There are still investors in the game!
As we hear so much about the housing market being driven largely
by desperate homeowners wildly throwing money around in order to secure their
dream home, it is refreshing to know there are folks who look at the numbers
and see them make sense as a long-term investment. What kind of return is
expected when one shells out on the Peninsula amongst the latest single family
home feeding frenzy?
This morning I stumbled on the comp which provides some insight.
At the start of September, a house near downtown San Mateo sold.
A 3/2 of almost 1700 sq. ft. and newly, though a bit cheaply, spruced up, it
closed at 1.569, or a hair above $925 a sq. ft. The two-week close time
indicates rock solid financing – as in all cash.
It is now listed on Craigslist for rent with an ask price of
$4695 per month. It is impossible to know the tax basis if we operate under the
assumption the deal was a 10-31 exchange. Should they get this price, the return
with no costs is approximately 3.5%. Reality scales back that assumption, tax
abatement aside. However, even paying a 10% management fee and 10K in tax, the
return hovers above 2.5%, or 0.5% above what Bloomberg is reporting as the 30
year Treasury yield.
