San Jose Investor Deals - Can you say "cash flow"?

Commercial Real Estate Agent with Intero Silicon Valley and Rebekah - Two Names You Can Trust!

I am a real estate broker. I don't work for the government or google or the teacher's union. I won't be getting a pension check or a gold watch after 30 years of service.

I was on track to leverage my investments into a nice $6K/mo income by the time I was 50, when the real estate market dumped. It's since been 3 years of crappy income but my investments have held on pretty strong. (I had to drop some of the rents when market rents dropped but I got into the properties smart and the lowered rents still cover the mortgage.) And I think it's a great time for a few more!

Before the dump we were buying in Dallas. It just made financial sense especially with the craziness in the California market. Instead of buying one $750K house here (or 1 fourplex with $500K equity and no cash flow) with $2500 income per month , we were buying TEN $75K houses with $1100/mo PER HOUSE income for $11,000/mo Gross Income.

Those deals are still available, and we are doing them every month, but I am starting to see deals here, in San Jose, again.

This last week I saw two investments that I like - a lot - and I'm gonna share one with you today:

Tradewinds Drive

This is a working class neighborhood with lots of rentals and there is lots of competition but let me tell you what I like.

Right now you can buy a 2 bed 2 bath 992sf condo for about $185K (These were going for $450K about 36 months ago). Since I am an investor, I need to put 30% down =$55,500 with $129,500 remaining loan @4.5% = 656.16/mo PI. Tax and HOA bring this to $193 + $345 = $538 for a grand total of 1194/mo. (Blah Blah Blah, I am not selling you loans, go shop APRs and all that financial disclosure stuff. This is JUST rough number crunching)

Today these same condos are renting for $1450-$1650/mo so lets take $1550 as an average so you'll get $356/mo POSITIVE CASH FLOW or $7.7% return on your down payment IF THE PROPERTY VALUE STAYS EVEN.

We all know it's gonna creep back up and as it does your renter pays your payment, you have a bit of cushion for repairs and such and in 30 years if you do NOTHING and the market stays even you'll have $1550/mo income to live on.

I like Tradewinds because it's a bit nicer than the neighborhood, has a pool and fitness club and the HOA takes nice care of the maintenance, upkeep and insurance for you.

Yes, you have to "deal with" tenants but if that's a big deal, someone that does proeprty management - like I do - can manage your tenants for around $110/month and you still make $248 EVERY MONTH for as long as you own the property.

BTW, there is the tax depreciation and interest write off and there will be out of pocket for interior wear, tear and updating. You can use the $356/mp to offset this expense.

My goal is to get 3 of these. That's about $12K/year for now and $4650/mo in 30 years. But 30 years just seems to darn long! Since I need to retire before I am 77 I'll probably take the $356 PROFIT and pay down the mortgage each month for a free and clear property in 14.58 years or 175 payments . I'll be 62! Perfect!

I really do love real estate. There is a ton of money to be made, all the tax incentive to do it and the property will always be there. It doesn't even matter what the market does because your tenants are BUYING THE HOUSE FOR YOU!

If you feel guilty about all the money you are making you can take a nice leisurely drive by your property on Sunday afternoon and act like you deserve the money.

Posted by

Rebekah Owen, MBA

SanJose-RealEstate since 1988


CA 00994952. TX 0555675


Comments (2)

David Beckham
Realty Executives Bayou Properties - Alexandria, LA
Your Louisiana Real Estate Connection

Great blog post!

Nov 15, 2010 08:40 AM
Bryan Robertson
Los Altos, CA

I've got clients who are considering investing and when I describe a deal like this, they balk at it because they can't make enough money.  I think 7+% is pretty good myself but some people want more - a lot more.

You've put up a really good analysis of a possible deal.

Nov 15, 2010 08:41 AM