Does investing in a Condo in Fremont near BART station make any sense?


By kartoon   Follow   Sun, 26 Feb 2012, 7:15am   2,633 views   15 comments
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I own a home and have some spare money to invest. I have been looking at ways to put that money to use and so far haven't found any good ones. Once you look into details, almost no investment looks good! And just leaving the money collecting 0.0000000000000000000000000000000001% (reverse-googleplex) interest seems just fine! Thanks to Bank of america - our neighborhood bank :)

One thought I have is to buy a condo in Fremont area close to BART.

I live in the peninsula area but the Cherry/Guardino area seems to be close to BART. Just for e.g. in this area -

39224 Guardino Drive #105, Fremont CA 94538

I can invest up to 20-40% and am well covered on credit scores, income etc.

Is it conceivable that if you buy something like this for investment, you can make some money?

Also what do you folks think is a good price for this or *similar* property? I think 170-180K is possible. It has about $350 HOA and the area seems decent with rent potential of 1400-1500/month

Thanks,
K

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  1. clambo


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    1   7:55am Sun 26 Feb 2012   Share   Quote   Permalink   Like   Dislike  

    Buy Vanguard High Yield Corporate Bond Fund, make 6%, wired directly into your checking account, or let it ride and build up the balance.
    Unless you really want to be a landlord, why bother?

  2. Patrick


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    2   8:51am Sun 26 Feb 2012   Share   Quote   Permalink   Like   Dislike   Protected  

    There is some danger with those bond funds. You may get your 6% and see the principle decline 7% etc.

    As for the condo in Fremont, it might work if you can pay a low enough price. Here's one that my calculator says might work (well, in Union City):

    http://patrick.net/housing/calculator.php?uaddr=1370+Buckingham+Way%2C+94544

  3. clambo


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    3   9:16am Sun 26 Feb 2012   Share   Quote   Permalink   Like   Dislike  

    For the potential bond investor:
    The LONG term results of bond funds is the interest you are paid by them. The NAV=net asset value=share price="principal" may fluctuate up and down. Over long time periods it's not an issue.
    Likewise, economic conditions may favor or disfavor bonds, as also cash, stocks, etc.
    Present economic conditions favor corporate bonds because businesses are generally 1. making money 2. sitting on a pile of cash.
    Regarding risk of bonds, last year my Vanguard Total Bond Market Index Fund Admiral shares paid about 2.5% AND the shares also went up (capital appreciation) because of the "flight to safety."
    You would have to pay me $200 to even drive over to Fremont, let alone own a condo over there.
    Why complicate your life? HOA fees, property taxes, bad tenants, missed rent payments, clogged toilets, etc.

  4. clambo


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    4   9:21am Sun 26 Feb 2012   Share   Quote   Permalink   Like   Dislike  

    OR:
    If cash is burning a hole in your pocket, and you want to have no tax impact from the interest:
    Vanguard Tax Free High Yield Fund
    I think that's about 3.5% free of federal taxes. But, your income also will determine if it is worth the lower yield to go tax free. Also it is a matter of taste that some people just HATE having to pay tax on their interest.
    The place to buy bond funds is Vanguard because the fees are the lowest so you keep more of your interest. As a second choice if you need something more esoteric (e.g. emerging market bond fund) T.Rowe Price.
    Despite my mention of bonds here, I have just a bit of my financial investments in bonds because I love stock funds more.

  5. Patrick


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    5   9:21am Sun 26 Feb 2012   Share   Quote   Permalink   Like   Dislike   Protected  

    Sure, bond funds go up and down, but remember mortgage-backed bonds? Many of those utterly imploded and you don't know just what's in most bond funds.

    So that bond fund might be a good deal, but might not. Hard to say without some study.

    And I agree it's a lot of work and trouble to be a landlord, but at the right price, it's a good deal. And there are management companies that take care of the details if you pay them enough.

  6. clambo


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    6   10:18am Sun 26 Feb 2012   Share   Quote   Permalink   Like   Dislike  

    You can easily know what is in the funds, it's in the reports and prospectus. Also, Vanguard will never sell toxic garbage.
    If 2.5% and low risk sounds like a bad deal to a saver, well, the alternative is letting the bank use your money and pay you nothing for the privilege.
    If 6%+ and more risk is a bad deal I say borrowing capital to "invest" in a crappy condo and becoming a landllord (i.e. new part time occupation) is less attractive.
    Everyone's results may vary. I will alert the readers here when I "lose money" at Vanguard.

  7. swebb


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    7   10:18am Sun 26 Feb 2012   Share   Quote   Permalink   Like   Dislike  

    clambo says

    bad tenants, missed rent payments, clogged toilets, etc.

    I have had some exposure to the landlord side of the arrangement, and in my experience this is solid advice to consider. People here will tell you that with proper screening, a property that attracts high quality tenants, etc you are able to avoid most tenant related problems. Be careful, though...you have to know what to guard against and how to guard against it (experience is the best teacher.)...and you are still going to get a bad apple from time to time (at least).

    From what I have seen, it doesn't seem to be a good business to get into on a onesie-twosie basis. Maybe if you have a management company deal with it all, but that eats into your profits. Your risk of loss is probably higher than you think...an eviction, loss of rent and repairs could eat a year worth of profits easily. I'm just saying, don't be lulled into thinking it's a "safe investment" because you can't click a button and get a 5 year graph of the performance...what you don't know can hurt you.

    Of course, I know nothing about the specific market you are talking about. It could be great.

  8. drew_eckhardt


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    8   11:38am Sun 26 Feb 2012   Share   Quote   Permalink   Like   Dislike  

    clambo says

    If 2.5% and low risk sounds like a bad deal to a saver, well, the alternative is letting the bank use your money and pay you nothing for the privilege.

    Provident Credit Union pays 2.3% on the first $25K in "Super Reward Checking" balance and lets married couples have two such accounts for a $50K total at that rate with essentially 0% risk on the principal (the US could theoretically collapse with NCUSIF and FDIC not paying up on losses) provided that you have an automatic deposit and 10 check card transactions each month.

  9. drew_eckhardt


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    9   11:44am Sun 26 Feb 2012   Share   Quote   Permalink   Like   Dislike  

    kartoon says

    Patrick,

    Thanks for the link. It appears the link u sent me is in Hayward and it's a manufactured home. I don't know much about hayward nor mfg homes. Very interesting.

    Thanks,

    K

    1. The nice parks prohibit renting.

    2. You also have slot rent to deal with which runs $750-$950 a month in Sunnyvale/Mountain View and I haven't a clue what it might be in Hayward. 3% annual increases are typical although they can be higher if park management feels like it in places without rent control.

    3. An 800 credit score will only get you a 7% loan rate on a 20 year loan with 20% down because it's a chattel loan.

  10. Patrick


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    10   12:11pm Sun 26 Feb 2012   Share   Quote   Permalink   Like   Dislike   Protected  

    Oops, didn't realize that was a mobile. My calculator doesn't have a place to put in land rent, so that makes those mobiles look like better deals than they really are.

  11. Patrick


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    11   12:17pm Sun 26 Feb 2012   Share   Quote   Permalink   Like   Dislike   Protected  

    kartoon says

    I own a home and have some spare money to invest. I have been looking at ways to put that money to use and so far haven't found any good ones. Once you look into details, almost no investment looks good!

    Maybe it's a good time to use the money to start your own small business. Takes time, but you might build something that will pay better than a bank or a bond and it's something you can see, touch, and personally control.

  12. RentingForHalfTheCost


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    12   3:19pm Sun 26 Feb 2012   Share   Quote   Permalink   Like   Dislike  

    Help out our troubling economy and go buy some "Made in America" products. Is your entertainment center the bomb? Have you seen the giant screen TV at Costco lately? Upgrade that car. Take the family to Disneyland. Buy the wife that necklace you forgot she asked you for. You can't take this stuff with you, and anything that adds to your quality of life and makes you happier will keep you making good money in the future.

    Just a thought.

  13. toothfairy


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    13   3:34pm Sun 26 Feb 2012   Share   Quote   Permalink   Like   Dislike  

    I dont like condos because the board can prevent you from renting it out.

    How about something like this
    http://www.redfin.com/CA/San-Francisco/372-Sawyer-St-94134/home/1302148

    I dont know this neighborhood but I'd think you could get $1k per month.

    Not the greatest house but I like having land so that 20 years from now when your house is worth a lot more you can tear it down and build something nicer.

  14. Patrick


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    14   3:56pm Sun 26 Feb 2012   Share   Quote   Permalink   Like   Dislike   Protected  

    toothfairy says

    I dont know this neighborhood but I'd think you could get $1k per month.

    From my comparable rent data service, the median of the 40 closest 1br rents is actually $1,997.

    But the first few rents (the closer one geographically) are more like $1,200.

  15. waiting_for_the_fall


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    15   5:55pm Sun 26 Feb 2012   Share   Quote   Permalink   Like   Dislike  

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