Home Buying in San Ramon>Question Details

tictactoe, Home Buyer in San Jose, CA

Good area for condo investment in bay area?

Asked by tictactoe, San Jose, CA Tue Jan 25, 2011

I have been seeing these days the prices of condo have bean fallen a lot so that I am thinking this is a good time to purchase a condo for investment purpose. For this matter, of course, the rental income should be at least more than monthly expense (after 20% ~ 25% down payment at purchase time). Where do you think is a good place to purchase a condo for this purpose?

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The best place to purchase condos in my opinion is close to job centers. San Ramon, Pleasanton, Dublin, Danville, Walnut Creek, and Silicon Valley are all good places to look. What you are going to find is a trade off between strong rental market and yeilds. Closer in markets like the ones mentioned above are easier to rent. However, prices are also higher, and it becomes more difficult to break even with 25% down. Most of the time it seems to take around 40% to break even on condos in the Pleasanton, San Ramon, Dublin area. You will be mostly banking on appreciation.

Further out in the central valley (Tracy, Modesto, etc) you can get better cash flow, and you will get more of your return today in the form of positive cash flow. Future appreciation may not be as certain in outlying areas, but you can find arguments on both sides of that one.

One thing to be very aware of is the financial condition of the HOA for any condo you purchase. Some of the areas that have been decimated by foreclosures have condos with associations that are in terrible financial condition, and there is risk in that scenario. Many of these associations may see sharp increases in the HOA dues to make up for deferred maintenance and legal fees as a result of so many of the units being in default. As always, find an expert agent to help you.

Here is a link to good information on the San Ramon area in particular http://www.680homes.com/san-ramon-real-estate/

Good Luck!

Doug Buenz
The 680 group at Alain PInel Realtors
(925) 463-2000
Web Reference: http://www.680homes.com/
0 votes Thank Flag Link Tue Jan 25, 2011
Condos are almost always bad investments. They are the first type of property to lose value when prices drop and the last to go back up when the economy improves. HOA costs dig into your profits and dealing with the HOA board and management company can be a pain. Very, very seldom do they pencil out.
The only time I recommend a condo for investment is if it's either on one of the best beaches in the world or if it's in an urban location that has high employment and limited housing. Otherwise, consider saving for a single family or multi-family property, you'll make more money.
If you are hooked on buying a condo, look into the resort areas in Hawaii.
Best of luck!
1 vote Thank Flag Link Tue Jan 25, 2011
I'm going to be contrarian and I don't think condos are a bad investment right now. Here's why:
1. Prices are depressed a lot more than SFR's b/c of the financing on them right now, you can get better cash flow
2. Many times you can find condos in MUCH better locations than SFR's of comparable prices
3. The numbers are hard to get to work on rental SFR's anywhere in Coastal CA - you can't get enough rent to cash flow
4. If you research the HOA carefully you can minimize some risks, but there will always be risks
5. If you buy it cheap enough and can make it cash flow with the HOA dues, then it is not a big deal what the HOA is
6. Once the market stabilizes, there is a good chance lenders will loosen condo guidelines, b/c since SFR's are out of reach for most in Coastal CA, condos are the only affordable option for first time homebuyers
7. With condos you are not responsible for repairs on the exterior, roof, landscaping, etc...so there can be less maintenance costs than a SFR

Yes everything being equal of course a SFR is a better investment. But the problem is SFR's in decent locations are at WAY too high of a price point to make work as rentals unless you go far into the inland parts of CA from Sacramento down to the Inland Empire. But would you rather have a coastal condo close to where you live or a SFR rental 2+ hrs drive inland?
0 votes Thank Flag Link Sat Feb 5, 2011
I would look at Townhomes (PUD's) vs. condos do to the fact that finance restrictions on condos have been what's causing their prices to fall first of all.

As far as getting the best return on investment. Santa Clara and San mateo counties have been showing great returns for my investors without risking too much of a decline in value.
0 votes Thank Flag Link Sat Feb 5, 2011
TicTac,

Pretty much everywhere so long as the banks are discriminating against condo's. The issue is finding a condo where you can buy as an investor. Since the banks started pulling financing on condos on account of low owner occupany ratios boards have put restrictions in place and they are holding.
Web Reference: http://bob2sell.com
0 votes Thank Flag Link Wed Jan 26, 2011
As mentioned by others, areas that are centralized - close proximity to such things as bart, shopping, restaurants and so on. There are plenty of people looking for rentals and many like the idea of a condo. Depending on the condo complex you choose, you may have trouble finding financing. Also, be sure to check out the HOA fees as these may negate any positive income you are anticipating. One area that is quite popular is Pleasant Hill. Also keep in mind that some of the condos that are priced low are for a reason. You may have to improve the property to get it in shape for rental.
Web Reference: http://homesalespros.com
0 votes Thank Flag Link Tue Jan 25, 2011
In El Sobrante where I have an excellent investment, in tip top condition for $95,000.
0 votes Thank Flag Link Tue Jan 25, 2011
Hi tictactoe,

As mentioned below, condos are not a good investment. However, townhouses may be a good compromise between condos and single family homes. Single family homes are the very best investment. Get together with an agent and ask them to show you trends for condos, townhouses and differently priced homes in the markets you are looking. The statistics will speak for themselves.

Regards,
Suzanne Looker
0 votes Thank Flag Link Tue Jan 25, 2011
I dont recommend condos but if you are thinking from a price point view, then yes they are cheap right now, and putting down 25%, your monthly payments will most likley be less then the rent you collect. I think San Ramon and surrounding areas are an excellent place where you won't have finding renters and these will probably go up in value faster then condos in other areas.

If you like, I can send you a list of what's available if you have a price point in mind.
0 votes Thank Flag Link Tue Jan 25, 2011
Condo's are generally a bad investment. However, each property and situation is unique. There is a reason Condo's are cheap right now - because they are bad investments and because they are hard to get loans on.

If you have 25% to put down (I don't know what that means in terms of cash money) you would be better off buying two or three single family homes with 10% down. You will actually earn more money. A lot more. Yes you can get an investment property with 10%.

Go to the blog post below to see what I am talking about. Then you can hit a link there to get a free book on real estate investing. Much of the rental market is driven by what Section 8 pays (even if you do not want Section 8 renters.) Antioch California is the sweet spot for investors right now. Contact me for more info if you are interested.
0 votes Thank Flag Link Tue Jan 25, 2011
Hi Tictactoe...

I recognize your name from before. I would consult the condo expert of the area. Tyler Moxley. You can messenge him on Trulia or contact him at http://www.MoxleyTeam.com.
Web Reference: http://www.loansquawk.com
0 votes Thank Flag Link Tue Jan 25, 2011
There are seveal areas to select from. The rental market seems to be great due to homeowners that have lost there homes and need a rental. I can givvve you a few options.
0 votes Thank Flag Link Tue Jan 25, 2011
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