If I plan to buy a rental property hope for appreciation, should it be in San Jose,Milpitas,Sunnyvale or Cupertino?

Asked by Henry, Milpitas, CA Wed Jun 20, 2012

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Erica Glessing’s answer
Erica Glessi…, Agent, San Jose, CA
Sun Jun 24, 2012
When you are focused on appreciation, I recommend you carefully study the schools that feed to the home you want to purchase. Rental and appreciation are interesting words when used together in our market! We're going to see appreciation (my prediction) near Facebook in Menlo Park/Palo Alto with the influx of the IPO and all the ways that this drives up the home values and drives down inventory.

All of those cities have excellent pockets of schools. There is a trio of schools in Evergreen that are all rated "10s" (this is south of downtown San Jose area and East into the hills).

All of the city of Cupertino has top rated schools, but for a rental investment property, you would have a challenging time with cash flow at the $900K break in point.

Santa Clara has an area of 95051 that feeds to Cupertino schools that is in the $750K break-in point.

Milpitas has strong areas of Elementary-Middle combos in Park Town, but the homes are old and typically need upgrades. They will rent well due to the excellence of elementary (look for Sinnott) and middle (El Rancho). There is a home listed for $410K with offers due tomorrow on North Abbott, excellent elementary school, but with only 9 homes under 600K listed in Milpitas you can expect multiple offers and the sold price to exceed 410K.

You can't necessarily bet on appreciation anywhere in California. What with interest rates at a historical all-time low, you may in fact find that the prices today are the best buying opportunity we may see for some time. You might be getting the best deal now for return on investment for your rental, but nec. appreciation potential.

Let's say the interest rates go to10 percent. What this translates to is that people can afford less home. This will influence appreciation. Because if a home buyer is qualified to purchase $500K and suddenly can only purchase $400K due to interest rate payments increasing -- the value of the homes may possibly decline as a balancing effect.

If you are interested in a rental income property in Atlanta Georgia, where you can pay $60,000 and experience $1K monthly rents, let me know, I work with R1 Real Estate at the national level and I can connect you to their properties. They study all of the rental markets in the US and buy only where you can experience 10 percent return on your investment.

That's not likely to happen in our area for the fore-seeable future!

Good luck!


Erica Glessing Nelson
Editor & Co-Publisher "Sell Your House For the Right Price" slated for July 2012 release
"Buy the Right House" slated for Thanksgiving 2012 release
DRE 01425475, Realtor(r)
1 vote
Tina Lam, Agent, San Jose, CA
Wed Jun 20, 2012
You should buy in Sunnyvale or Cupertino for pure appreciation potential. If you want the best over all returns, then San Jose and Milpitas would be better.
Web Reference:  http://www.archershomes.com
1 vote
Robert Lei, Agent, Cupertino, CA
Mon Jun 25, 2012
Hi Henry,
Another thing you may not have considered is with rental property in the nicer areas, not only is it much easier to rent out, you also are almost guaranteed to get A+ tenants. Usually tenants are great, but from past experience, I've had to go through a lot more effort to find quality, low-risk tenants in the less expensive neighborhoods. When I've looked for tenants in Cupertino, I immediately get dual-income, A+ credit, stable tenants and I don't have to worry about them messing up the place.

When you are a landlord, don't worry so much about little things, like a couple hundred in rent. What really hurts is when you happen to get a tenant who no longer can pay the rent. One month of lost rent is equal to two years of a hundred dollar increase/decrease in rent. In other words, your focus should not be on charging the maximum rent you can possibly charge, but on minimizing your risk of vacancy and/or a bad tenant.

Worst case is if you have to evict a tenant and they damage your house before they leave. Stuff like this statistically happens much more frequently in the lower socio-economic neighborhoods. Investors who buy in Central Valley will encounter eviction risks more than those who buy in nice areas like Cupertino.
0 votes
Terri Vellios, Agent, Campbell, CA
Wed Jun 20, 2012
Your budget will be the factor. San Jose has a large area and micro pockets. Some of those areas you can get in relatively low, they hold their value and/or appreciate. So I wouldn't rule San Jose our as a whole.

Yes, the rule of thumb is the further north you go the higher the price and greater appreciation. Again, your overall expected rate of return along with your budget will determine where you can buy.

I have some time available this weekend if you would like to schedule a free consultation and we can look at some numbers for you.

Terri Vellios
Keller Williams Realty
Web Reference:  http://www.terrivellios.com
0 votes
Norman Aless…, Agent, San Jose, CA
Wed Jun 20, 2012
I agree with Tina, the price will be higher in Cupertino and Sunnyvale, but so will the rent you will be able to charge. The thing is if you buy in an area will good to very good schools you can get more rent and they will hold there value. I would also check out parts of the Cambrian area they can be more affordable with the good schools.
Please feel free to contact me with any questions or if you need assistance.
At your service,
Certified Distressed Property Expert
0 votes
Elena Talis, , Palo Alto, CA
Wed Jun 20, 2012
What is your budget? Sunnyvale - Cupertino schools would be my first choice, then Cupertino and Sunnyvale.
0 votes
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