Wow! A whirlwind of activities has transpired in the last 24 hours; I almost had to pinch myself this morning to actually believe everything that’s been going on…
As readers may know, lately, I’ve been attending some local Bigger Pockets Meet-Ups, and have been picking the brains of the local investors, looking for a way to get back into the Bay Area and purchase another rental property. Because prices are so insane right now, I kind of realized awhile ago that the only way I would realistically have a shot of getting in on a deal would be to partner up with others.
Last Sunday, I attended an open-house for a townhouse property located in a wonderful neighborhood… Actually, this townhouse was located on the EXACT same block as Rental Property #2. Since I was passing by, I decided to swing by and take a look around.
The house was staged very well. Most impressively, everything was basically turnkey, so a new owner wouldn’t have to fork over any more funds for renovations. The place featured: new laminate flooring, new granite countertops, recessed lighting, remodeled bathrooms, stainless steel appliances, and really, outside of the dirty old upstairs carpet, everything else seemed to be in excellent condition.
When I left the open house, I seriously had no inkling that I would try and make a move on the property. Actually, the listing price was for $490,000, so I already knew that it was priced way out of my budget…
But the more I thought about it, the more intrigued I was with the idea of owning another property in this neighborhood… You see, it’s located within walking distance of the new 49er’s stadium, and that whole area is undergoing massive redevelopment.
As of present day, I would classify it as a Class A property… Others might disagree, but eventually, over time, I have no doubt that the area will continue to improve drastically. Quite simply, there’s a ton of money pouring in (to the tune of $6.5 Billion), and that can’t help but bode well for the value of all the properties located in this region.
So, on Tuesday night, I entertained the idea of putting in an offer. I talked to a few friends, and they were on board with the plan. There would be four of us partnering up, total. I reached out to my shark of an agent — the same guy who helped me win Rental Property #1 and Rental Property #2.
On Wednesday morning, my agent informed me that offers were due that afternoon… The only way we could compete was to get a pre-approval letter that same day, and to submit an offer by that evening.
My friends and I wasted no time! We went to the bank during lunch and got a pre-approval letter good up to $600,000. Next, I talked to my agent, and he told me he had past experience working with the listing agent… He felt like he knew what strategy to use to help us win. While on the phone talking, I instructed him to be aggressive with any offers… In fact, I admitted to him that we all really wanted to win this one, and would be willing to pay over listing to make it happen.
My agent countered back… He said, “Let’s go in at listing, $490,000… I think we have a shot if we remove all contingencies — loan, inspection, and appraisal.”
When I heard that, my first reaction was that my agent was off his rocker! It had been two years since we last worked together, and I was getting worried that he might have lost his “midas touch”. I blurted out to him, “Seriously?!? You want us to come in at listing for a property in the Bay Area that’s located in a fabulous location?!? I was at the open house… it was pretty crowded!”
My agent stood firm on his stance… Because of our past successes, I decided to trust him on this. I felt like it was a complete long-shot, but finally relented, “OK. Let’s remove all contingencies and go in at the listing price… Keep me posted!”
Well, by that evening, it was all silence… I got tired of waiting around, so I decided to take a jog outside. By the time I returned, I was greeted with two missed calls and a voicemail.
I didn’t know what to expect…
My agent is also a very even-keel kind of guy… Very expressionless in his speech, so even after 30 seconds of listening to the voice message, I had no clue if we had won or not…
Finally, he broke the news and suspense… Offer ACCEPTED! $490,000… our offer was the winning bid!
And since I’m all on vacation for basically the entire month of August, the real fun begins now! We have 30 days to close escrow! 😉
Here are some more articles discussing the “Stadium Effect” in Santa Clara:
There is no denying the brand name of the 49ers… Further, the stadium and location will be in the national spotlight when Super Bowl 50 arrives on February 7, 2016… Better to get in before all the festivities and redevelopment happens, right?
To be perfectly honest with readers, this investment is simply a “side hustle”. I don’t even want to call this investment Rental Property #6 because it won’t cash flow at all! Without factoring for closing costs, my contribution will start at $24,500.
The way I look at it, I’m investing in a hyper-growth stock that doesn’t pay dividends. When it comes to this particular investment, I simply feel that the risk/reward factor is heavily skewed on the reward side… Without a doubt, I have absolute conviction that this area will shine over the coming years, and property values will continue to surge tremendously.
Of course, I could be wrong… and of course, another recession, or market crash could ensue… As such, I am taking on a bit of risk here. By partnering up with 3 other savvy investors (who also make outstanding salaries at their day jobs), I feel like I am doing the best that I can to mitigate risks…
A 3 bedroom townhouse in Santa Clara priced at $490,000 is extremely affordable, if you ask me. If the schools in this area improve and the redevelopment goes to plan, I really feel like the upside here is sky-high. But we’ll see over the next 3-5 years…
Here are the “cash flow” numbers:
Yikes! Cash flow negative! That’s a no-no, right? Well, luckily each one of the four partners in on this deal also owns other cash flow positive assets to help cover this spread!
Again, this is a risk/reward play on future appreciation… Yes, it’s speculation… But so was Google (GOOG), Apple (AAPL), and Tesla Motors (TSLA), at one point in time… Ultimately, no risk, no reward… The important thing is to take smart, calculated risks… which is what I feel like I am doing here…
In 5-10 years, I hope to look back and say, “Yup, it’s all hindsight now… But even back then, I had a pretty good feeling about this investment.”
Time will tell… Wish us luck! 😉