18885 Kosich Dr, Saratoga, CA 95070


By zodeak   Follow   Fri, 12 Feb 2010, 12:16pm   2,146 views   12 comments
In Saratoga CA 95070   Watch (0)   Share   Quote   Permalink   Like   Dislike  

My wife and I had looked at this property almost a year ago when it was listed for sale. We thought it was way over-priced back then at somewhere around $1.35M (if i recall correctly) and it was de-listed when it didn't sell. Well, it has been recently been re-listed at $1.275 M, which of course is still too much.

The kicker is, I just also came across it on Craiglist where they are simultaneously trying to rent it out at $4,800/month. When compared to other rental houses this seems inordinately high as well. But let's assume they can find a renter at $4,800/month, what does the disparity look like between renting and owning?

Back of the envelope very simple math:

Buying at $1.275, assuming 20% down, maybe 6.5%:
- About $6,500/month mortgage
- Property tax tacks on about another $1,300/month
- Assume no cost of maintenance for simplicity sake
= $7,800/month to own

So if you want to live here you can pay about $3,000 less/month to rent. Plus you get a gardener every two weeks. =)

Here's the MLS Listing: http://www.redfin.com/CA/Saratoga/18885-Kosich-Dr-95070/home/806164
Here's CraigsList: http://sfbay.craigslist.org/sby/apa/1597229018.html

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  1. thomas.wong1986


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    1   5:40pm Sat 13 Feb 2010   Share   Quote   Permalink   Like (1)   Dislike  

    You can buy at silver creek, san jose, CA for about a half the price for new home.

    I see most of the homes in Saratoga were bought up at peak 2005 and selling under orginal sale price or so. Still overpriced by 100% mark up compared to prebubble years given they only went up by inflation.. say 30% per decade. I guess thats why they are on the market with rates on ARM loans resetting.

  2. SF Mikey


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    2   7:10pm Sat 13 Feb 2010   Share   Quote   Permalink   Like   Dislike  

    $1.275M for a rancher! Last sold in 2005 with $988k 1st mortgage (Countrywide!) and $92k second (National City Bank). Personally, I don't think that I would pay $600k for that rancher even in Saratoga. When will the insanity end!

  3. thomas.wong1986


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    3   12:18pm Sun 14 Feb 2010   Share   Quote   Permalink   Like (1)   Dislike  

    And more insane, homes like this were selling for 300-350K before the bubble ..1997.
    The insanity will end when prices catch up to reality $400-450K and not $600K.

  4. avkipper


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    4   4:17pm Wed 24 Feb 2010   Share   Quote   Permalink   Like   Dislike  

    These owners of the property robed us of huge amount of security deposit after we have rented from them for 1.5 years with great care for the property. We have rented from them for huge price of nearly $6000 per month after our house burned in Campbell. They're very dishonest and greedy people. Wish we would never had rented from them!
    A&T

  5. ishdakuteb


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    5   7:17pm Wed 24 Feb 2010   Share   Quote   Permalink   Like   Dislike (1)  

    @SF ACE: Where do you come up with the amount of 2,350? If I am correct .35% equals to .0035 :) If the math that you have posted up there is correct, then the result would be 23.51 instead of 2,350. That is a big big diff.... hihihihih....

  6. P2D2


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    6   9:49am Fri 26 Feb 2010   Share   Quote   Permalink   Like (1)   Dislike (1)  

    SF ace says

    Principle = 904 represents 1st payment
    Interest = 5,417
    Tax = 1300

    or 7,800 to own

    Income tax deduction (2,350) (1300+5417)*12*.35%/12 (tax rate = 28% fed and 9.8% state = 7% net of fed deduction)

    Less forced savings (904)
    Cost= 4,546 or about the same

    You are joking, right? Who would pay $4500 rent for this 2 bedroom? Yes it 2000+ sqft, but the rent price is still too high. $3000-3500 could be reasonable. Remember, no matter how much sq-ft or how much acres of land this property has, it is still 2 bedroom. And that's a important factor for renters. There are lot better properties are renting for lot less. Let's check some other rentals in market:
    Arrowhead Lane, Saratoga, CA: 4BR/2+1BA, 2500 SQFT. rent $4195.

    19488 RIESLING CT: 4BR/2BA, 2150 SQFT. Rent $3750.

    Just because someone is wishing to get $4800 per month as rental, that does not mean he is going to get it. So your calculation is plain simple nonsense.

  7. P2D2


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    7   10:05am Fri 26 Feb 2010   Share   Quote   Permalink   Like   Dislike (1)  

    SF ace says

    loop back to the top of the thread and avkipper previous rent.

    Not very relevant. He did not rent in normal circumstances since his home was burned down. First of all, I am guessing that he wanted to rent for short term (the time takes to build a new home or find a new one), so rental price wasn't an important factor for him. Secondly, we don't know when he rented (e.g. rent price was lot higher before dot-com bust).

    If you are really honest in your calculation, you would base your calculation with current comparable rentals.

    SF ace says

    Who knows what this will rent for, it is just an assumption for the sake of (mis)argument that the price to rent is about the price to own.

    And who cares what this will rent for? It might actually rent for $6000 again! But it is nonsensical to do rent vs own comparison based on someone's absurd wish price.

  8. veenstr


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    Oakland, CA

    8   10:38am Fri 26 Feb 2010   Share   Quote   Permalink   Like   Dislike  

    There are aspects of the costs not being taken into consideration here. Both positive and negative.

    The family who is buying a $1.27 million dollar home should be in at least the 33% tax bracket for federal. Over the first year based on proper amortization tables we pay $65,964.33 in interest. Times 42.8 (taxes we don't pay) = saving of $2742 per month.
    - No one is calculating the money/interest earned on the hefty down payment of $255,000. And minus the tax on those earning. If we assume they can safely make simple interest of 5% then this is $7293 after tax per year or $607 per month. This assumes no capital gains which would save us more money.

    - We assume no payment of principle which reduces interest over time. So this benefit overtime is not as strong.
    - We get a standard deduction in 2010 of $11,400 depending on your income and ability to write off the state tax as an itemized deduction on the feds this may be taken into account. In this case there should be no action taken here as the buyer of this home should be making over $150K a year. And the state tax on $150K a year is close to the standard deduction. So they would itemize either way.

    See below for actual numbers. I did not realize I could edit my own post...so I reposted. Now I edited.

  9. veenstr


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    Oakland, CA

    9   10:56am Fri 26 Feb 2010   Share   Quote   Permalink   Like (1)   Dislike  

    Here are the numbers as I see. Please correct any mistakes.

    I used bankrate.com to calculate amortization. And we pay a monthly mortgage of $6447.
    http://www.bankrate.com/calculators/mortgages/mortgage-calculator.aspx

    - Interest paid first year $65,964.33. Monthly $5497. Interest deduction saved. (65,964.33 * .428) = $28232 yearly or $2352 monthly.
    - Principle paid first year $11,400.80. Monthly forced savings. $950

    Now we have monthly of ...
    $6447 + $1300 monthly property tax - $556 property tax write off - $2352 interest paid write off + $607 interest earned on down payment - $950 forced savings = $4496 actual cost.

    A bit cheaper to buy. Not including maintenance.

    Updated with SF Ace correction.

  10. veenstr


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    Oakland, CA

    10   4:20pm Fri 26 Feb 2010   Share   Quote   Permalink   Like (2)   Dislike  

    I did not realize the phase out rule. But this does not seem to apply for 2010? Did I read this correctly?
    http://www.smartmoney.com/personal-finance/taxes/a-primer-on-homeowner-tax-breaks-14327/

    If it does it appears one should add $10 per year for every $1000 they make above $166,800. To do the quick math you costs increase about $1 per month for every $1000 of $166,800 you make. It looks like O'bama would like to bring this back at 3%. So that would be $30 per year per $1000 over.

  11. pfdv


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    11   7:57am Sat 27 Feb 2010   Share   Quote   Permalink   Like (1)   Dislike  

    Don't forget Alternative Minimum Tax in all this...

  12. mye


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    12   11:01am Sun 28 Feb 2010   Share   Quote   Permalink   Like (1)   Dislike (1)  

    veenstr says

    Here are the numbers as I see. Please correct any mistakes.
    I used bankrate.com to calculate amortization. And we pay a monthly mortgage of $6447.
    http://www.bankrate.com/calculators/mortgages/mortgage-calculator.aspx
    - Interest paid first year $65,964.33. Monthly $5497. Interest deduction saved. (65,964.33 * .428) = $28232 yearly or $2352 monthly.
    - Principle paid first year $11,400.80. Monthly forced savings. $950
    Now we have monthly of …
    $6447 + $1300 monthly property tax - $556 property tax write off - $2352 interest paid write off + $607 interest earned on down payment - $950 forced savings = $4496 actual cost.
    A bit cheaper to buy. Not including maintenance.
    Updated with SF Ace correction.

    This is to say that in best case scenario, buying is a little bit cheaper. The reasons are:
    Interest portion of the payment decreases over time, thus tax benefits decreases too.
    Property Tax will increase over time.
    It is easy to say that minus maintenance costs. As a renter, owner provides all the maintenance. At 1% of property value, you are looking at 12.5K a year = additional 1K a month.

    Also don't forget, 20% down payment equals 250K. How about the opportunity costs of not being able to invest 250K.
    Currently, interest rates are at lowest. As interest rate increases, the property value will drop.

    Essentially, real estate is still a falling knife. There are definitely better investment opportunity out there. I am waiting for better price ahead.

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