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EPA
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EPA
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Registered: ‎02-10-2013
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House in East Palo Alto - Strategic Advice Needed?

In 2009 I bought a property in East Palo Alto for $220 K (currently owe ~185 K on it). I've fixed it up and now estimate I could could sell for 350 - 400 K. The property has been slightly cash flow positive however it's been a headache and is dated. My plan is to free up the equity by selling the EPA property and buying a new townhouse/condo (built in the last 10 years) rental in Las Vegas area with cash (~100 K) and use the rest as a downpayment on a larger SFH in the Salt Lake City area (which should be cash flow neutral).

I've chosen the LV market because I already have a house there and am familiar with the market. I like the SLC market because I think it is poised for significant growth (and wouldn't mind living there one day).

Am I making any big mistakes here? My thought is that I would basically be increasing my cash flows because I would own the LV property outright. I would also likely have a much nicer newer property in Utah that I could should be cash flow neutral on (and maybe even have some capital appreciation).

Should I wait until summer to see if I can get more than $400 K for East Palo Alto property?

Does anyone have any good resources for 1031 exchange information?


Silver Super Contributor
ptiemann
Posts: 1,214
Registered: ‎08-07-2009

Re: House in East Palo Alto - Strategic Advice Needed?

i have rentals in all 3 locations, .. here are my comments

 

SLC .. great renters, never had a deadbeat in 10 years, landlord friendly eviction laws. I bought my houses for about 160k each, they had a peak value of 240k, now they are back at 160k on average..

so, the plus with SLC is the high tenant quality, the minus is that you won't get huge appreciation. The mentality there is not the same  as in the SFBA, slow appreciation

 

LV .. mixed quality tenants, sorry. I won't buy any more rentals there due to this reason. I have had some good tenants, true. but several people could not complete their lease.. more than one due to gambling problems, they had to leave the area.

LV overcorrected in the downturn and will see more appreciaton in the coming years. You may be a tad late on the curve but they still have to,go further.. homes still selling below construction cost.

 

SFBA : mixed quality tenants.. you are on the right track with your idea to sell the EPA place, because the cap rate is getting lower as the property value rises. BTW, The long distance landlording has some disadvantages, as you may hopefully know. PM me for a good property manager in SLC.

 

My personal solution is to have a few in each place, with a healthy mix of SFR, townhome, multi unit.

 

For that reason,  obviously I am not the "selling type".. I have used HELOCS to use the gained equity.. of course up to 80% only, but at least no 6% sale expense..

 

Good luck!

EPA
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EPA
Posts: 3
Registered: ‎02-10-2013
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Re: House in East Palo Alto - Strategic Advice Needed?

Peter - Thanks for the timely advice. It's nice to be partially validated in what I'm trying to do (especially regarding the cap rate). The HELOC also sounds like a very good idea, which I haven't fully explored. Are there any other markets you think I should consider? Couple people have recommended Sacramento, but I feel safer investing in LV and SLC because the landlord laws are more favorable (and houses more affordable).

Does anyone else have any opposing views?
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buyinghouse
Posts: 5,879
Registered: ‎04-23-2011
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Re: House in East Palo Alto - Strategic Advice Needed?


EPA wrote:
In 2009 I bought a property in East Palo Alto for $220 K (currently owe ~185 K on it). I've fixed it up and now estimate I could could sell for 350 - 400 K. The property has been slightly cash flow positive however it's been a headache and is dated. My plan is to free up the equity by selling the EPA property and buying a new townhouse/condo (built in the last 10 years) rental in Las Vegas area with cash (~100 K) and use the rest as a downpayment on a larger SFH in the Salt Lake City area (which should be cash flow neutral).

I've chosen the LV market because I already have a house there and am familiar with the market. I like the SLC market because I think it is poised for significant growth (and wouldn't mind living there one day).

Am I making any big mistakes here? My thought is that I would basically be increasing my cash flows because I would own the LV property outright. I would also likely have a much nicer newer property in Utah that I could should be cash flow neutral on (and maybe even have some capital appreciation).

Should I wait until summer to see if I can get more than $400 K for East Palo Alto property?

Does anyone have any good resources for 1031 exchange information?



  Your question is basically if you can time the market. If you read the forum, we have bulls and bears. So many bull-S... and so many bears:smileyvery-happy:

 

  As you can witness, appreciation is on its way from San Francisco to San Jose, there's no town left that hasn't seen an increase in prices. But the stigma of EPA still exists and you won't get people with guts to rent there. I lived in EPA for quite 10 years and I know the area pretty well. I rented a room from 1998 to 2004 in this guy's home and never had any problems with the thugs around. I basically was a friend to them by not showing signs of cowardice.

   Lately I heard the old EPA is coming back. Shootings and so on. So, if you want to hold on to that property chances are you won't get more than what you're getting now. The stigma of the old EPA still lingers around.

 

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Michelle1x
Posts: 1,063
Registered: ‎02-17-2008
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Re: House in East Palo Alto - Strategic Advice Needed?


buyinghouse wrote:

   Lately I heard the old EPA is coming back. Shootings and so on. So, if you want to hold on to that property chances are you won't get more than what you're getting now. The stigma of the old EPA still lingers around.


Is that happening in all the bad areas, then?  Oakland is also really bad again.  I am wondering about Alum Rock San Jose, I want to buy a house there but what is it going to take for the gangs to go away?

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buyinghouse
Posts: 5,879
Registered: ‎04-23-2011
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Re: House in East Palo Alto - Strategic Advice Needed?


Michelle1x wrote:

buyinghouse wrote:

   Lately I heard the old EPA is coming back. Shootings and so on. So, if you want to hold on to that property chances are you won't get more than what you're getting now. The stigma of the old EPA still lingers around.


Is that happening in all the bad areas, then?  Oakland is also really bad again.  I am wondering about Alum Rock San Jose, I want to buy a house there but what is it going to take for the gangs to go away?


  I don't know about Alum Rock beyond my area (King/Alum Rock/McKee) but where I live so far the only crime I witnessed was this xxxxx killing a possum  and leaving it on top of his abandoned car, right on front of everybody's eyes.

  Remember the home we discussed months ago on Platinum Ct? That's my area. Almost 30% price increase. I heard in the news this morning KGO radio about this town, forgot what it is, where the crime is spreading rapidly.

 

  You can't time RE market, neither you can time crime.

 

  I will send you my phone number if you want to discuss about this area. :smileywink:

Silver Trusted Contributor
SamShuehRealtor
Posts: 911
Registered: ‎10-27-2008
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Re: House in East Palo Alto - Strategic Advice Needed?

[ Edited ]

Without knowing the location and EPA address it is hard to say what the trend is.  It was investors who bought them for a song and are cashing out lately to take profit in EPA.

 

Month         Price/SqFt  DOM

Aug 2012$26162
Sep 2012$26841
Oct 2012$274157
Nov 2012$30317
Dec 2012$27830
Jan 2013$30429

 

What is not clear to me what kind of folks wanting to move in?  I was in MV leasing out a home, there was not a single section 8 prospect and I was stunned what the prospects do and how well compensated they are.  With EPA do you expect 

investors or first time FB, Google buyers wanting to move in?  

 

Assuming you can get $400K I am not sure what the cash flow/ cap rates will be as a rental. I personally would move to a MV condo paying the going price live in a neighborhood I feel comfortable. 

 

As for 1031 please send me a private msg

Sam Shueh

Keller Williams Realty

Silver Contributor
kinectimal
Posts: 442
Registered: ‎12-18-2011
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Re: House in East Palo Alto - Strategic Advice Needed?

That was my concern about epa.  Id live there myself but I realize there's probably. Not a lot of other people who would.  Even low income folks are probably better served in East San Jose unless you happen to work on the peninsula.

 

I think the idea to sell epa and trade for 2 houses with 1 paid off sounds like a good plan.

Silver Trusted Contributor
Michelle1x
Posts: 1,063
Registered: ‎02-17-2008
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Re: House in East Palo Alto - Strategic Advice Needed?

[ Edited ]

my family has rental properties in many other (non bay area) locations and the problem is, with those places you hardly get any appreciation.  You get cash flow and stable rents (with more vacancy) but thats it.  In many places it is difficult to find renters except for section 8.   For that reason I'd rather have a bay area rental property portfolio (even if it is in EPA) vs elsewhere.

 

better served in East San Jose

Some neighborhoods (Evergreen) started to pop up in ESJ that started to gentrify it a little.  Maybe that is wishful thinking on my part though.  Since I am in San Jose I am always looking at the eastside areas trying to figure out if there is potential there to clean it up.

Silver Trusted Contributor
Michelle1x
Posts: 1,063
Registered: ‎02-17-2008
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Re: House in East Palo Alto - Strategic Advice Needed?


buyinghouse wrote:
 was this xxxxx killing a possum  and leaving it on top of his abandoned car, right on front of everybody's eyes.

 

A critter crime is the worst kind of crime!!!!!  Actually I am a little surprised possums are up there on McKee which is a hilly location right?  Possums are in the creeks.  Raccoons come from the sewers though so they are everywhere.

 

I once came home at 4am to discover a huge critter festival on my street.