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Hello folks,
We are a family of two young professionals from Europe renting an apartment in San Jose for about 3.5 years. It is time to be a first-home buyers.
What we have:
- good credit history, good salary, already per-qualify for a possible mortgage
- no debts, no car loans, etc
- very modest life expenses. We prefer hiking and biking instead of fancy restaurants and beauty salons
- no plans to have kids in the next several years, so we do not need a good school district
Our ideal home is a detached single family house 3bedroom/2bathroom, not extremely old and not a fixer-upper, and close as much as possible to my work in northern part of Santa Clara (my husband's office is in Cupertino). My husband doesn't want to live in Milpitas or North San Jose, so we are thinking about Santa Clara and area to south from it. It is “trapezoid” between 280/17/85/87 highways or near by (W and part of S SJ, Campbell, Burbank, Cambrian, Blossom Hill, Camden ave, Santa Teresa boulevard). All other areas are not affordable for us, or they are too far from work.
There are dog and cat with us, so big lot is a must. We are also thinking about making a small revenue from renting one room for a several days per month via Airbnb or similar service. Therefore house should have two separated bathrooms, and be not too far from public transportation. Possibly, we'll even put a small cottage on backyard or remodel a garage for renting it on daily basis (and paying taxes of cause).
We are going to buy for $700,000 as maximum price, and have already had about 20-25% for a downpayment in cash. We plan to live in our first house for five years, and then to sell it or continue to live in the same place. Most likely, we will sell it in five years, ideally without deficit in price and who knows possibly even with some profit after paying to agent. We can pay about $5000 per month for a mortgage+property tax, so we will apply for a loan for 15 years.
Before I contact to real estate agent, I want to ask you guys what do you think about such kind of plans.
1) Is it real price for our “ideal house”? Real estate web-sites answer “yes it is”, but I'm not sure if it is possibly to win bidding war without 50% or even 100% in cash.
2) In our case, is it make more sense to put a little bit more money and buy in Santa Clara or very close to it, or it is better to save some $ and buy newest house (1970's vs 50's) somewhere near Blossom Hill\Santa Teresa boulevard? I know about traffic... We are OK with a little bit sketchy areas like Burbank or “Ghetto Glen” because in several years situation is going to improve there.
3) Is it make any sense to think about small renovated 2 bdr/1bath house but in desirable place like downtown Santa Clara in terms of selling it in five years?
I'm scary to make a wrong decision, so any suggestions or comments will be really useful. Thank you a lot!
Last edited by dogandcat; 08-19-2014 at 12:57 PM..
There are realtors that hold first time buying seminars. These are free seminars with the purpose to make contacts for the realtors. You should find one and attend. One objective is to learn. Another is to check the realtor out whether you might want to work with that realtor.
The list price is not necessarily the sales price. In today's seller's market, the sales price is typically higher (10-15%) than list price. You can get statistics on Redfin.
Then the sales price is related to the offer. 100% cash offers, waving contingencies (inspection, appraisal, loan) will result in slightly lower sales price than an offer that requires loans and with contingencies. And of course # of offers and bidding war also impact the price. Yes, you can still buy home with loan. You have to be prepared. You probably need 25% down and waive the appraisal contingency; 20% down with appraisal contingency won't work in today's market.
The most important thing about house is location. The neighborhood can change over time, but it is out of your control. The lot size, orientation, shape cannot be changed. So in general, these factors should be prioritized in your decision or direction on where to buy.
What is your definition of renovation. If you are just painting, fixing things that can be done in 1 week, that makes sense. If you want to expand 2 br/1 bath to 3 br/2 baths, you probably have to spend $100-$150k, get permits, and take up 6 months; that would not make sense if you just plan to stay there for 5 years.
Thank you for all your advices. Yes, I try to learn as much as possible about real estate market and home buying process, and read books and web-sites. Redfin is really useful and offers a lot of tools and information for first-home buyers to learn, especially if people monitor market changes on regular basis. I'll also visit one of their seminars, as you suggest.
What about possible renovation in desirable place, how much (approximately) would it cost to add one full bathroom as a part of garage space, without extension of house living space? I found a lot of very pretty and charming Eichlers in Rose Glen district (95128, near Leigh ave), but in our price category the majority of houses there 3bd/1bath. They are selling for about $700-750,000 I mean real sell price.
Last edited by dogandcat; 08-20-2014 at 04:57 PM..
One of the best ways to get acquainted with local real estate is simply to tour a few properties with a real estate agent. You don't have to make any offers. They'll answer questions about houses and neighborhoods and point out flaws that might not be obvious to you. If your weekends are mostly available, well it's free education. Typically you don't even have to drive.
Laws in California are different than in Europe. Converting a garage to a residence is illegal in most places. Also, many communities do not allow a second dwelling to be built on a residential lot. These restrictions are always in place in newer developments, and in many older housing tracts as well. Not to mention, neighbors can be very upset at people living in their high income neighborhood who are running a boarding house, having extra cars, etc.
And if you do significant construction, which will require permits in line with local building codes, the house may be reassessed to a higher property tax rate.
Also, there have been some recent problems with Airbandb tenants not moving out, and owners being unable to evict them.
Maybe you should concentrate on buying a home that you can afford independently, without the need for having tenants.
Last edited by nightlysparrow; 08-21-2014 at 12:34 PM..
I think you need to raise your budget to 800k for a 3/2 single family house in that area that is neither too old nor a fixer upper. If you drop one of those conditions, you can get one within your price range.
Quote:
Originally Posted by dogandcat
Hello folks,
We are a family of two young professionals from Europe renting an apartment in San Jose for about 3.5 years. It is time to be a first-home buyers.
What we have:
- good credit history, good salary, already per-qualify for a possible mortgage
- no debts, no car loans, etc
- very modest life expenses. We prefer hiking and biking instead of fancy restaurants and beauty salons
- no plans to have kids in the next several years, so we do not need a good school district
Our ideal home is a detached single family house 3bedroom/2bathroom, not extremely old and not a fixer-upper, and close as much as possible to my work in northern part of Santa Clara (my husband's office is in Cupertino). My husband doesn't want to live in Milpitas or North San Jose, so we are thinking about Santa Clara and area to south from it. It is “trapezoid” between 280/17/85/87 highways or near by (W and part of S SJ, Campbell, Burbank, Cambrian, Blossom Hill, Camden ave, Santa Teresa boulevard). All other areas are not affordable for us, or they are too far from work.
There are dog and cat with us, so big lot is a must. We are also thinking about making a small revenue from renting one room for a several days per month via Airbnb or similar service. Therefore house should have two separated bathrooms, and be not too far from public transportation. Possibly, we'll even put a small cottage on backyard or remodel a garage for renting it on daily basis (and paying taxes of cause).
We are going to buy for $700,000 as maximum price, and have already had about 20-25% for a downpayment in cash. We plan to live in our first house for five years, and then to sell it or continue to live in the same place. Most likely, we will sell it in five years, ideally without deficit in price and who knows possibly even with some profit after paying to agent. We can pay about $5000 per month for a mortgage+property tax, so we will apply for a loan for 15 years.
Before I contact to real estate agent, I want to ask you guys what do you think about such kind of plans.
1) Is it real price for our “ideal house”? Real estate web-sites answer “yes it is”, but I'm not sure if it is possibly to win bidding war without 50% or even 100% in cash.
2) In our case, is it make more sense to put a little bit more money and buy in Santa Clara or very close to it, or it is better to save some $ and buy newest house (1970's vs 50's) somewhere near Blossom Hill\Santa Teresa boulevard? I know about traffic... We are OK with a little bit sketchy areas like Burbank or “Ghetto Glen” because in several years situation is going to improve there.
3) Is it make any sense to think about small renovated 2 bdr/1bath house but in desirable place like downtown Santa Clara in terms of selling it in five years?
I'm scary to make a wrong decision, so any suggestions or comments will be really useful. Thank you a lot!
Laws in California are different than in Europe. Converting a garage to a residence is illegal in most places. Also, many communities do not allow a second dwelling to be built on a residential lot. These restrictions are always in place in newer developments, and in many older housing tracts as well. Not to mention, neighbors can be very upset at people living in their high income neighborhood who are running a boarding house, having extra cars, etc.
And if you do significant construction, which will require permits in line with local building codes, the house may be reassessed to a higher property tax rate.
Also, there have been some recent problems with Airbandb tenants not moving out, and owners being unable to evict them.
Maybe you should concentrate on buying a home that you can afford independently, without the need for having tenants.
I agree. Go with the smaller home in the better location. There will always be buyers for smaller starter homes. And renting rooms is no fun.
You don't need all that space, since it's just the two of you and you aren't planning on kids right away, and you plan to sell it anyway.
When I took real estate, I was taught what's already been mentioned. My teacher asked what are the three most important things when considering buying real estate? Location, location and location.
Thank you all for practical tips. I will keep in mind a thesis "the smaller home in the better location", and update this thread in case of finding something useful about its topic.
So, there are our results! We bought a small but renovated detached 3 bdr 2 bthr house in San Jose, Blossom Valley neighbourhood zip 95123 with good schools (elementary 8, middle 7) two months ago. It is near La Colina park very close to Santa Theresa hills, very safe and healthy family oriented neighbourhood. Asking price was $685,000, selling price was 715,000. Our offer was 20% cash in down payment. So, it is still possible to find something good for relatively reasonable money.
After two months living there I can say that traffic is not a pain for us because we are leaving home after 10:30 AM and return from office after 7PM. There is NO traffic at that time. We use 85 and 87, then 280 highways every day. About 9AM and 5-6PM traffic is bad or very bad. I notice that many of our neighbours have electric cars or hybrids to be able to use commute line during traffic time. I think it is a really good solution if your work is not far away.
We are very happy to be first home buyers and live in our chosen house! Thanks everybody who share thoughts and advices on city-data forum.
What about other options? In our case, after several months of searching for a house, we were not able to find something affordable in Santa Clara or West San Jose (Cambrian, etc) because of bidding wars and price rise, so we desired to go a little bit South.
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