Rent vs Buy in 95138>Question Details

Rosie K., Other/Just Looking in San Jose, CA

Would this be a good time to RENT TO OWN?

Asked by Rosie K., San Jose, CA Fri Jan 9, 2009

What are the advantages and or disadvantages?

Help the community by answering this question:


Rent to own is only good when the price of the house is going up.

However, I do not believe that is what is happening now. According to most economist(including builders) believe the price degradation is NOT over yet. And the downward pressure of the housing market will be here two more years. The unemployment rate will go up for another two years(per Obama administration project - check Youtube and graphs) and this will definitely negatively impact the housing price.

I tend to believe it is foolish to get in a rent to own agreement at this time. Just get into a regular rental contract and buy when the house price stabilize.

High end housing such as silvercreek area has not been impacted yet but it will get there. It will just take little longer to get there. As soon as many people no longer consider housing as an investment vehicle, it will slowly deflate its value.

I recommend that you just rent for a nice house for 3-4K per month. I expect the price erosion of 1 Million + houses to exceed 100K per year; thus, you are up 50K per year immediately. Only the economic hurricane has passed, consider rent to own. The low interest rate is meaningless. What matters is that is the home you purchase is going to retain its value.

If you consider home like a car(value going down each year), then, purchase a home. If you want to retain value, I recommend that you rent. In Santa Clara valley, I cannot think of any area that I would purchase now and that includes Saratoga and Palo Altos. It is much economical to rent and wait out the storm. In two years, I believe you will able to afford the much better house at cheaper prices.

Good luck!!
2 votes Thank Flag Link Sun Jan 11, 2009
yes and no. This gives the landlord an option to negotiate directly before putting it on the market. In this market having renters occupied while trying to sell is unlikely to get the price asked. The landlord has to terminate the lease, spend $ and time make it attractive, pay a realtor commission and leave the house vacate for 4-5 months or longer. For 95138 zip many homes sell over 1 million dollars. Assuming 1 mil is the price. You save 60K on brokerage, 10K on house paintings/repair, 10K on home staging and 3 months of mortgage (say 15K). That is ~100K the sellers have to swallow. The renters already intimately know ins and outs of the house and are unlikely to demand the disclosures and inspections. This scenario applies when the occupants have the income but do not have 200K (20%) down payment. I am aware of several cases where the sellers even help with a 2nd mortgage to make this a win-win case.
1 vote Thank Flag Link Sat Jan 10, 2009
I think it is. The sellers can not sell easily and need to rent it out. What you need is to negotiate with your landlord and put it in the rental contract. Try to be specific such as 20-30% of rent can be applied toward down payment.

If you pay your rent on time and keep the house tidy, the landlord will consider you first before others.
Get on my website and there is a calculator allowing you to compare both cases to arrive at a long term cash flow. Assume 4-5% annual appreciation after we get out this recession. In Newer neighborhood such as Silver Creek Valley they will appreciate faster than Monterey/Ford Rd side of 95138.
1 vote Thank Flag Link Sat Jan 10, 2009
This is a great time to buy! Home prices have come down considerably and have never been more affordable. Interest rates are at historic lows. Can they really go much lower? Selllers are motivated to sell so buyers have a large inventory of property to choose from now. Additionally, you’ll have bargaining power. Lenders are lending. If you have a job, a reasonable down payment, and good credit, takes the plunge!

Rents are back on the rise while property prices, according to some experts, have dropped nationwide by 30% to 40%. Other experts believe we are back to 2002 property values.

If the above wasn’t compelling enough for you buy a home, keep in mind that you can deduct property tax and mortgage interest expense on your tax return. Check with your accountant or tax expert to confirm your projected deduction based on your specific circumstances. This is better than taking a renter’s credit on your tax return. Finally, owning property could be your biggest retirement nest egg. Instead of paying a landlord rent you are investing in an asset you own!
0 votes Thank Flag Link Wed Sep 22, 2010
Yes, I agree thread posted here may be true in other areas that are still depressed.

The question posted over 14 months ago address a new Mediterranean style high end estates area in zip code 95138. They consist of typ. ~3,500 to 6,000 sf GLA estates. Few homes there are under 1 mil regardless of the economy.

I am a specialist in the area since it was constructed. Home owners rent homes out to wait for the next upswing cycle. You can rent it for ~$3,500-4,000 which barely covers the mortgage. Owners do better sell to highest offer not to any future price projection.
0 votes Thank Flag Link Thu Mar 4, 2010
This is a questions that comes-up a lot lately. For some reason, many prospective tenants think it's a good idea to obtain a "lease option" on the property they intend to rent. The problem here is that the "purchase price" is usually determined at that time the lease is executed. We are in a declining market throughout most of the country and it's quite possible that the purchase price you agreed upon at the inception of your lease will be higher than the value of the property when you exercise your option. Don't bother with a lease option. Instead, get a "right of first refusal" from the Landlord. That way, if he decides to sell, you'll get "first crack" at it. And, at a price that makes sense, at that moment. Good luck.
0 votes Thank Flag Link Thu Mar 4, 2010
Hey Rosie,

Why are you considering rent to own vs. a normal purchase?
0 votes Thank Flag Link Thu Mar 4, 2010
A quick search of Trulia shows 10 pages worth of houses in 95138 currently going through the foreclosure process... Clearly someone in this area is being impacted.
0 votes Thank Flag Link Sun Jan 11, 2009
This question is addressed for Silver Creek Valley area only. Question is Rent vs Buy in
95138. Foreclosures and shortsales do not affect this part of Valley. Doctors and highly educated scientists still get paid.
0 votes Thank Flag Link Sun Jan 11, 2009
It is a great time to buy! Interest rates at 5.25% is fantastic. And foreclosures and even better, short sales are the best bargains. Be sure you can wait 60-90 days to close on a short sale though. Call your local realtor for a lender "you can sit across a table from" and once you have that pre-qualification letter you are ready! Save time too by telling your realtor what you are looking for. Let him/or her search for you and find the house or condo, etc that meets your needs. Have fun!
0 votes Thank Flag Link Sat Jan 10, 2009
i just happen to have a deal like this. 12 year old 3,014 sf 5br, top schools. contact me directly. Do not post it here.
0 votes Thank Flag Link Sat Jan 10, 2009
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