Archive for January, 2009
South County Realtors Association Wednesday Meeting
The South County Realtors Association welcomed Realtors and affiliates back from a two week break with a robust meeting and a great turnout. Over 25 real estate sales were announced and many of those sales were multiple-offer situations. There were two sales announced that were priced over $2 million. A lot of new real estate listings were also announced as well as changes to existing listings – lots of price reductions.
Three Morgan Hill real estate listings were on tour this morning: 408 Scotts Bluff Place ($978,000), 15750 Casino Real ($700,000) and 820 Mercedes Drive ($724,900).
820 Mercedes Drive is a well-priced 6 year-old single story home with 4 bedrooms and 2 1/2 bathrooms. The home is 2727 sq.ft. and it is situated on a 7841 sq.ft. lot. It is a lovely home with a nice floorplan, gated front courtyard, 3 car garage and a backyard with a very nice built-in barbecue, fireplace and patio area. Although the backyard is small, it looks to be very low maintenance (which is sounding better and better to me these days!)
820 Mercedes Drive sold for $1,049,000 in May of 2006. Please contact me if you have any further questions about this or any other listing.
Morgan Hill Homes Priced Under $400,000
There are currently seventeen single family homes in the Morgan Hill zip code area of 95037 priced under $400,000. There are twelve townhouse/condominiums priced under $400,000. Many of the residences are short sales or bank-owned properties, but for buyers with patience, they will be rewarded with a nice Morgan Hill home at a very attractive price.
Let’s take a look at a couple of homes.
17165 Birch Way, priced at $399,000, is a 1295 sq.ft. home with 3 bedrooms and 2 bathrooms on a 7405 sq.ft. lot. Birch Way is in the Nordstrom Elementary School boundary.
This home is a short sale. It was purchased for $664,800 in March of 2006.
199 Bender Circle, priced at $384,000, is a 1827 sq.ft. home with 4 bedrooms and 2 bathrooms. It sits on a 6300 sq.ft. lot.
199 Bender Circle is also a short sale. It was purchased thirteen years ago in 1995 for $203,000.
To view these, or any other properties, please call me at 408-892-9015 or email GMerrick@InteroRealEstate.com
South County Sales Week of December 29, 2008 – January 4, 2009
Sales ticked up last week in the south Santa Clara County towns of Morgan Hill, San Martin and Gilroy. Last week there were 24 residences that went from active to pending status. Of these, 22 were single family homes and 2 were townhouses/condominiums.
Of these sales, the list price ranges were:
Below $200,000 = 3 sales (12.5% of total)
$200,000 – $500,000 = 16 sales (67% of total)
$500,000 – $800,000 = 3 sales (12.5% of total)
$800,000 – $1,200,000 = 1 sale (4% of total)
$1,200,000 – $2,000,000 = 1 sale (4% of total)
As of January 4, 2009, there are 580 residential (single family homes and condos) listings active on the market in Morgan Hill, San Martin and Gilroy, which is 41 less than last week and 88 less than 3 weeks ago. There are currently 222 pending residential listings. Therefore, 28% of the total listings are pending under contract as of this date. Many of the pendings are short sales and therefore take a long time to close. This could keep our pending percentage up artificially high.
Tune in next week for an update on the number of sales in South Santa Clara County!
San Francisco Peninsula Real Estate Expert, Arn Cenedella
For the latest updates on the real estate market in the mid-peninsula regions of Santa Clara and San Mateo Counties, contact Arn Cenedella. Arn has been serving this area for 30 years and offers his clients superior knowledge and experience.
Investment Property Case Study
It has been quite a few years since a Bay Area residence could be purchased for investment purposes and have a positive cash flow from the income received from rent. But with the large drop in real estate sale prices, it appears that not only will there be great potential for gains in equity appreciation, but that the property will have a positive cash flow.
Let’s look at an example case study on a real property currently for sale in Gilroy. I chose this property because the Multiple Listing Service states that it is currently rented for $1900/month. This property is located at 9110 Church Street, has 3 bedrooms and 2 bathrooms, is 1132 sq.ft. and is on a 5227 sq.ft. lot. The list price is $279,000 (originally $369,000), and this property is a short sale.
Although we are given the current rent amount, there are other assumptions that must be made in order to analyze this potential investment. Here are the assumptions that I made:
- Purchase price = $250,000, 25% down payment = $62,500
- Loan: 6% interest rate with 1 1/2 discount points, 30 year loan, monthly payment = $1124.16, total acquisition cost = $5000 (including closing costs)
- Utilities paid by tenant
- Self-managed (no property management costs)
- 5% vacancy allowance
- Annual property taxes = $3125
- Annual insurance = $800
- Annual maintenance costs = $2500
- Investor’s federal tax bracket = 25%, California state tax = 9.3%
- Holding period = 7 years
- Annual appreciation, average over 7 years = 3% (hopefully this is a very conservative number)
- Projected sales costs = 7%
Using the above assumptions, the property can be analyzed as an investment, taking into account tax depreciation, cash flow before and after taxes. We will also look at the eventual sale of the property, looking at taxes due upon the sale and the after-tax rate of return.
- Income – Vacancy Allowance = Gross Operating Income = $21,660
- GOI – Operating Expenses = Net Operating Income = $15,235
- Subtract Mortgage Payments = $13,490
- ANNUAL CASH FLOW BEFORE TAXES = $1745
Looking at my assumption of selling the property in seven years with a conservative guess of 3% appreciation in value per year:
- Projected sale price in 2016 = $307,468
- Subtract cost of sale = $21,523
- Add 7 years of cash flow = $12,215
- Subtract remaining loan balance = $168,073
- CASH OUT ON SALE = $130,087
- Subtract initial investment of $67,500
- TOTAL GAIN ON SALE = $62,587
This example shows a viable real estate investment in south Santa Clara County with a before-tax rate of return of 8.55% on the investor’s initial $67,500 investment. Please consult your tax advisor for more information regarding the tax implications of buying, leasing and selling investment real estate.
Gretchen Merrick
cell (408) 892 9015
