Archive for April, 2009
Santa Cruz’s Newest Resident
April 29, 2009
And again, a shockingly long time has gone by since my last blog post. But this time, I’ve got a really good excuse. Just about 3 1/2 weeks ago (April 4, 2009), my wife and I welcomed into this crazy mixed-up world our first child, Aiden Santiago.
I’ve got so much to say on the subject of Aiden Santiago, I hardly know where to begin! There’s so much to talk about on the subject of being an expectant father, the birth, and now of course, being dad to a newborn. But there’s one thing I want to comment on, because I think a lot of expectant parents in Santa Cruz are asking themselves this:
My wife and I did the tour of both Sutter and Dominican. We have friends who have had babies at both facilities. We registered at both facilities. If you talk to people about this, many people will favor one or the other – the general consensus seems to be that both are excellent places to have a baby, but that the food at Sutter is better.
In the end, we did go to Sutter – and the baby was delivered by unplanned C-Section after almost 20 hours of labor. Throughout the whole labor and post-op time at Sutter, I was just blown away by the staff. I could not imagine a more professional, compassionate, caring, and friendly group of people to take care of my wife and our baby.
Yes, the room was nice, the food was OK (except there is no WiFi available for patients or guests – grr!) – but the care we received there was just beyond description. I feel a deep and genuine debt of gratitude to the staff there – this is something that they do all day, every day – but I never got the feeling that they were just doing their job or punching the clock.
I’d also like to give a shout-out to the lactation center at Sutter. We went there a few times with Aiden so we could nail this breast-feeding thing. The nurses there were also fabulous – they spent a lot of time with us to make sure that baby Aiden and mom were connecting well and Aiden was gaining weight as he should.
And thanks, also, to all my friends and family who have written and called and come by to visit! Thanks especially to my mother who has been spending a lot of time with us here in Capitola, away from her home in Berkeley, helping us to adjust to our new life as parents. Thanks, ma!
Posted by SantaCruzBroker at 8:42am
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Speculating on Santa Cruz Real Estate
April 02, 2009
I got a phone call the other day from a lady who was interested in one of my listings in Capitola. Unfortunately, the property had just closed escrow the previous day, and I let her know…being the good Realtor I am, I quickly brought up the MLS and tried to find some good “switch” properties for her.
I found one, and during our conversation, it turned out she was an investor, looking to buy a property for investment purposes. This came up because the “switch” I had found for her had higher HOA dues than the property she was originally calling on, but I explained that the “switch” would rent for considerably more than the property which originally interested her, and would in fact provide much better cash flow.
These days, though, the people who are investing for cash flow are not buying in the mid-county area (Capitola, Aptos, Soquel, etc.) – because the properties there do not cash flow without a huge down payment- and even then, if you were to put a huge cash down payment, you would have a poor cash-on-cash return of your investment. I suggested to her that she take a look in Watsonville, because there’s a place where you can get good ROI (return on investment) with a relatively low down payment.
She wasn’t interested in buying in Watsonville, though. Her feeling was that Watsonville would not be appreciating in the future, and that she felt that Capitola, Aptos, and Soquel would have much better appreciation in the future.
Ahhh. Here is an important distinction to make: this lady is not truly an investor. Real investors are in fact snapping up properties in Watsonville in droves. This lady is a speculator – she speculates that the values in Capitola and such will be going up farther and faster than they will in Watsonville.
We then spoke for a few minutes about future price appreciation. I indicated that it will be some time before prices start rising in the mid-county area, and that before they do, prices will continue dropping for some time to come – whereas Watsonville has fallen farther, faster, and is closer to the bottom. However, to an investor, it does not matter so much that the prices in Watsonville will continue to fall for some time to come. When a property is truly providing positive cash flow, it does not matter much that the value has dropped, if it costs you nothing to own it and instead reliably kicks off money every month that ends up in your pocket.
I don’t see the sense in buying something in, say, Santa Cruz that requires a large down payment, which does not provide much in the way of cash flow (and probably has a negative real cash flow, considering vacancy factor, maintenance, etc.), and will be heading steadily down in resale value for some months (or years?) to come, before someday eventually climbing back up to the price you paid for it, and then jumping high enough up over that price to justify the money you have spent on taxes, insurance, maintenance, and of course, the cost of the eventual sale (let’s not forget that 6% commission!).
On the other hand, it is patently sensible to me to buy a $250,000 3-bedroom house in Watsonville, put down 20% ($50,000), rent it out for $2000 a month, make $500/month after principal, interest, tax, and insurance – and assuming a 10% vacancy factor, you’re making a 10.8% return on your money every month. Now that is what I call investing! Who cares if the property drops in value the next 1-2-3 years? You’re making a 10.8% return on your $50K, where else are you going to get that? OK, I didn’t factor in maintenance and whatnot, but even so, you’d still be looking at a return that’s much better than you’re going to get in today’s stock market.
Having said that, there are investors who do work in the mid-county area and do well – however, these are people who invest in properties that are, typically, not in a condition that can be financed. They pay cash for the properties, do the repairs necessary to put them into a livable, easily-financed condition, and turn around and flip them in a short period of time. Typically, they are contractors, or investors paired with contractors. There are very few investment-grade properties in Santa Cruz county outside of Watsonville where you can buy, hold at a profit, and sell down the road for a net profit – without speculating on an eventual price increase to make it all worth the considerable risk.
Posted by SantaCruzBroker at 12:01pm
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