Tag: Buyer Articles

Downsizers: Use Your Existing Home To Finance Your Next Move

Posted on by Julie Tsai

DOWNSIZERS: USE YOUR EXISTING HOME TO FINANCE YOUR NEXT MOVE

 

With some of the highest rental rates in the country, many Bay Area homeowners who are near retirement or are recent empty-nesters are using their existing homes as a creative source of income. This option allows them to downsize and relocate in-state, out-of-state, abroad—or even stay right on their properties.

Opportunity In Disparity

It’s no secret that high local housing costs have been part of a recent exodus from California to places with much lower housing costs. For example, close to 700,000 people left California in 2018. Texas was their first choice, followed by Arizona, Washington, Nevada, and Oregon. No doubt many were lured by the relative affordability of single-family homes in those areas: Texas at $209,000, Arizona at $272,000, Washington at $419,000, Nevada at $303,000, and Oregon at $366,000 (according to data provided by Zillow through January 2020).

With an average cost of $313,000 across these five states, the monthly mortgage payment for a new home would amount to roughly $1,400, if financed at 100% loan-to-value at current interest rates.

Conversely, with rental rates in San Jose, for example, at $3,200 per month for a two-bedroom unit, or San Francisco at $4,520 (according to Rent Jungle), Bay Area homeowners are uniquely positioned to convert their primary home into a rental property to finance a move to a smaller home.

Even if you’re thinking of downsizing but not planning to vacate entirely, you may even consider consolidating your belongings and living arrangements and renting out a bedroom or portion of your home to create supplemental income.

Ease Of Property Management

In the past, homeowners were reluctant to rent out their properties because of the hassles involved in being a landlord. However, a growing number of professional property management companies is now making it possible to outsource the hassle at a very competitive price, usually averaging 8% of the monthly rent. If you’re considering renting out your property, Julie and our team can help you find the property management team that best suits the intentions for your property.

New Legislation

Recent rental legislation in California allows landlords to raise rents by 5% annually. This is in addition to the regional cost-of-living increase, or a maximum of 10%. Based on current inflation rates, Bay Area landlords could raise rents by an estimated 7.7% per year, which could translate to a healthy, regular profit that downsizers can put towards a smaller, less expensive home.

Accessory Dwelling Units

Another option being considered by a growing number of aging couples is building an accessory dwelling unit (ADU) on their existing property. When ready, they can move into this ADU while concurrently renting out their primary residence to outsiders or younger family members. Recent housing legislation now gives homeowners greater flexibility to consider this option. Click here (“Homesellers, New ADU Housing Bills Could Add Value To Your Home”) for more information.  

Can We Help?

Of course, the viability of pursuing a strategy like this will obviously depend on your current monthly mortgage payment, property insurance, and ongoing maintenance costs, as well as the carrying costs of the new house. As with any key financial decision, considering turning your primary home into an income property to finance your next move should be done under professional counsel from your financial, tax, and real estate advisors.

For more information on how we can help with your downsizing needs, please contact Julie at 650.799.8888 or Julie@JulieTsaiLaw.com to schedule a free consultation.

 

How To Get Started

Posted on by Julie Tsai

Real Estate Investing

Like starting a business or investing in the stock market, real estate investing can seem intimidating. It’s not, though. There are just some key fundamentals you need to know before getting started.

Julie and her team are here to point you in the right direction and provide the tools necessary for making smart decisions. We’ll introduce the basics of real estate investing and provide you a step-by-step guide to success.

Investment Basics

At a basic level, real estate investing is a method of earning money by renting, flipping, or owning residential, industrial, or commercial properties. Ownership can be outright, or through a Real Estate Investment Trust (REIT) or crowdfunding platform.

Although no type of investment can offer guaranteed profits or protection of the principal value, real estate has historically been one of the safest asset classes for investors, and offers several possible benefits generally not associated with other types of investments, such as:

LEVERAGE—Real estate investors can use borrowed funds to invest in a piece of real estate they could not otherwise afford to purchase outright, and then realize all potential profit from such ownership.

TAX ADVANTAGES—Outright ownership of income property offers landlords eight unique tax deductions: (1) Rental Property Depreciation, (2) mortgage interest, (3) deferral of capital gains via a 1031 exchange, (4) maintenance and repair costs, (5) cost of professional services such as rental property management and legal counsel, (6) utilities, (7) travel costs associated with managing property, and (8) property taxes.

CONTROL—Unlike a passive investment in stocks or in an REIT, outright ownership of real estate affords you greater control over your financial outcome.

Step-by-Step Guide

STEP 1: KNOWLEDGE IS POWER

Learn as much as you can before making your first investment. There are plenty of creditable online resources which render expensive real estate investment courses unnecessary. Read blogs like lendinghome.com, join forums like biggerpockets.com, and network by attending meetings of your area’s Real Estate Investor Association.

Next, find yourself a mentor. Julie is always ready to consult with you about her experience in real estate, and she can offer you a wealth of information that will help you make the most effective decisions.

STEP 2: TREAT IT AS A BUSINESS—DEVELOP A PLAN

Real estate investors must consider their real estate activities as a business in order to set and achieve their goals. A solid business plan will allow you to define your objectives and determine a viable course of action leading to their attainment. A business plan helps you visualize the big picture, maintain focus on your long-term goals, and avoid being distracted by minor setbacks. Real estate investing can be complicated and demanding, and a solid plan will keep you organized and on task. For more on developing your business plan, click here.

STEP 3: INVEST FOR CASH FLOW

As a beginner, your primary focus should be on the cash flow generated by rental income rather than speculating simply on potential gains in property values. Betting on appreciation alone is not always the best idea, but real estate professionals like Julie can help you when determining where the best areas of appreciation may be found.

STEP 4: START SMALL & WORK YOUR WAY UP

Start with an affordable initial investment, like a duplex, avoiding properties needing significant repairs. Make it your primary residence for two to five years and rent out the extra unit, saving the rental income to purchase your second property. Then repeat the process to grow your investment portfolio.

The most affordable way to purchase your first duplex is through a Federal Housing Administration owner-occupied loan that allows a low down payment (3.5% as of March 2015), doesn’t require landlord experience, and that will count the future rental income from the other half of the duplex to help you qualify for a loan. 

STEP 5: UNDERSTAND MARKET FUNDAMENTALS

Choosing the location of your first investment should begin with a thorough understanding of fundamental factors that drive the real estate market in our area.

  • Supply and demand determines whether a real estate market is a seller’s or buyer’s market. A shortage of supply will push up rental property prices while a surplus of supply will cause prices to fall (Click here for a detailed look at current supply and demand in the San Francisco Bay Area. Webcast requires signup). 
  • Demographics and economics, including population, job, and income growth, make for a robust and healthy real estate market. With an annual growth rate of 4.3% over the past three years, strong population growth, rising incomes, low unemployment, and a new wave of tech IPOs slated for 2019 and 2020, the Bay Area offers a solid underpinning for the rental market in the foreseeable future.
  • Good schools are one of the primary factors considered by families with school-age children when buying or renting a home. According to a recent survey conducted by realtor.com among homebuyers, nearly three quarters of respondents said good schools were important to their search, while 78% of buyers in their preferred school district gave up important home features, such as a large backyard and updated kitchen, to get their district. Detailed information on schools, including parent reviews, can be found at greatschools.org.
  • Price-to-rent ratios are used by investors to determine if a residential property investment will be profitable. The price-to-rent ratio is a simple metric that measures whether buying or renting is more affordable in a given city, and is used as an indicator for whether housing markets are fairly valued or in a bubble. Basically, it calculates the ratio between property prices and annual rent. Thus, the formula for calculating this ratio is average property price/average annual rent. Zillow offers a searchable database for median home values and rent prices, while biggerpockets.com provides a more complex tool for detailed analysis.
  • Rent control, zoning, and future development plans, though outside of your control, can significantly impact your investment. It is essential you take time to become familiar with current and planned rent-control initiatives, as well as future development plans for your targeted areas of investment (Click here to find out which cities in the Bay Area have rent control).

Julie and her team of experts are ready to help you achieve your dream of real estate investment. We look forward to helping you with any real estate investment questions you may have.

Please contact Julie at 650.799.8888 or Julie@JulieTsaiLaw.com to schedule a free consultation.

A Targeted Remodel Before Moving Up

Posted on by Julie Tsai

MOVE-UP BUYERS: A TARGETED REMODEL BEFORE MOVING UP

 

Savvy Bay Area homeowners looking to purchase and move to a larger house are increasingly utilizing a new, targeted approach: remodeling their existing home to extract maximum value upon sale.

Rather than basing their choices on what they would like, they are considering renovations from the perspective of future buyers. At 83 million strong, those buyers are millennials, who, in 2019, made up the largest share of homebuyers according the National Association of Realtors.

The next generation of homeowners wants smart, stylish homes that enable them to connect with friends and family. 

– Jill Waage, Editorial Director at Better Homes & Gardens

With nearly three-quarters of this demographic preferring experiences over things, millennials—now representing one-third of the national population—are often referred to as the “Experiences Generation.” Thus, how a home “lives” and “feels” is becoming the blueprint for design and the vital criterion for home features. 

New Trends To Consider

  • Open-Concept Living

 

Millennials’ strong desire to connect and engage with people is breaking down the walls in interior home design, resulting in flexible, open-concept floorplans. For example, being raised on cooking shows and the “foodie” movement explains their strong desire for an open kitchen that faces a family room so they can engage with others during meal preparation. Front-row seats for family and friends to marvel at their culinary skills is another hot trend in kitchen design. Function over size is now the main driver.

  • Outdoor Entertaining

 

Outdoor spaces for entertaining are also now a “must-have” feature in multi-family and single-family homes. Three out of four millennials say outdoor space is important for entertaining ,and consider an outdoor living space an extension of the home and a relaxing retreat for family and friends to spend time together.

  • Working From Home

 

Savvy developers and designers are also responding to the growing trend in remote work. This conceptis revising workplace needs and enhancing a desired work/life balance by the upcoming generation. Future housing may contain design features that allow millennials the flexibility to work or play depending on the time of day. Living spaces may now double as workspaces with plenty of built-in storage to help maximize space and furniture that can serve more than one purpose. Smart, flexible, efficient, and minimalistic are now the guideposts for interior design.

  • Home Sustainability

 

Known also as the “Green Generation,” millennials continue to be most willing to pay extra for sustainable offerings. Consequently, they’re more interested than ever in sustainable and regenerative features such as solar panels and dual-pane windows, as well as eco-friendly materials, including paint and floor coverings that don’t contain volatile organic compounds (VOCs), Energy Star appliances, LEED-compliant lighting, and organic materials such as wood and stone. Heating and cooling cost efficiencies are also top of mind with 33% of millennials saying they are a very important consideration.

Preferred Features

  • Eco-Friendly

 

Millennials’ concerns about the environment and desire for a closer connection to the natural world are driving their preferences for more organic materials that give the feeling of bringing the outdoors in. Tile in all its forms—from ceramic to stone—along with hardwood floors, river-rock shower flooring, rainfall showers, and quartz kitchen countertops, are among features being used by developers and designers to respond to the growing environmental awareness and concerns of their clients.

  • Minimalist

 

Perceptive developers are incorporating sleek, simple design lines, light/muted color palettes, and abundant natural light to respond to millennials’ desire for natural, harmonious, and uncluttered living spaces.

  • Technologically Advanced

 

More connected and tech-savvy than any previous generation, millennials also prefer homes to be pre-wired with plenty of electrical outlets that offer USB ports for charging their devices, ethernet ports for connecting wireless routers, and HDMI jacks for flat-panel televisions and home theater systems. Smart home technology is fast becoming an essential component in home design, offering this new generation what they want and need: greater automation, connectivity, and control.

Can We Help?

Whether you are ready to move-up to a larger home or just considering a remodel for the time being, Julie and her team of experts are ready to help. Our vast experience and high-quality network of contractors and providers will ensure you maximize your investment return while preparing your home for maximum buyer appeal when ready to sell. 

For more information on how we can help with your buying and selling needs, please contact Julie at 650.799.8888 or Julie@JulieTsaiLaw.com to schedule a free consultation.

 

Figuring Out How Much House You Can Afford

Posted on by Julie Tsai

“If you fail to plan, you’re planning to fail.” – Benjamin Franklin

Americans are an optimistic bunch. Consider a recent study from Bank of The West that found 85% of millennials are confident they’ll achieve the American Dream, of which owning a home is a big piece. Yet more than half of those surveyed don’t have a plan to actually get there, and once they start on the path, are often shocked at how much it costs. Not surprisingly, 68% reported buyer’s remorse, wishing they had been more prepared going into the purchase.

The last thing you want to do is jump into a home loan that’s too expensive for your budget, even if you can find a lender willing to underwrite the mortgage.

What You Should Consider

  1. The 28/36 Rule

Lenders generally use the 28/36 rule when considering a conventional loan. The 28/36 rule states that a household should spend no more than 28% of its gross monthly income on total housing costs, and no more than 36% on all debt which includes total housing costs plus other recurring debt payments.

The first part of the 28/36 rule requires your front-end ratio to be no more than 28%. The front-end ratio equals your monthly housing costs divided by your gross monthly income. Monthly housing costs, or PITI, include:

  • The principal and interest portion of your mortgage payment
  • Property taxes, and
  • Property and hazard insurance.

The second part of the 28/36 rule requires your back-end ratio to be no more than 36%. The back-end ratio equals your monthly housing costs (PITI) plus your other monthly debt payments (car loans, student loans, credit cards, etc.), divided by your gross monthly income. Where applicable, the back-end ratio also includes required child support or alimony payments.

Example: Add together the amount you and your spouse earn per month (before taxes) to determine your gross monthly income. Let’s say each of you earn $5,000.

Multiply your combined income by 0.28 to determine the maximum monthly housing costs (PITI) you can afford. In this example, you’d multiply $10,000 by 0.28 to get $2,800, which means you can afford up to $2,800 per month based on the front-end ratio.

Next, determine your and your spouse’s total monthly non-housing debt payments, such as car loans, student loans, credit cards, and alimony and child support. For this exercise, we’ll assume you and your spouse pay $1,000 in total monthly non-housing debt payments. Multiply your gross monthly income by 0.36 to determine the total monthly debt payments you can afford, including your mortgage payment and non-housing debt payments. Following the example, you’d multiply $10,000 by 0.36 to get $3,600, which means you can afford up to $3,600 per month in total debt payments.

Subtract your monthly non-housing debt payments from your result to determine the maximum monthly mortgage payment you can afford based on the back-end debt-to-income ratio. In this example, subtract $1,000 from $3,600 to get a $2,600 maximum monthly mortgage payment.

The $2,600 back-end ratio mortgage payment is the lower payment of your two ratios, which means you can afford up to $2,600 for a total monthly mortgage payment.

2.       Property Taxes

Counties in California collect an average of 0.74% of a property’s assessed fair market value as property tax per year. Based on the median price of $ 830,000 reported for the San Francisco Bay Area in March 2019, the annual property tax payment would be $6,142, or $511/month. (For county-specific average property taxes click here).

3.       Property Insurance

According to a 2018 study by Insurance.com, average home insurance costs vary widely from state to state. Generally, you can expect to pay roughly $3.50 for every $1,000 of property value. For a median home price of $830,000, insurance payments would total $242/month (for a comprehensive look at property insurance click here).

If you are purchasing a condo, property insurance is typically covered under a master policy which homeowners pay along with homeowner association (HOA) dues. It is essential you review the HOA’s financial documents and by-laws to ascertain coverage.

4.      Other Recurring Costs

    • Private Mortgage Insurance (PMI): If you put down less than 20%, your lender will most likely require you to buy insurance from a PMI company. PMI protects lenders from the risk of default and allows buyers who cannot make a significant down payment – or those who choose not to – to obtain mortgage financing at affordable rates. PMI typically costs between 0.5% to 1% of the loan amount on an annual basis.
    • Maintenance: According to the Harvard University Joint Center on Housing Studies, you should plan on paying 1% to 2% (annually) of the value of your home in maintenance and upkeep. If you’re purchasing a condo, general maintenance costs are usually covered by HOA dues. However, make sure your HOA has adequate reserves for large-scale maintenance projects such as roof replacement, exterior paint, access-road maintenance, and wood rot and siding repairs.

Julie understands purchasing a home might seem overwhelming. This is why we have a team of seasoned experts ready to help you navigate this complex process, developing a prudent financial plan to achieve your dream of homeownership.

We look forward to helping you with your real estate questions. Please contact Julie at 650.799.8888 or Julie@JulieTsaiLaw.com to schedule a free consultation.

Finding The Perfect Neighborhood For Your First Home

Posted on by Julie Tsai

As a first-time homebuyer, determining the neighborhood that fits your needs is pivotal to narrowing your home selection.

Choosing the neighborhood for your first home should follow a prescription whittled down by your values and priorities, always keeping your future plans in mind. You will eliminate much anxiety if you first decide upon a checklist of qualities which resonate most deeply with what you value in a home and in a location.

Julie and her team have years and years of experience in helping our clients devise checklists of preferences for their future neighborhoods. Here are our suggestions for major points to consider when deciding upon your new neighborhood.

Safety

Safety first, right? This is especially true if you have or intend to have children. The easiest way to learn about crime in a particular area is to visit CrimeReports.com.

Future Plans For The Neighborhood

Development plans can have a major impact on your home value, lifestyle, and traffic conditions. We can help you get in contact with the area’s Planning Division for zoning information and future development plans in your preferred neighborhood.

High-Performing Schools

For general information about schools in your desired neighborhood, you can always go to the National Center for Education Statistics website. More detailed information, including parent reviews, can be found at Greatschools.org. After you’ve done your online research, we recommend scheduling a tour of the schools, which Julie and her team can also help you arrange. You may even ask to be put in contact with other parents who can answer any additional questions you may have.

Make sure the schools are in good financial health. Ed-Data enables you to access financial information for school districts and county offices of education. You may also review a school’s financial information at the Foundation Center’s website.

Convenience

Consider if your commute to work from your desired neighborhood is tolerable. Taking a test drive at your normal commuting times may be helpful. Also find out if grocery stores, gyms, car repair and service shops, public transportation, schools, and health services are within reasonable distance.

Activities & Amenities

Think of your daily and weekend routines. Some buyers will never consider choosing a place which does not offer ready access to open spaces, while others consider a vibrant cultural or culinary scene essential to their sense of satisfaction and wellbeing. List your essentials and then research the different neighborhoods you are considering. Julie and her team will work closely with you in determining which neighborhood is the closest match.

Once you’ve narrowed your search, it is time to hit the streets and “date” your potential choices. As you do, use all your senses and trust your gut. First impressions are often reliable. Visualize yourself in the neighborhood. Where will you jog or walk your dog in the morning? Are there sidewalks? Look up an address on the Walk Score website to obtain a “walkability” rating for the area. Check the traffic at different hours. How congested does it get?

Visit the neighborhoods at different times of the day. Are people out and about during the evening hours? Are kids playing along the street? Enter a café and get a feel for the level of interconnectedness of your future neighbors. Is the social scene vibrant or are people basically keeping to themselves?

Look for activities that show owners are keeping up or investing in their properties. Also look for signs that the city is doing a proper job in maintaining public areas. Beware of cracked streets and sidewalks, broken streetlights, and vacant homes with shattered windows and overgrown yards. Find out all you can about the city’s Operating and Capital Improvement Budget and its overall financial health.   

If you already have your eye on a specific property, knock on doors and chat with your potential future neighbors. Ask about crime, noise, traffic, and neighborhood issues. Julie can even help you find a neighborhood group and attend one of its meetings.

Julie and her team of experts are ready to guide and help you choose the neighborhood that most closely matches your priorities, values, and overall lifestyle. We look forward to helping you on your neighborhood search.

Please contact Julie at 650.799.8888 or Julie@JulieTsaiLaw.com to schedule a free consultation.

Where Are The Best Local Places To Invest

Posted on by Julie Tsai

In a previous article (“Which Areas Will Have The Greatest Appreciation?”), we covered the factors you need to consider when investing in real estate for appreciation.

Now we’ll look at investing for cash flow, and how to discover the most promising areas in the Bay Area.

In real estate terms, cash flow is the byproduct of owning a property and leasing it to tenants for a monthly rental income. The higher the net cash return, the better the return on your investment. The rental income must cover your total expenses and reap a surplus of cash as extra income to deem a rental property profitable.

Cash-On-Cash (CoC) Return

The most popular metric used in real estate investing is the cash-on-cash return (CoC). Also called the equity dividend rate, the CoC return is calculated by dividing the cash flow (net operating rental income, before tax) by the amount of cash invested.

The CoC return is calculated in the following way:

Annual Pre-Tax Cash Flow

Total Cash Invested

Because pre-tax cash flow is used in the calculation, you should be aware of the tax treatment of your investment. If the CoC return is low, high taxes may erase any potential investment returns.

Capitalization (Cap) Rate

This calculation is also very important because it is the purest form of understanding a property’s returns. The cap rate reveals the investment return of a property independent of its financing. Therefore, this number indicates the return as if the property was already paid for.

The cap rate is calculated by dividing the net operating income by the property’s price.

(Click here for more on how to analyze an investment property and determine its quality and/or estimating its profitability through calculating the property’s cash flow.)

Mashadvisor offers an interactive investment property calculator that not only gives returns based on what is entered, but also provides insights by using predictive, comparative data and algorithms. The tool also gives investors an understanding of an overall neighborhood by providing data on the neighborhood’s average median home price, traditional rental income, and Airbnb rental income and occupancy rate.

Trends To Observes

Honing down on a good location and neighborhood for attracting the right tenants and maintaining high rental demand requires patience and meticulous analysis. While CoC returns and cap rates allow you to determine a property’s profitability in present terms, you also need to consider long-term trends which will sustain those returns during the lifetime of your investment.

  • Look for areas where properties are comparatively more affordable based on their price-to-rent ratio, a simple metric that measures the ratio between property prices in a particular area and annual rent. Zillow offers a searchable database for estimated median market rate rents by housing type across a given region.

As earlier reported, the 10 Bay Area cities with the fastest housing appreciation over the past five years aren’t traditionally the most sought-after communities and have seen housing prices grow by more than 15 percent over the time period. Cities like Richmond, Pittsburg, and Antioch have seen some of the highest increases regionally yet still have median home prices under $500,000.

  • Look for areas which are experiencing comparatively higher rates of population growth which will underpin rents in the future. Make sure the property is located in an area where the job market is robust. Job and income growth are key when deciding where to invest.

According to the US Census Bureau’s 2017 population growth estimates, the 10 fastest-growing cities and towns in the Bay Area between 2016 and 2017 were:

Jurisdiction

Percent Increase

Rio Vista

4.3%

Gilroy

4.1%

Newark

3.5%

Brentwood

2.9%

Oakley

2.4%

Dublin

2.1%

Dixon

2.0%

Albany

1.9%

San Carlos

1.8%

Pittsburg

1.8%
  • Look for areas which have future development plans likely to attract more residents, such as transport links to major job hubs, new schools, shopping centers, restaurants, amenities, etc.
  • As environmental consciousness continues to grow, especially among millennials, look for cities leading the pack in sustainable living. A recent nationwide study done by SmartAsset shows nine Bay Area’s cities among the top 25.

The highest-ranked city is Mountain View. Not too far behind, at #9, is San Francisco. The other cities which made it to the 25 Best Green Cities For Families are:

Sunnyvale

South San Francisco

Alameda

Berkeley

San Mateo

Palo Alto

Whether you are investing in real estate for appreciation or cash flow, hiring a professional real estate agent is key. A real estate agent has the right knowledge and expertise to identify the most promising income properties, help you conduct the proper analysis and assessment, and, most importantly, negotiating for the right price.

***

Julie and her team of experts are ready to help you achieve your real estate investment goals. We will prepare you with all the necessary info, and even recommend the best places for investment.

We look forward to helping you with any real estate investment questions you may have. Please contact Julie at 650.799.8888 or Julie@JulieTsaiLaw.com to schedule a free consultation.

Moving Up To Strengthen The Family

Posted on by Julie Tsai

MOVE-UP BUYERS: MOVING UP TO STRENGTHEN THE FAMILY

 

Family is at the core of many cultures around the world.

In many Asian and Latin American cultures, for instance, most young adults stay home until they marry. When their parents age, they move in with their children who consider it an honor to care for them in their later years. 

Keeping Family Close

Family has long been a key component within Chinese society, and many aspects of Chinese life are tied to honoring one’s parents or ancestors. In fact, the majority of the “Five Relationships” espoused by Confucius were directly centered on the family. Due to this focus, it has historically been common for the Chinese—even when fully grown with children of their own—to not only remain in or close to their hometown, but also to have many living generations of a family living under the same roof.

While in the United States, the small nuclear family—father, mother, and one or two children—still predominates, things appear to be changing. According to the Pew Research Center, in 2014 a record 60.6 million people (19% of the US population) lived with multiple generations under one roof. More than one-fifth of Americans older than 55 now live in a multigenerational household.

Reasons For Staying Together

Fueling this shift are rising home prices, staggering childcare expenses, college debt, longer life expectancies, high costs of elderly care, and the growth of ethnic communities in which extended families traditionally live together.

Economics might be forcing the issue, but people now are rediscovering the advantages of this way of life, according to Donna Butts, executive director of Generations United, a family research nonprofit and advocacy group. The Great Recession of 2008 drove a lot of young adult “boomerang children” back to their parents’ homes when they couldn’t find a job.

“People came together by necessity, and they stayed together by choice,” says Butts. “In many other countries, it’s just a way of life. It helps strengthen the family.”

With home prices in the Bay Area out of reach for most young adults, families are increasingly purchasing larger homes to keep everyone close while helping their children save money for an eventual down payment on their own home. Even those who don’t have relatives living with them fulltime are looking at larger homes to accommodate international relatives during their long visits from abroad.

Enhanced Benefits

New housing bills (“New ADU Housing Bills Could Add Value To Your Home) passed by the California legislature are making things easier by giving existing homeowners greater flexibility and options to add auxiliary dwelling units, or ADUs, to their properties. Also known as ‘granny flats,’ ‘in-law units,’ and ‘guest apartments,’ these additional units can be added around the main house in a larger property, creating a sort of family compound.

Closeness to family is not the only benefit of moving up. Larger homes are usually located in higher-priced neighborhoods which generate higher property-tax income—a significant funding source for public schools. More resources mean state-of-the-art facilities and equipment and better paid and trained teachers. Realizing how critical a top-notch education is becoming in the 21st century, savvy parents in the Bay Area are actively seeking better schools to give their younger children a competitive edge.

A better neighborhood also means less congestion, noise, and closer proximity to open spaces with proven benefits to physical and mental wellbeing. 

Of course, moving up will usually cost you more—but considering the benefits, the trade-off is more than worth it. 

Can We Help?

For more information on how we can help with your move-up needs, please contact Julie at 650.799.8888 or Julie@JulieTsaiLaw.com to schedule a free consultation.

 

Why Is The Bay Area Great For Real Estate Investment

Posted on by Julie Tsai

Nearly 7.8 million people now call the San Francisco Bay Area home, with the fastest growth rates in Alameda, San Francisco, and Contra Costa counties (U.S. Census Bureau April 2019). The population of the nine-county region grew by over 600,000 people since 2010 — a nearly 8.5% increase — outpacing the growth rate in any other part of California. How did all this growth come about?

“You don’t need an expert to tell you that it’s obviously related to the strong economy of the Bay Area,” says Hans Johnson, a demographer with the Public Policy Institute of California, noting that the region is now struggling to accommodate its rapid pace of job growth and very low unemployment.

Of course, with this extreme growth comes plenty of opportunities for sound real estate investments. The following excerpt from the July 2018 report by the Bay Area Council Institute/ McKinsey & Company mentions factors that have made this area so ripe for investment:

The nine-county San Francisco-Silicon Valley Bay Area has been the international innovation hub since the 1970s, one of the nation’s most resilient regions for the past fifty years, and the fertile ground on which Apple, Facebook, Google, and other corporations have grown into top companies by global capitalization in just the last decade.

Even though these economic success trajectories have been almost unprecedented, the Bay Area economy is still currently on the upswing, rather than having reached a peak or started a decline. Much of the growth has occurred in clusters of highly-productive industries. These have thrived due to factors such as the Bay Area’s unparalleled workforce, world-class higher education system, premier startup ecosystem, and the almost limitless opportunities created by the region’s dense concentration of venture capital that funds innovation across a broad range of established and emerging industries.

Here are our professional findings for why you should consider investing in Bay Area real estate.

A Resilient Market

The steadfastness of our local market projects a significant influence on real estate values.

“Financial-market cycles have been around for hundreds of years, from the Dutch tulip mania of the 1600’s through today’s speculative frenzy in digital-currencies,” says Patrick Carlisle, Compass chief market analyst in the Bay Area. “While future cycles will vary in their details, the causes, effects, and trend lines are often quite similar. Looking at cycles gives us more context to how the market works over time and where it may be going much more than dwelling in the immediacy of the present.”

A look at Bay Area housing price cycles over the past 30+ years shows a market that recovers relatively quickly from economic downturns and disruptions to the financial system, offering investors positive returns in the long term.

Outpacing Inflation

Property price appreciation generally tracks inflation by +/- 2%. Based on the inflation rate of 2% for the past 12 months, a real estate investment should have seen (at minimum) a 0-4% appreciation.

A look at price gains in Bay Area properties over the last two decades, however, shows a market that consistently outpaces this norm.

Price appreciation, however, is a secondary attribute.

Your main focus should be on the net return on your real estate investment generated by rental income.

High Rental Prices

The Bay Area rental market is unlike any other in the country. Unprecedented growth of tech companies has fueled the market over the past few years, placing upward pressure on rents and downward pressure on vacancies.

Rents in the Bay Area are among the priciest in the nation. After two years of low-to-negative growth, Bay Area rents picked up steam in 2018, especially in the second half of the year, according to a quarterly survey of large apartment complexes by RealPage. At the start of 2019, the average asking rent for all sizes of apartments in the San Francisco, San Jose, and Oakland metro areas stood at $3,335, $2,789 ,and $2,302 respectively.

RealPage predicts that rises in rents will slow a bit this year—to 3.7% in the San Francisco metro area, 3.9% in San Jose, and 2.2% in Oakland—thanks to a big jump in new construction.

While the correction is welcome, the Bay Area’s economy—with an annual growth rate of 4.3% over the past three years, strong population growth, rising incomes, low unemployment, and a new wave of tech-company IPOs slated for 2019 and 2020—offers a solid underpinning for the rental market in the foreseeable future.

Julie and her team of experts are ready to help you achieve your dream of real estate investment. We look forward to helping you with any real estate investment questions you may have.

Please contact Julie at 650.799.8888 or Julie@JulieTsaiLaw.com to schedule a free consultation.

The Top 5 Things You Need to Know about Buying a House on the Mid-Peninsula

Posted on by Julie Tsai

The Top 5 Things You Need to Know about Buying a House on the Mid-peninsula

 

#1 There will be blood. (link to IMDB movie site) (Ed. Note: Many Americans will get that this was an academy-award winning movie, but if the reference is too obscure for Chinese, we can change it.)

 

Ok, not really, but it will be competitive to buy a good house in a good location at a good price.

 

Findings from the 2013 Housing Market Survey show 70 percent of properties sold in California that year had multiple offers. You need to be prepared to do battle. And you need to be prepared to lose and to go back into battle again until you get the house you want.

 

#2 You need to be extremely prepared.

 

Do whatever you can do to prepare you to quickly make an offer when you find a house you like. Get pre-approved for a loan (not just pre-qualified—link to real estate terms blog), have cash in the bank (at least a 20% down payment for most homes) and be ready to go to go the extra mile, like securing your own inspections before you make your offer, so that your offer has few or no contingencies.

 

#3 No matter how well-prepared and qualified you are, you will likely lose several houses that you would have liked to buy. And that’s ok.

 

There is so much competition for good homes now that most people who make offers lose. That’s just the numbers. Everything is a learning process. There will be homes that you lost and wished you would have bid more for, and homes that you are grateful that you did not get after all the dust settles. In the end, it will all be an education that will hopefully lead you to being confident in making an offer on a house that you really want, at a price that is reasonable for you, that will culminate in a purchase.

 

#4 Still, you must be careful and only make an offer that you feel comfortable with and that you will feel happy about if you win.

 

In this hyper-crazy market, it is tempting to want to win at any cost. This is a mistake. This NY Times article (Link: http://www.nytimes.com/2014/04/06/realestate/borrowing-the-maximum.html?ref=realestate&_r=0) advises against buying a home at the top of your budget.

 

I feel like I’m channeling Suze Orzman here, but here are some guidelines:

 

  • You must be comfortable paying the mortgage with the income and expenses you have now—not the income you anticipate coming in the future.
  • You should have savings so that you can pay the mortgage if you unexpectedly lose your job and have to be unemployed for a while—probably about 12 months in this economy.
  • You have to be okay with the purchase, even if the real estate market drops and your house is worth less the year after you buy it. Real estate cycles. Any investment of this magnitude is risky. If you can’t stomach the risk, don’t purchase a home.

 

#5 Having an experienced real estate agent who knows the area you want to buy in is more important than ever.

 

The market is crazy and dynamic. An agent who knows the local market, knows the trends and who has a reputation among the other agents as someone who is a professional with integrity will be able to navigate the stormy waters and steer you toward the best deal for you.

 

 

在Mid-Peninsula购房您需要注意的5事情

Posted on by Julie Tsai

在Mid-Peninsula购房您需要注意的5事情

 

#1《血色将至》（您可到IMDB（互联网电影数据库)電影網站觀看）（編注：許多美國人都知道這是一部奧斯卡獲獎電影，但如果其參考資料對於中國人而言過於晦澀難懂，我們可以改變這一狀況）。

 

好了，也不完全是如此，但是以一個好價錢來買一棟地段較好的房子將會是非常有競爭力的一件事情。

 

2013年住房市場調查結果顯示加州當年售出的70％的物業有多个买家竞价。因此你需要爲買房之戰做好準備。 你可能需要做好失敗的準備， 重新上陣，直到你得到你想要的房子爲止。

 

＃2你必須準備得非常充分。

 

當你找到一棟你喜歡的房子時，盡一切努力儘快給出你的出價。要獲得預批准的貸款（不只是通過資格預審鏈接到房地產方面博客），在銀行存款（至少是可以買得起絕大多數房屋20％的首付），並準備好要多花費一點時間，例如在你做出報價之前確保你做出的房屋檢查足夠完善 ，讓你的報價不會或少受到突發事件的干擾。

 

＃3要知道無論你之前是多麼精心準備或是你有多麼合格，你都可能會失去你中意的房屋 。不過，那沒關係。

 

現在一棟好房子會有衆多買家參與競爭，每次都會有許多人最終失敗。這僅僅是數字方面的 。 每件事都是個學習的過程。有些房屋你競價失敗 原因是房主希望你可以多出一些錢，有些房屋在所有的塵埃落定後你會慶幸自己當初並沒有得到它。最後，它都將教育我們，引導我們在做出報價之前變得更加自信，得到你真正想要的，價格合理的房屋。在下一次購房中，將你所學的知識運用的爐火純青。

 

＃4不過，你必須要小心，做出你認爲合理並且舒服的報價，而且只有那樣你贏了，你才會感到高興。

 

不過在這個超瘋狂的市場中，很容易讓人們爲了贏得某物而不惜一切代價。 這是個誤區。這是紐約時報的一篇文章（鏈接： http://www.nytimes.com/2014/04/06/realestate/borrowing-the-maximum.html?ref=realestate&_r=0 ）建議人們不要花光全部預算買房產。

 

我覺得我正在收看Suze Orzman的節目，不過這其中有一些指導原則：

 

1）       你要以你現在的收入和開銷來決定你月供的數額，而不是以你預期的收入和開銷。

2）       你應該有一定的積蓄，這樣如果你意外的失業了，你可以用其來支付抵押貸款——總額大概是能支付一年的月供。

你必須爲此次的房屋購買事宜做好心理準備，因爲根據房地產週期，房地產市場可能變壞，你購買的房屋也可能會貶值。如此大額的投資是有風險的。 假如 你不能承受的起這一風險，我們不建議你購買住房。

 

＃5擁有一個經驗房豐富的房產經紀人尤爲重要，他們對你目標地區房產情況會非常熟悉。

 

市場是瘋狂的並且變化無常。擁有一個熟悉當地房地產市場，了解其發展趨勢而且能在同行中聲名卓著的房地產經紀人極爲重要。他們的專業以及對客戶的忠誠將引領你在充滿驚濤駭浪的房地產市場找到正確的方向爲您做出最正確的決定。

 

 

JULIE TSAI LAW REALTY GROUP

JULIE TSAI LAW

650.799.8888

JULIE@JULIETSAILAW.COM

DRE #01339682

KRISTIN TSAI

408.605.80000

KRISTIN@JULIETSAILAW.COM

DRE #01294153

Contact Us
Skip to content