This is a typical single family investment property in San Jose.  This is a 3 bedroom 2 bath, with converted garage.  According to county record, it has about 1200 sq ft. (excluding the converted garage).  The purchase price is under $330,000.

The garage is converted into a 1 bedroom 1 bath with living room, it can be rented out separately or the house can be rented to a big family, which is typical in this area.

Assume the purchase price is $330,000 and the mortgage rate is 6.857%, the following analysis is for different % of down payment.

A few years back, it is impossible to put 20~30% down in a property in the Bay Area that would cash flow.  Last time this happens was over 10 years ago, around 1995.  If you miss the boat this time, you might need to wait another 10 years.

The media keeps broadcasting the bad news about how poor the real estate market is, properties sitting on the market for several months even years and nothing is selling.  Why?  Because bad news sells.

Some first time investors ask me, can I rent my property quickly?  What if I can’t rent it out?  My response is always the following question, “If you rent it at $1.00 per month, do you think you have a hard time finding a tenant?”

It all comes down to the price, everything has a value.  When the property is priced correctly, even at this depressing market, it can be sold in 2 days.  That’s exactly what happened to this property, located in San Jose, it is a bank owned property, 3 bedroom 2 baths, around 1000 sq. ft.  It was listed below $330,000 with a huge lot.  It is not in perfect move in condition but not much work needs to be done.  Good choice for investors and first time home buyers.

This is a property owned by Wachovia, it is totally remodeled in perfect move in condition.

What’s the reason behind it?  The lenders have learned, they used to list the property at a price close to what was owed on the debt, that didn’t work.  Now, what they are trying to do is to lower the listing price and start a bidding war, usually with a perfect property like this, multiple offer will happen and the bank can get rid of this property in less than 10 days.  It is listed at around $320k, it should close around $350k

It DOES NOT mean that you can’t get it at a low price, some lenders play the FIRST COME FIRST SERVE game, if you are the first one offering full price with good down payment, you can get it at the low listing price.

Market condition in San Jose, CA.

Current inventory level for min. 3 bedroom / 1 bath, 1000 sq ft, Max. price $400k  SFR in San Jose, CA is around 23. 8 months.  It seems to be a lot but what was it a few months ago?  60 months.

The inventory level has dropped drastically, which is an indicator that lots of buying is going on.

What’s the reason behind this?  Typcial rent for these SFR in San Jose ranges from $1,800 ~ $2,400.  For people who can afford the down payment, buying a $350k SFR is cheaper or same as paying rent, so what would they do?

On the other hand, for investors with lots of cash who can afford 20~30% down payment, it is also an attractive investment, since it would cash flow.