in to Mountain View every week from the Central Valley. He has stayed at the EconoLodge for the past 4 years after he sold his home in Palo Alto and moved east. The room rates he was getting are going from $100 per night to over $200. That is still a deal for a room in Mountain View during the week. Hotels room rates are soaring and empty rooms are very hard to find. Smells of 1999... My girlfriend's comment was, I should be able to rent out my 1 bedroom condo for easily $2,000 per month. Smells of 2000...

Tuesday, July 17, 2007

Trulia.com sooooo Coolia

I've spent the last week learning the ins and outs of Trulia.com It is a very well done site to search for homes, get area information and has a new forum to ask the cyber-community questions about real estate. The site fuses together statistical data from all sorts of sources to allow for buyers to make good, informed choices. The pictures are pretty too...!

The Real Estate Market Slows in Summer

This is time tested and true. I have three, count them, one, two, three buyer clients that are holding off on their home search due to summer vacations. We are not talking, I'm going to the south of France for a month neither. These are just normal one week jaunts somewhere where Southwest Airlines flies. Although short, these trips temporarily avert the focus on writing offers. This is also the perfect time to be buying a home. Listings are at their peak and buyers are scarce.

Monday, July 16, 2007

San Jose Home Offer

I agree with the theory that the first offer is the best offer. When shopping for homes in a fluid market, a buyer will have seen all the current inventory in a certain neighborhood quickly. Some of these buyers buy what is sitting on the market and others find that the homes do not satisfy their needs enough. These people sit on the fence and wait for the new listings to come out. Once one does that fits their needs (and with the realization that this is a rare occurance) they make a serious offer with the intent to purchase that home. This coupled with the fact that new listings generate a lot of activity within the first two weeks gives credence to the fact that the first offer will be the best. As a home sits on the market, the offers that come in will tend to cut more at the price. A seller who gets an offer quickly should not think "we priced it too low". They instead should be happy that their agent advised them correctly.

Saturday, July 14, 2007

New Home Listings in Cupertino 2nd week of July

1. 6074 Alcante Drive, San Jose, CA 95129, $1,285,000, 4 bed, 3 bath, 2082sqft
2. 1104 Del Cambre Drive, San Jose, CA 95129, $958,000, 4 bed, 3 bath, 1880sqft
3. 7822 Festival Drive, Cupertino, CA 95014, $1,088,800, 3 bed, 2.5 bath, 2012sqft
4. 18721 Newsom Ave, Cupertino, CA 95014, $789,950, 3 bed, 2 bath, 1249 sqft
5. 10399 Rivercrest Court, Cupertino, CA 95014, $1,395,000, 3 bed, 2.5 bath, 1915 sqft
6. 7512 De La Farge Drive, Cupertino, CA 95014, $1,068,888, 3 bed, 2 bath, 1300 sqft
7. 1038 Craig Drive, San Jose, CA 95129, $945,000, 4 bed, 2.5 bath, 1363 sqftSan Jose
8. 850 Alderbrook Lane, Cupertino, CA 95014, $928,000, 3 bed, 2 bath, 1201 sqft
9. 1631 McGregor Way, San Jose, CA 95129, $1,100,000, 4 bed, 3 bath, 2004 sqft
10. 10407 Avenida Lane, Cupertino, CA 95014, $1,595,000, 4 bed, 3 bath, 2429 sqft
11. 6608 Danridge Drive, Cupertino, CA 95014, $1,199,000, 4 bed, 3 bath, 1800 sqft
12. 5066 Doyle Road, San Jose, CA 95129, $2,250,000, 4 bed, 4+ bath, 4227 sqft

If you want any further information on these Cupertino area homes, let me know.

Friday, July 13, 2007

Wrap Financing

The time of creative house financing is upon us. With the major shake out of the zero down, stated-income loan debacle will come the need to sell property the creative way. Are there still many buyers out there who want to buy homes? Yet, 100% financing is gone and homes will sit if market forces don't change to allow the sales to happen. The last wrap I participated in was in 1999. It was on a very ugly, old and quite un-finance-able fourplex in San Jose. The seller wrapped the note for 100% of the purchase price and kept the underlying financing in place. I paid the seller monthly and he paid his lender monthly. After a couple years, when rents rose, I refinanced the property and the seller went away happy (and unencumbered). This creativity goes away in hot markets where every buyer has cash, financing and motivation to buy, buy, buy. By the way, I don't suggest this method of operation, it's not typically allowed by lenders. Peace!

Wednesday, July 11, 2007

Zillow - give me a pillow

Zillow.com still is not accurate with house prices based on my scientific and highly biased survey by myself of my house. About an 18% below market valuation of a simple track house in Menlo Park, CA. What would I have said if the valuation was 18% higher than what I thought the value was? Maybe not blogged this issue. Like I said, it was a very biased survey. I hope nobody makes buying decisions based on Zillow. I sure won't list my house based on Zillow!

Automotive Commercial Real Estate

In the Bay Area, I know that available lease space is hard to come by if you have an automotive use (read dirty - as in auto repair, smog, tires, muffler, etc) The difficulty in finding lease space, due to neighborhood issues, zoning, averse landlords, etc. makes lease rates higher and keeps occupancy very high. This seems like a good niche to invest in. I agree. Expect to pay more though in lender margins and the cost of a Phase 2 environmental report on each sale or refinance. My mantra is - people make money doing what other people won't. Mechanics do and landlords that rent to mechanics do.

Tuesday, July 10, 2007

Sometimes the Experts are Not

In the Mercury News Real Estate section this last weekend, a mailed in question was answered about selling a triplex that the owner lived in one unit. He wanted to sell his place and 1031 into a condo to live in. The "expert" completely disallowed any 1031 possibility because he lived in the property. This is not true depending on how he filed his taxes. He very well may have listed his 1/3 portion as his principal residence and the other 2/3 as investment property. Thereby allowing him to exchange his investment portion via the 1031 exchange. Could he exchange into a condo? Yes, though he cannot live there until he converts it to investment property, ideally at least after one year of renting it out. Then, he also would be allowed his capital gains exclusion for the 1/3 portion. From this, he could buy a condo and live in it right away. Let's talk to a CPA please.

Monday, July 2, 2007

Larger Loans - Better Rates

If you need more money, you get better rates. That's not an addage that bankers go by, although, they sure seem to act that way. The lowest margin commercial (read conduit) financing starts at loans above $2,000,000. Margins over the 10 year approaching 120 basis points. The same loan under $1,000,000 and you may be paying margins of 190 or more basis points. Not fair in my book. Something must be said about a larger investment property providing more stability in a market. Especially in a less costly market, where a $3,000,000 shopping center IS significant. Not so in the Bay Area, where the donut shop I patronized today would sell for that amount. My eyes glaze over...