Investment

Duplex in Cambrian area of San Jose along Los Gatos borderDuplexes and duet homes are often confused with each other because both involve two attached residential units.  But legally and financially, they are very different!

The photo to the left is of a home I sold a few years back.  You cannot tell from the image, but there is a front door off to the right of the single car garage door, and back around on the left side, near the double car garage door, there’s another front door.  It is a duplex or a duet home?  You cannot necessarily tell by looking!

A duplex is a multifamily home, in the same category as a triplex of four plex, meaning there are multiple attached living units.  But what is truly distinctive is the way they are bought and sold.  With multifamily homes, such as a duplex, all of these dwellings are sold together. (The units are not sold separately.)  So if you buy a duplex, you get both sides.  If you buy a triplex, you get three units. Sometimes an owner will live in one of the homes and renters are in the rest.  Many times, though, all of these multifamily homes are entirely leased out.  (Duplexes are usually 1 story and many of the duplexes in the San Jose area were built in the 1950s and 1960s, but you cannot tell from looking at it what the zoning and class of housing are with certainty.)  These types of properties are considered income producing or investment properties.

With duet homes, each side is sold separately. Most of the time they are 2 stories, younger, and both sides are owner occupied and they are considered “attached single family homes” while a house is usually a “detached single family home”.  Although just as with a house, there could be a tenant in a duet home, it is not presumed to be an investment property.

Is it possible to change the zoning and classification of housing?  Can a duplex become a duet home?  Possibly.  Sometimes owners will work to change the classification of the property. We see it especially with some former 4 plex places, McKeon built, which have been changed to condo ownership so that instead of one 4 plex, 4 distinct homes are sold (four condominiums). So it changes from class 3 to class 2 (condos and townhomes). In Los Gatos, I knew of someone who purchased a parcel with two small houses on it and although they were not attached, they were “detached duplexes”.  I’d never seen that before!  Wisely, the owner of these two worked hard to change the classification and do a lot split – now there are 2 houses on 2 parcels and they are both single family homes, and worth more too.

Related reading:

What Is the Difference Between CID Ownership in a Condo, Townhouse or PUD?

  1. 2 beds, 1 bath
    Home size: 955 sq ft
  2. 4 beds, 4 baths
    Home size: 2,004 sq ft
    Lot size: 2,038 sqft
  3. 2 beds, 1 bath
    Home size: 955 sq ft
  4. 3 beds, 3 baths
    Home size: 1,716 sq ft
    Lot size: 1,197 sqft
  5. 3 beds, 3 baths
    Home size: 1,740 sq ft
    Lot size: 6,141 sqft
  6. 2 beds, 2 baths
    Home size: 1,070 sq ft
    Lot size: 1,193 sqft
  7. 3 beds, 3 baths
    Home size: 1,458 sq ft
    Lot size: 2,443 sqft
  8. 2 beds, 2 baths
    Home size: 1,062 sq ft
    Lot size: 1,258 sqft
  9. 1 bed, 1 bath
    Home size: 862 sq ft
    Lot size: 945 sqft
  10. 5 beds, 3 baths
    Home size: 2,471 sq ft
    Lot size: 7,588 sqft

See all Real estate in the city of Santa Clara.
(all data current as of 9/21/2017)

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

If you’re a Silicon Valley homeowner, you will sometimes need to replace elements of your home, such as the roof or water heater, or do repairs or remodeling to keep the home functional, comfortable, and efficient. Kitchens and bathrooms need to be updated from time to time, and sometimes remodeled. These repairs and remodeling projects often (if not always) require permits and finals.

Will you apply and pay for the required permits and finals?

What difference does it make if you do or do not get them?

Will it matter when you sell your home?

If you’re a Silicon Valley homebuyer, the whole idea of buying a home without all the necessary permits is a bit spooky.  My buyer clients often hear or read something like “garage conversion done – permits unknown” or “kitchen remodel done by contractor but without permits”.  They worry about the consequences of buying homes with non-permitted work, so let’s talk about the issues involved.
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kitchen-counters-are-pink-and-sink-stainedWhat does it take to be a successful move-up buyer in Silicon Valley right now?  How hard is that to do? What does it take for a move up scenario in the San Jose area to be a possibility?
There are a few big challenges for buyers and sellers of Silicon Valley real estate right now:

(1) Buyers are extremely picky – most want a turnkey, perfect home.

(2) Homes that need work (updating, remodeling) are selling at deep discounts, if they sell at all.

(3) Loans are harder to come by then they used to be. If your credit is not perfect, clean it up!  Save for a bigger downpayment, especially in the arena of jumbo loans.

If you must sell the current home to buy the next home, you’ll need to get your house or condo into ideal condition.  If you can buy the next home without selling the current one, it’s a great rental market!  You may want to investigate the possibility of investing by holding your current home and renting it out. Talk to your tax professional about the ramifications of doing this before you decide.  Continue reading

mapAre you looking to purchase a Silicon Valley investment property? Now is a great time as several segments of the Silicon Valley and San Jose real estate market are extremely favorable to buyers, and interest rates are being aided by recent government action.

Let’s consider what to buy and where you might want to invest in Santa Clara County real estate. Part of the equation will be the type of housing you’d like to own, part will be the location, and of course much of it will be determined by your budget.

Types of Silicon Valley Residential Investment Properties

The most popular type of property for investment buyers is a single family home. This makes sense in Silicon Valley especially because the structure of the house is not what truly holds the value here. Instead, it’s land value for the long term preservation of your assets and the growth potential. There’s also the issue of control. In a condo, owners have a loss of control in regards to noise and other nuisances, suprise special assessments from a poorly managed Homeowners Association, and so on. With a single family home, there’s less risk because there’s more space between neighbors, more control over one’s own property improvements and maintenance, etc.
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Which part of the Santa Clara Valley
is seeing all of this foreclosure and pre-foreclosure activity?

Short sales pre foreclosuresDepending on where you live in Santa Clara County, you may be seeing a whole lot of distressed properties on the market – or you may be seeing none at all. This is part of our current “bifurcated market” situation.

Generally, the more expensive areas of Silicon Valley (Palo Alto, Cupertino, Saratoga, Monte Sereno, Los Gatos, Almaden Valley and Silver Creek) are not suffering from a huge number of listings in which the sellers are in financial straits.  There are some, though.

It is the less wealthy areas in San Jose (including parts of downtown, the east side, south San Jose, Santa Teresa, Blossom Valley) and the south county cities of Morgan Hill and Gilroy) where there is an inundation with short sales – in the lower price ranges especially.

Generally speaking, most short sales, preforeclosures and bank owned homes are priced below $600,000.

How can you tell if a home is in pre-foreclosure?

Homes listed for sale in your neighborhood of San Jose, Saratoga or Los Gatos that are in pre-foreclosure may look like any others available. They may have granite in the kitchen, beautiful baseboard and crown molding, new dual pane windows, and on and on. The sellers may have borrowed and borrowed to improve the property, be unable to make the payments due to job loss, divorce, or other problems, and now be in default on a loan, heading toward foreclosure.

This status usually doesn’t “show” unless you have access to the county records or have a subscription to a service that lets you know the status (and those services are no where near 100% reliable, by the way). Your real estate agent, who should have a subscription to the MLS with full information, can see a report at no cost that shows the foreclosure history.  (Not all pre-foreclosures are short sales.)

What’s a short sale? Being in “pre-foreclosure” means that the seller has missed payments on a loan in which the real estate owned is used as collateral, or security. Let’s say a home is worth $1 million, but the amount in default is a small loan, perhaps of $25,000. If the home is sold, it can pay off the debt in full.

Sometimes, though, a distressed seller bought higher than the home is now worth. When prices fall (and if the owner bought the home with a low down payment especially), selling the home will not be enough to pay off the loan. So again let’s imagine that a house is worth $1 million, but the owners owe $1.1 million on it (and to sell they have to worry about closing costs to boot). By selling the home, foreclosure can be averted – but to do so, the bank will have to agree to not being repaid 100%. This is a “short sale”. (Not all short sales are in preforeclosure, though, as not all home owners of these properties have missed payments on their mortgage.)

We’re seeing a lot of short sales in the entry level markets. In these cases, current owners bought their properties a year or two ago – for 10% or 20% more than those houses are now worth.

In the higher-priced regions of Silicon Valley, it’s less common to see a short sale than it is a straight pre-foreclosure because someone just can’t make the loan payment (due to some new problem like divorce or job loss, or because the adjustable loan went up and the payments are now untenable).

See also:
So you think you want to buy a Silicon Valley short sale?

Short sales sell but often don’t close: why?

Browse Short Sale Listings & Bank Owned Properties for Sale in Los Gatos

Recently I viewed a piece on Forbes.com that said that San Jose was on it’s “top 10” list of good places to be a landlord. Investors, take note!

http://www.forbes.com/2007/09/04/landlord-subprime-realestate-forbeslife-cx_mw_0905bestlandlordmarket_slide_11.html?thisSpeed=15000

Update:  Trulia’s rent vs buy study puts the San Jose area as more affordable to buy than to rent in late Jan 2011.  Check it out!

Translation

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Mary Pope-Handy
Realtor
ABR, CIPS, CRS, SRES
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

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Silicon Valley relocation info

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Mary’s Blog Awards
Top 25 real estate blogs 2016
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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