How's The MarketInterested in buying a rental property?  Perhaps you were thinking that a 20% rental property down payment would do the trick to get you started as a real estate investor?  That may work in some places. In most of the U.S., though, you’ll need 30% down to be “cash flow neutral”, meaning that you aren’t losing money each month.  In pricey Silicon Valley, though, often it takes more than a 40% down payment on an investment property just to break even.

Today a friend and past client asked me exactly this question.  The investment property in mind, a townhouse,  would pull in a monthly rent of about $2600 to $2800 when occupied. (Remember, you have to also factor in at least some vacancy rate.)  The list price for this townhouse is about $650,000. (Side note:  with a condo or townhouse,  insurance coverage is probably going to be a lot less costly than with a single family home.  The estimates below are for a townhome.)

Where do you think the cash flow neutral or break even point would be in terms of the down payment?    That question is today’s case study.  Have a look at the various scenarios of  20% down, 30% down,40% down and 50% down:

Investment property down payment needed to be cash flow neutral

If my calculations are correct, you really need to put about 50% down to buy this particular Santa Clara County townhome and have it support itself.

Is that a good deal?  Not really. At least not if your main focus is cash flow.

There are other places in the country where you can put a lot less down and break even or have a positive cash flow.

Of course, cash flow is one motivator.  Another, though, is appreciation.  Depending on your own goals, you may be far more interested in appreciation than cash flow.  If that’s the case,  Silicon Valley may be exactly what  you’re looking for as an investment buyer.  Those places where the down payment can be smaller may not have the same upside potential with appreciation as we have here in the San Jose area, or the San Francisco Bay Area as a whole.

Interested in becoming a real estate investor? Have a good down payment saved?  Please call or email me and we can chat.  If Silicon Valley isn’t the right place for you to make your real estate investment, I can introduce you to wonderful Realtors in other areas where the numbers may be more favorable.


See also: Buy a Los Gatos home or real estate investment property

What does a title company do? People helping buyers, sellers, real estate professionals with title and escrow work.What is the function of a title company or title insurance company in real estate purchases or refinances? In Silicon Valley, and the San Francisco Bay Area and northern California generally, title companies perform two specific services:

  • provide title insurance for real estate being bought or borrowed against
  • provide escrow services, acting as the neutral third party which takes in the deposit money and holds it during the escrow period, disbursing all funds when escrow closes and having someone go to the county recorder’s office to record the deeds to complete the sale

Title insurance companies research the title history, find out what recorded easements may exist,reveal any encumbrances (leins, clouds on title, etc.). An escrow officer from the title company is usually the professional with a notary’s license who will sign off home buyers and sellers on the final documents, too.

There are many other services that title companies provide. Many people wonder how to hold title, and while neither your Realtor nor your escrow officer can advise you on how to do so, the title companies all have a little 1 page handout explaining the major concepts for each option on how to hold title.

If you need to sign off on the final documents out of town or even out of the country, the escrow officer and her or his support staff will work with you to coordinate it. (It can be a little tricky if overseas and outside of the U.S.).

If you are selling your house or condo and discover that an old loan that you paid off is still showing up in the preliminary title report, the escrow officer at the title insurance company will work to get it resolved and removed.

The customer service department at title companies can research the chain of title, too. Sometimes it’s quite interesting as the chain brings you back to the time of patents and land grants, with hand written deeds in a style of cursive which is somewhat foreign to us today.

There are many other things that title companies do – big and small – and most of them are “behind the scenes” that few of us ever witness directly, but without which no one would be able to close out sales with the safety net of title insurance which we value so much.

Title insurance can be a confusing concept, but I wrote about it elsewhere on this site.

What Is Title Insurance and Who Pays For It?
What is a preliminary title report? Why does it matter?

What happens at signoffThe sign off is an appointment in which home buyers and sellers sign the final papers which will lead to closing a few days later.  (In some states, the closing happens when all parties sign, and both sellers and buyers meet at the same time for the official paperwork.  Not so here in Silicon Valley, though.)  Usually the appointment takes place at the title company which is also handling the escrow – that is the norm in northern California.  Sometimes either buyers or sellers cannot be available during regular business hours.  In that case, they have an option of paying for a mobile notary to do the signing at their home or some other convenient location.

The closing, or close of escrow, takes place when the deed is recorded with the county at the County Recorder’s Office.  Usually each title company will send one person to record all of the deeds scheduled to close that day for that firm.    Once a particular property has been recorded, we say “it is on record”.  Someone from the title company will call or email the clients or the real estate agents (or both) to confirm that it’s on record.  For short, they often say “we have confirmation” – meaning that they’ve been told that the deed was recorded.  The property transfer happens when the deed is recorded – not when the papers are signed.

Related reading:

Who should be at the sign off or closing in Silicon Valley?

What is escrow?

  1. 6 beds, 5 full baths
    Home size: 5,835 sq ft
    Lot size: 19,514 sqft
  2. 3 beds, 2 full baths
    Home size: 1,144 sq ft
    Lot size: 6,882 sqft
  3. 4 beds, 3 full baths
    Home size: 2,249 sq ft
    Lot size: 10,236 sqft
  4. 3 beds, 2 full, 1 half baths
    Home size: 2,055 sq ft
    Lot size: 1,742 sqft
  5. 4 beds, 2 full baths
    Home size: 1,855 sq ft
    Lot size: 6,446 sqft
  6. 3 beds, 2 full, 1 half baths
    Home size: 1,437 sq ft
    Lot size: 2,178 sqft
  7. 4 beds, 2 full baths
    Home size: 1,626 sq ft
    Lot size: 6,098 sqft
  8. 5 beds, 2 full baths
    Home size: 2,000 sq ft
    Lot size: 6,926 sqft
  9. 3 beds, 2 full baths
    Home size: 1,244 sq ft
    Lot size: 6,098 sqft
  10. 3 beds, 2 full, 1 half baths
    Home size: 1,676 sq ft
    Lot size: 1,350 sqft

See all Real estate in the city of Campbell.
(all data current as of 4/30/2017)

Listing information deemed reliable but not guaranteed. Read full disclaimer.

Same House Different ValuationsOne big challenge we have in today’s Silicon Valley real estate market that we didn’t have 20 years ago is the proliferation of misinformation on real estate or home values due to the prevalence and popularity of online home valuation websites.  Everyone wants an easy answer, but often the easy answers aren’t all that accurate.

Sometimes my clients present me with “THE VALUE” of property per one of these online sites and in some cases, they challenge me to disprove it (Zillow says it, so it must be right, goes the thinking).  If they want to buy a house which is listed for more than the auto-comped value, it may cause some emotional anguish.  And if they want to buy one which is listed for less, they may feel a little giddy – unless multiple offers are looming.  Same with home sellers.  They agonize when Zillow, Trulia or some other big name site places a worth on their property which is less than what they feel it should be.  (It is not uncommon for most home owners – including real estate agents, by the way – to feel that their home is really going to sell for 5-10% more than is likely. But this is an additional problem.)

Over the last couple of days, I used various web sites (Eppraisal, Trulia, Zillow, Chase, FindTheBest, SmartZip, DataQuick, HomePriceReview), some of which you may have heard of and perhaps others you haven’t, to spot check the value of a particular house in San Jose’s Cambrian area (95124, Cambrian Gardens in the Little Branham area).  Most of these provide the number or range without an account or email address.  A couple of them came from other sources (SmartZip and Dataquick) listed, so is second hand info in those cases. Also, some of these which do require your contact info will provide what you give to a real estate agent who will then want to follow up with you (HomePriceReview, for one).

What might surprise a lot of people is the huge discrepancy in values given.

In our sample of the San Jose house above, the estimated value ranges from $624,239 all the way to $888,000.  That’s a whopping $263,761 difference, which is more than a typical down payment, well more than 30%!   Zillow’s stated goal is right in line with this spread, though.  Zillow says it targets being within 20% of the correct value 80% of the time.

How can they disagree so much?

Continue reading

Have your own agentSome Silicon Valley home buyers do not want to have their own buyers agent, but instead expect that they can find properties in the San Jose area that they want to see and request that the listing agent show it to them in a private appointment.  These same potential buyers may be surprised that the listing agent may refuse to show them the listing outside of a regularly scheduled open house – that is, if the seller is permitting open houses.

What’s going on?

In earlier articles we’ve discussed the need for a buyer broker agreement (verbal at the least, but possibly in writing) and why you, as a buyer, ought to have your own representation at the negotiation table.  (If you missed these, see the links under “related reading” below.)   Today I want to dispel the myth that the listing agent is required to open up and show condos or houses for sale to anyone who calls and requests seeing them and explain why that’s the case.

Showings of homes for sale are determined by the listing agreement or contract between the home seller, the listing agent or Realtor and the broker

The most important thing for buyers to understand is that the accessibility of the home for viewings depends upon the agreement, verbally or in writing, between the owner of the property and the agent/brokerage hired to market, negotiate, and sell the real estate.   It’s not an “on demand” situation where an interested buyer can insist on seeing the property as desired. Here are some of the expected scenarios and reasons why showings are somewhat restricted most of the time: Continue reading

Hot sellers marketWhat does it mean when real estate professionals, journalists and consumers refer to a “hot seller’s market“?  Simply put, it means there’s an imbalance in the market which is very much in the seller’s favor.  In terms of supply and demand, it translates to far more demand than available inventory for sale (supply). It’s a good time to sell, but a hard time to buy.

We measure or note the market conditions using a variety of data points;

  • days to sell (and days on market for all homes, including unsold)
  • sale price to list price ratio
  • absorption rate (months of inventory, weeks or days of inventory)
  • number of listings available vs pendings and recently closed homes
  • rapid rise in home sale prices, especially if to unsustainable levels
  • number of offers received on a property at once (multiple offers)
  • buyers upping their price and improving their terms voluntarily, without getting a counter offer
  • buyers writing offers with few or no contingencies, fast close of escrow or other extremely strong terms
  • overall market trends of inventory lessening, prices rising, buyers getting more desperate – how all of these look when viewed as a whole

While some of the above can be easily tracked on our multiple listing service, some are not findable anywhere except in conversations with real estate agents who are actively working the market, writing and receiving contracts.    What isn’t tracked includes the number of offers placed on a home for sale, whether buyers are engaging in “bidding war” tactics such as upping their price before even getting a counter offer, or offers with no contingencies.

Related reading:

A summary of tips for multiple-offer situations in Silicon Valley real estate contracts

Should you write an offer with no contingencies? What is the risk with a non-contingent offer?

Mistakes that buyers’ agents make which damage their clients’ chances of winning in multiple offers

  1. 6 beds, 4 full baths
    Home size: 2,930 sq ft
    Lot size: 6,011 sqft
  2. 3 beds, 2 full baths
    Home size: 1,798 sq ft
    Lot size: 6,272 sqft
  3. 2 beds, 2 full baths
    Home size: 1,025 sq ft
    Lot size: 1,742 sqft
  4. 4 beds, 3 full, 1 half baths
    Home size: 2,144 sq ft
    Lot size: 6,011 sqft
  5. 3 beds, 2 full baths
    Home size: 1,372 sq ft
    Lot size: 5,793 sqft
  6. 3 beds, 2 full, 1 half baths
    Home size: 1,862 sq ft
    Lot size: 7,100 sqft
  7. 5 beds, 2 full, 1 half baths
    Home size: 2,216 sq ft
    Lot size: 5,967 sqft
  8. 2 beds, 2 full, 1 half baths
    Home size: 1,300 sq ft
    Lot size: 1,045 sqft
  9. 3 beds, 3 full baths
    Home size: 2,131 sq ft
    Lot size: 6,185 sqft
  10. 4 beds, 2 full baths
    Home size: 1,464 sq ft
    Lot size: 5,009 sqft

See all Real estate in the city of Sunnyvale.
(all data current as of 4/30/2017)

Listing information deemed reliable but not guaranteed. Read full disclaimer.

Location issues and impact on home valuesSavvy Silicon Valley home buyers tend to look at properties with an eye toward what they can change versus what they cannot change.  It’s a pain, but not really so hard, to make cosmetic fixes or upgrade a house or condo.  It’s more work, but still possible in most cases, to move walls around.  With some houses, an expansion may be an option.

But the one thing that cannot be changed is location issues.  Things too nearby like high voltage power lines, train tracks, freeways, schools, busy roads, commercial properties, less expensive properties or types of residences (such as apartment buildings) will pull the property value down.  Similarly, being on a T intersection, having neighbors with run down houses will also impact pricing because again, the home seller cannot control or mitigate their impact.   The question is how much of a home pricing impact will it be?

From a slightly busier than normal street to a quieter one, it could be as little as 3-5%.  Being directly on a main road, it could be 10% or more.  Pile up several unfixable issues and it will possibly be more, perhaps 15%, or higher. In general, 10% is a good working number to use but it could be too high or too low based on your particular situation. Continue reading

See you thereReal estate practices vary from state to state and in the case of California, even from one region to the next.  How the settlement or closing appointment goes is one of them.

Many of my east coast friends and relatives have told me that when they close on realty transactions, everyone goes to the same table – buyers, sellers, the attorneys for each and the real estate agents for each.  Not only do they all meet in one room to finalize the deal, but when it’s over, the property transfers title right then.

Not so in Silicon Valley!

Here in northern California, buyers and sellers sign off separately, and almost never are lawyers involved.  The closing or sign off happens 5-7 days prior to the deed being recorded and title transferring.  The buyers often have both their real estate agent and their lender present to answer any questions.  This final paperwork is most often done at a title company’s office.  Also for the seller, it’s usually at the title company and the agent is present.

What happens on the day of closing, then?  There are two main events that take place on the day that escrow closes and the real estate sale is finalized.  First, the title company gets the deeds recorded with the County of Santa Clara.  One employee goes to the county recorder’s office and gets each deed recorded for that company’s closings.  When finished, he or she phoned the branches and confirms that recording did take place.  The escrow officer or assistant will then call (sometimes email) the Realtors or licensees involved and tell them “we have confirmation – we are on record”.  The agents, in turn, notify the buyer(s) and seller(s).   The second thing that happens is that the new buyer gets keys to the home!  This is true even if there is a rent back, since the buyer is now a landlord, even if it’s just for a little while.

  1. 3 beds, 2 full, 1 half baths
    Home size: 2,437 sq ft
    Lot size: 8,015 sqft
  2. 2 beds, 1 full bath
    Home size: 1,160 sq ft
    Lot size: 8,232 sqft
  3. 4 beds, 2 full, 1 half baths
    Home size: 2,996 sq ft
    Lot size: 10,802 sqft
  4. 3 beds, 2 full baths
    Home size: 1,305 sq ft
    Lot size: 7,710 sqft
  5. 4 beds, 2 full baths
    Home size: 1,642 sq ft
    Lot size: 7,797 sqft
  6. 4 beds, 3 full baths
    Home size: 3,918 sq ft
    Lot size: 2.41 ac
  7. 1 bed, 1 full, 1 half baths
    Home size: 800 sq ft
    Lot size: 12.86 ac
  8. 4 beds, 4 full, 1 half baths
    Home size: 4,090 sq ft
    Lot size: 4.38 ac
  9. 4 beds, 2 full, 1 half baths
    Home size: 2,450 sq ft
    Lot size: 6,751 sqft
  10. 3 beds, 2 full baths
    Home size: 1,940 sq ft
    Lot size: 8,712 sqft

See all Real estate in the city of Los Gatos.
(all data current as of 4/30/2017)

Listing information deemed reliable but not guaranteed. Read full disclaimer.

Supplemental taxes are billed about six to eight months after a property is sold and closed in Santa Clara County.  At the time the sale is finalized, the home buyer pays property taxes at closing, but they are paid at the former owner’s rate.  Because of Proposition 13, many long time residents in the San Jose area pay incredibly low property taxes.  Those taxes are reassessed upon change of ownership, but that reassessment won’t kick in for a few months.

For the sake of easy math, let’s use round numbers in an example.  Let’s say Joe and Jean buy a house for $1 million.  Their property tax will be approximately 1.25% of that value per year to begin, or approximately $12,500 per year.  They bought their home from a senior citizen who’s been in the house for 20 or 30 years, and that owner’s property tax rate is (for the sake of example) $1,250 per year.  Let’s say that the property closed December 1st, about a month before the very end of the tax semester. The sellers had already paid that tax, so the buyers paid them a credit for 1/6 of the tax bill (1/12 of $1250), appx $104.  But the tax assessor will later come back and say that the month of December should be charged at a much higher rate, that is, 1/12 of $12,500 or $1,041, and will then issue a supplemental bill for the difference.  Sometimes one tax bill, and other times two, will be impacted by the supplemental taxes.

It is a little crazy that in the center of technology and innovation we have such an antiquated property tax system, but that’s how it is.

  1. 3 beds, 1 full bath
    Home size: 1,075 sq ft
    Lot size: 5,706 sqft
  2. 2 beds, 2 full, 1 half baths
    Home size: 1,300 sq ft
    Lot size: 2,962 sqft
  3. 4 beds, 2 full baths
    Home size: 1,418 sq ft
    Lot size: 6,011 sqft
  4. 2 beds, 2 full baths
    Home size: 924 sq ft
    Lot size: 1,524 sqft
  5. 4 beds, 3 full baths
    Home size: 1,954 sq ft
    Lot size: 5,662 sqft
  6. 3 beds, 2 full baths
    Home size: 1,284 sq ft
    Lot size: 6,185 sqft
  7. 3 beds, 2 full baths
    Home size: 1,535 sq ft
    Lot size: 6,011 sqft
  8. 3 beds, 1 full, 1 half baths
    Home size: 1,411 sq ft
    Lot size: 6,011 sqft
  9. 4 beds, 2 full baths
    Home size: 1,374 sq ft
    Lot size: 5,445 sqft
  10. 1 bed, 1 full bath
    Home size: 574 sq ft

See all Real estate in the city of Santa Clara.
(all data current as of 4/30/2017)

Listing information deemed reliable but not guaranteed. Read full disclaimer.

CC & Rs are “Covenants, Conditions and Restrictions”  (sometimes “Covenants, Codes & Restriction”s).  They are a set of rules drawn up for a neighborhood or subdivision by the builder or by a board comprised of the builder and a few others who want to set the neighborhood standards to keep property values up.

The C, C & Rs  are put in place, usually for a set number of years such as for 30 or 35 years, and most of the homes in Silicon Valley do have CC & Rs and most of them are now expired.   It’s always for a finite period of time, though usually extendable if the neighbors vote it in again (which I have never seen done), but sometimes gauged by something perhaps not so predictable.  The weirdest time line I ever saw referenced something like “until the death of the last living great grandchild of…” and it mentioned one of the Kennedys. Odd, but apparently legit.

What are the CC & Rs about?

Here’s a peek at part of one –

Usually the CC & Rs dictate the minimum size of a home (e.g., the home must be at least “X” number of square feet)  that may be built in the subdivision, the setbacks (homes must be so many feet from the street and property lines), what kind of signage may appear (only for sale and for rent signs, for instance), and normally there’s a restriction on farm animals so that people may not raise goats, sheep, chickens and so on in their backyards or breed animals professionally.

Covenants Codes Restrictions

Illegal restrictions in the CCRs

Many years ago, some C, C & Rs also had restrictions on who might buy or live in a neighborhood (racial, religious and other restrictions).  This is illegal today, of course, and so the first page of any C C and R document you see now will have a large disclaimer stating , in a nutshell, any fair housing violations are illegal and are null & void. (At least it should be there.)   Since the C C & Rs “run with the property”, they supposedly cannot be amended (though I have never been convinced that they couldn’t be – just that the government chooses to require the disclaimer instead). Want to see the cover sheet itself? I’ve uploaded a typical version of one – though often they are in large font and red ink.  Click on the following link to download the PDF of the typical CCRs cover sheet.

What’s illegal?  Surprisingly, not every kind of discrimination is illegal!  I have many attorney clients and suggest to them that they keep their profession quiet when home buying or selling because there is a lot of fear and prejudice around being in transaction with an attorney. Only “protected classes” – race, religion, handicap, sexual orientation, national origin, and a few others – are those which are protected under the law.  To see the comprehensive list, you’ll want to access Section 12956.2 of the Government Code. Continue reading


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Mary Pope-Handy
Sereno Group Real Estate
214 Los Gatos-Saratoga Rd
Los Gatos, CA 95030
408 204-7673
Mary (at) PopeHandy.com
License# 01153805

Selling homes in
Silicon Valley:
Santa Clara County,
San Mateo County, and
Santa Cruz County.
Special focus on:
San Jose, Los Gatos,
Saratoga, Campbell,
Almaden Valley,
Cambrian Park.
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Valley Of Hearts Delight
Santa Clara County Real Estate,
with an interest in history

Silicon Valley relocation info

Silicon Valley real estate,
focus on home selling

Silicon Valley Real Estate Report
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Mary’s Blog Awards
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2016: Personal Income's list of top 25 real estate blogs.

Best Realtor blog award
2016: Coastal Group OC's list of best Realtor blogs

The 2009 Sellsius list of top 12 women real estate bloggers
2009: Sellsius list of top
12 women real estate bloggers

Mary Pope-Handy's Live in Los Gatos blog won the 2007 Project Blogger contest, sponsored by Inman News and Active Rain

2007: Mary Pope-Handy and Frances Flynn Thorsen win the Project Blogger Contest for Mary's Live in Los Gatos blog. The contest was sponsored by
Active Rain and Inman News.

Non blog award

Best real estate agent in Silicon Valley from the San Jose Mercury News poll of readers in 2011
"Best real estate agent
in Silicon Valley"

2011 readers' poll,
San Jose Mercury News

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