Percentage of Distressed Sales in South County
Date: Sunday January 24, 2010Posted in: real estate, short sales, Morgan Hill, San Martin, Gilroy, foreclosure, bank-owned
Diane Kawell, an award-winning Realtor in the Tacoma/Seattle area of Washington, mentioned in a comment on my previous post that 44% of all residential real estate sales in her area were distressed sales, i.e. sold listings that are short sales or bank-owned REOs. This made me curious about what the numbers are in our south Santa Clara County area.
I looked at each community of Morgan Hill, Gilroy and San Martin separately for single family home and condo/townhouse listings sold on the MLS within the past 365 days. Here is what I found:
Morgan Hill: total sales = 444, distressed sales = 231, percentage distressed = 52%
Gilroy: total sales = 659, distressed sales = 491, percentage distressed = 75%
San Martin: total sales = 36, distressed sales = 23, percentage distressed = 64%
I was somewhat surprised at the large percentage numbers. Buyers are buying “the deals” and the price discounts on distressed properties are very attractive. I suppose that I should have been expecting these large percentages. When I look back at the real estate properties that I sold within the past 365 days, 55% of those properties were either short sales or REOs.
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Investment Property Case Study 2
Date: Friday February 6, 2009Posted in: REO, rentals, Morgan Hill, bank-owned, investment property
As we saw in my previous investment property case study , south Santa Clara County real estate can now be purchased for investment purposes and have a positive cash flow from the income received from rent. Not only will there be a positive cash flow, but there is great potential for gains in equity appreciation.
Last month I looked at an example case study on a property in Gilroy and this month I will look at Morgan Hill. The property chosen for this case study is 17230 Torrey Way located near the Morgan Hill City Hall. There is a pool and spa in the backyard of this 4 bedroom, 2 bathroom, 1340 sq.ft. home sitting on a 7370 sq.ft. lot. The current list price of this home is $359,900 and it is a bank-owned property. This property has been on the market for 37 days. Most likely the list price is a little high for this 52 year old home in an old part of Morgan Hill. Therefore I will make the assumption that the bank will accept $325,000 for the purchase of this home.
Here are the assumptions that I made:
- Monthly rent amount = $2000
- Purchase price = $325,000, 25% down payment = $81,250
- Loan: 5.5% interest rate with 1 5/8 discount points, 30 year loan, monthly payment = $1384, total acquisition cost = $6000 (including closing costs and points)
- Utilities paid by tenant
- Self-managed (no property management costs)
- 5% vacancy allowance
- Annual property taxes = $4062
- Annual insurance = $1000
- Annual maintenance costs = $3250
- Investor’s federal tax bracket = 25%, California state tax = 9.3%
- Holding period = 7 years
- Annual appreciation: we’ll look at 3% and 4%
- 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 the total gain on the sale.
- Income - Vacancy Allowance = Gross Operating Income = $22,800
- GOI - Operating Expenses = Net Operating Income = $17,738
- Subtract Mortgage Payments = $16,608
- ANNUAL CASH FLOW BEFORE TAXES = $1130
- ANNUAL CASH FLOW AFTER TAXES = $3,090 (takes cost recovery (depreciation) into account)
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 = $399,709
- Subtract cost of sale = $27,980
- Add 7 years of cash flow = $21,630
- Subtract remaining loan balance = $243,750
- CASH OUT ON SALE = $149,609
- Subtract initial investment of $87,250
- TOTAL GAIN ON SALE = $62,359
Looking at the same 7 year holding period but with a 4% average annual appreciation:
- Projected sale price in 2016 = $427,678
- Subtract cost of sale = $29,937
- Add 7 years of cash flow = $21,630
- Subtract remaining loan balance = $243,750
- CASH OUT ON SALE = $175,621
- Subtract initial investment of $67,500
- TOTAL GAIN ON SALE = $108,121
The increase in annual appreciation from 3% to 4% increased the gain by $45,762.
Please consult your tax advisor for more information regarding the tax implications of buying, leasing and selling investment real estate.
Morgan Hill Real Estate: SFR under $400,000
Date: Thursday January 29, 2009Posted in: REO, real estate, Morgan Hill, bank-owned, investment property, first time buyer
There are currently 19 active listings of single family residences (SFR) located in Morgan Hill, CA on the Multiple Listing Service priced $400,000 and under. These prices were unheard of in 2005 and 2006, and, while those higher prices are long gone now, they will be back. Smart buyers are taking this opportunity to purchase their first home or an investment home. Many of these investment homes are cash-flowing positively due to the low interest rates currently available to investors.
A home in a nice east-side Morgan Hill neighborhood came on the market yesterday.
1420 Kelly Park Circle is a 3 bedroom/2 bathroom, 1299 sq.ft. home on a 5,227 sq.ft. lot. This is a bank-owned home (i.e. usually smoother transaction than a short sale.) The Kelly Park Circle community has an HOA pool/spa and the association fee covers many amenities for approximately $193/month. This neighborhood feeds into Nordstrom Elementary School.
Homes in the Kelly Park Circle neighborhood sold in the mid-$600,000s during the peak of 2005 and 2006. For more information on this home or other residences in our South County area, please contact me. I am also able to lead you through an investment analysis to determine if any property will suit your needs.
Condition of South Santa Clara County Distressed Properties
Date: Sunday November 23, 2008Posted in: REO, real estate, short sale, Santa Clara County, Morgan Hill, South Santa Clara County, San Martin, Gilroy, foreclosure, housing inventory, Morgan Hill Real Estate, Gilroy real estate, bank-owned
As I mentioned in my last post, I showed a lot of bank-owned residences in Los Banos on Friday. One thing that struck me was that for the most part (with a few exceptions), the properties were in good condition. Out of the ten that we saw, at least half of them had been freshly painted and new carpet was installed.
This goes against what most people think of when they consider the condition of REOs and short sales. But the condition of these homes is sometimes ”turn-key”, meaning that you could move into the home and not have to do anything.
In the south Santa Clara County cities of Morgan Hill, San Martin and Gilroy, there are currently 346 distressed residential properties that are either REOs (bank-owned) or short sales. See my previous post that defines the meaning of these types of sales. These homes range in price from $1,999,999 for a short sale at 12895 Ales Place in San Martin,
to $104,900 for a bank-owned townhouse at 7759 Murray Avenue in Gilroy:
Both of these properties appear ready to move into.
If you like the prices of the distressed properties that are on the market now but are reluctant to even look at them because you are concerned that all distressed properties are going to be terribly damaged, please reconsider. As your agent, I can weed out the properties that are in poor condition and only show you the properties that require very little work to make them habitable.
Good Thing Gas Prices Are Down
Date: Friday November 21, 2008Posted in: real estate market, REO, real estate, real estate buyers, buying a home, Santa Cruz, Los Banos, referrals, bank-owned
I have many great repeat clients and two of them have called me within the past week to help them in locations other than Santa Clara County. I suggested to each of them that they may want to use a Realtor who is located closer than I am to their property sale or purchase, but both sets of clients insisted on working with me. And who am I to refuse?! Not only do I know that I can do a “way beyond expectations” job for them by doing a lot of research up front along with the excellent service I always offer, but I also get to spend time with some wonderful people and help them achieve their real estate goals.
The first call came from some previous clients who asked me to do our sixth transaction together. They’d like me to sell some investment property they have in Santa Cruz. I sold this home to them several years ago.
They now have some very fortunate tenants living there from UCSC who are lucky enough to live in a beautifully remodeled home with a lovely backyard. This home has a wonderful floorplan with 4 bedrooms and 2 1/2 bathrooms. The choices in colors and finishes are incredible. Look for it on MLS sometime early next week.
So yesterday I had lunch at Cafe Sparrow in Aptos (so delicious!) with the Santa Cruz clients. Life is good. Then today, I trek off to Los Banos with my investment buying clients. Life is still good. I hadn’t been to Los Banos in a while and it has grown into quite a city. Many new businesses and nice housing developments.
My clients and I both did a lot of research on the city regarding investment property prior to our house tour today. I talked with several people who gave me first-hand accounts on the excellent rental market in Los Banos. My clients and I saw 10 homes today that met their criteria: 5 years or newer, 4 bedrooms, and priced under $150,000. Homes meeting the age and bedroom criteria in 2005 would have been selling in the $400,000s. We found some homes that may fit the bill for my clients. We’ll see how the REO negotiations go….
Most of the homes we saw in Los Banos were bank-owned homes and, although this home pictured above was also bank-owned, most of them had dead grass in the front yard, and no landscaping at all in the back yard. And most appeared to be in good condition, with a few exceptions.
Obviously, I travel far and wide for my clients. If you need help anywhere in the Bay Area, I can help you with advice, with agent referrals or with my very own expertise!
