Erica Nelson

Your loan rate will depend on your FICO and employment combo (and the rates when you offer) and your down payment and price will determine the cash flow. You can get into Santa Clara in the $420K range on an REO right now but in general, you are more likely looking at townhouse/condo under $450K.

If you can get around 5.8 percent on $350K loan, the payment could be in the $2K range. Then add taxes and interest. If you can afford $150K down or so, you can cash flow at the $450K price point.

You should get to know the zip codes before you launch your search. For Sunnyvale, there is a zip code heirarchy. So, 94089 is the most affordable and least "desirable" from a school and market value perspective. 94085 is a good working /business class area with more affordable homes but you still have some issues with school quality. 94086 is a nicer area and the most desirable/expensive area is 94087 where you start getting into Homestead and Cupertino high schools and very strong islands of elementary school excellence.

Santa Clara did not go down in price during the downturn as much as most of our region. The area near Cisco/North San Jose but still in Santa Clara is very reasonable right now with homes in the $400K range.

New homes in Santa Clara run about $550K for 3 bedroom/two bath and could be interesting if you can afford a higher price point, because you will incur so little maintenance.

If you are looking at 20-25 percent down, research rents on Craigslist, and do the math on what you can afford to cash flow because it will depend on your loan rate and such. Don't forget property taxes (around 1.2% annually) and insurance in your calculations. And if you go for a lower priced condominium or townhouse, factor in the HOA. I have a mortgage calculator at http://www.EricaNelsonEstates.com and you can play with the numbers. I also just closed a deal with Princeton Capital in Saratoga, and my client got a very good rate on interest only/10 year ARM (5.6) on an investment property with 20 percent down.

Most of my investment clients are looking at Milpitas, North and South San Jose, and downtown. Downtown is great for renting because of San Jose State, but the homes run very old and sometimes need a lot of work.

Between Sunnyvale and Santa Clara, I would say Santa Clara would likely give you a better cash flow. You might find though that Sunnyvale would have a higher property value over time.

And regardless of where, stick to 2 baths because if an area becomes glutted with rentals, two baths will always rent before 1 bath properties.

I hope this helps!!

Erica Nelson http://www.EricaNelsonEstates.com
408-416-7090
EricaNelsonEstates@gmail.com - Thu Dec 10 2009, 21:46