Home Buying in San Jose>Question Details

Jason, Home Buyer in Alum Rock, San Jose,...

What are some good places in the bay area to buy rental houses? Looking for areas where rent covers the mortgage.

Asked by Jason, Alum Rock, San Jose, CA Wed Jul 20, 2011

Help the community by answering this question:


Your question is impossible to answer.
You first need to determine how much of a down payment you can make, since the size of the mortgage is completely dependent upon that. Can you provide more information on your price range and current cash position? Also, have you talked to a financial planner or CPA to verify how a particular range of down payments could effect your personal cashflow and tax situation?
I recommend you don't contact a real estate agent until you've consulted with a financial planner and tax pro.
3 votes Thank Flag Link Wed Jul 20, 2011
Hi Jason

There are many bank owned properties in Sunnyvale, Milpitas, Santa Clara to name a few
That I just passed on to some of my investor clients below $400k last week.

Banks will likely require at least 25% if you wish to get a good rate. With a 5 year fixed loan at 3%
for investment properties on a conforming loan you will do just fine.

Blossom Valley and Santa Teresa also represent value but rents can be slightly low.

Closer to Silicon Valley better the rents.

There are also terrific Condos and Town Homes in Mountain View and San Mateo County and
Of course Santa Clara county.

Good luck.
0 votes Thank Flag Link Sun Aug 14, 2011
Hi Jason,

Some of real estate pros would give you one or couple names of places as a clear answer and others answer your question with their question(s). Which one do you need?

0 votes Thank Flag Link Thu Aug 11, 2011
Since you're already in San Jose, you are well-positioned to get solid rental properties. Several of my clients have successfully purchased properties in San Jose that generate positive annual cash flow of a of up to few thousand a year after taxes and maintenance with a 20% downpayment. The key is in getting the right deal and often that involves going outside the standard listings.

As others have mentioned, it's harder to make positive cash flow on single family homes, but it's still possible. If you're looking for the highest returns, then townhouses and condos are your best bet.

If you're really looking to stretch your returns, you'll have to get friendly with some East Bay communities which offer single family homes with strong positive cash flows even with just 20% down. Those require more legwork and management time.
Web Reference: http://www.archershomes.com
0 votes Thank Flag Link Mon Aug 8, 2011
ive seen a few pop up in the Willow Glen area since rents have been increasing.

I'm currently renting my 3br house in WG for $3000/mo
so even up to a 500k house the rent would cover the mortgage.
0 votes Thank Flag Link Fri Jul 29, 2011
You say "houses" so I'm assuming you prefer a single family home. To command highest rent you will want to be in an area with better schools/neighborhoods which tops your price to about $450k (at least 3 bdrms). On investment properties, most conventional lenders want about 30% down payment. If you own other property, for instance the home you live in, your income will need to show that you can afford both payments if you have a vacancy. Furthermore, you should have a reserve fund (in addition to the rent you collect to pay mortgage) for maintenance, property taxes, insurance, vacancies, etc. You will need over $100k down to get started. If you would like me to email you some listings with pictures, please contact me through my Trulia profile. Kind regards.
0 votes Thank Flag Link Fri Jul 22, 2011
Jason, it really depends on how much you are willing to invest up front. I ran some numbers for a buyer last week on condos in Santa Cruz and in order for them to have the rent cover the total monthly cost (this is before any tax advantages) They would need to purchase a 2 bedroom 2 bath with a mortgage of no more than $250,000. Now this varied by the location, HOA dues, and went down in price depending on what it could rent for - for the location. It didn't make sense for them because they only wanted to put down 20% and were looking at possibly living it in two months out of the year.

The other investor I worked with was also looking at 2bed 2 bath condos in Los Gatos, Cambrian, and Campbell. For investment properties expect to put down 30% then run the numbers. We found a condo with a Los Gatos address (not schools) for less than $300,000 which could rent for $1800 per month.

Now one factor many investors fail to consider is the entire vacancy, maintenance, and loss of interest on the initial investment (down) There are assumed equity factors. I use an Excel Spread sheet to run some scenarios. It is important for you to understand your ultimate goal when purchasing. Do you want tax write off, cash flow, someone paying your mortgage, a portfolio of property, and what is you strategy, Buy and Sell or Buy and Hold.

I agree with John the importance to talk with your tax adviser, they will be able to look at your portfolio and determine with you your risk factors.

All the Best to You.
Web Reference: http://www.terrivellios.com
0 votes Thank Flag Link Thu Jul 21, 2011
Thank you for your inquiry Jason:

Today, there are no places in the bay area where the rent covers the mortgage for single family houses unless you are prepared to make a very large down payment.

When Real Estate prices were most severely depressed back in 2009 there were some places in the Blossom Valley Area , North San Jose, Pacifica and Daly City where you could do that, however that was two years ago.

Real Estate prices in the Bay Area have recovered to the point that in the Bay Area you can no longer do that.

It is my sad duty to tell you that you are two years too late.

Charles Butterfield
Real Estate Broker/REALTOR
American Realty
Cell Phone: (408)509-6218
Fax: (408)269-3597
Email Address: charlesbutterfieldbkr@yahoo.com
0 votes Thank Flag Link Wed Jul 20, 2011
To meet your parameters with the maximum investment value you should be considering multi family property i.e. Duplex, 3plex, 4plex in locations close to major employment areas. Note: above 4 plex gets into a totally different legal world.
I would be investigating the Downtown San jose and North East San Jose through to the Fremont border.
Remember, you are not looking to buy a property you might want to live in. You are looking to buy property thet people less fortunate than you will be happy to live in.
If you have to have a positive cash flow we need to talk about the variables that play into that scenario.
Good luck,
0 votes Thank Flag Link Wed Jul 20, 2011
One could answer this question a few different ways. I've seen some multi-family deals in Richmond, Oakland, and close to UC Berkeley that would fit your criteria. I've also seen some SFHs in Oakland and Richmond that would fit your criteria. You might also check into acquiring properties in other areas via wholesalers. It also depends upon the way one negotiates one's deals. And the list goes on. . . .
0 votes Thank Flag Link Wed Jul 20, 2011
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