$369,000 for Redwood City home still not cheap enough

If the adage "You make money on the BUY" is true, how do you determine what is a "good buy" and what isn't.  What is the sorting process in selecting a property and determining what the right price to pay for a property is?  The best way to learn, is to go out and see LOTS of property; but who has time to spend their entire day looking at homes??  Since, it is my job, I do!  Here I will share a few of the places I visit each week.  And, thanks to today’s technology, I can video my adventures for you to see.  (Go to www.youtube.com/realsmartvideo and you'll see 3 clips for this property)

The first property I visited turned out to be a “don’t buy” property. It looked good on the surface, and at $369,500 sales price for a west side Redwood City home, I was motivated to view the home minutes after being listed. You can check out a video tour of the property.


Here’s the profile:
Single Family Home on Clinton St in Redwood City listed for $369,500
2 bedroom, 1 bath located West of El Camino, South of Jefferson Ave. in a neighborhood with a mixture of single family and multi family dwellings.

What drew me to this home was, of course, the price. But the price relative to other prices in the same neighborhood. In the last 3 months, the average price for a home under 950 square feet, in this area, was $498,000. In addition, homes in this range will rent for close to $2000 per month. (I have one rented right now for $1950 just up the street). It appeared to be priced well, and had the potential to provide very good cash flow. The picture of the front of the house looked promising, and certainly lower square footage homes were selling. But the property was only 670 square feet, and while it looked on paper to have potential from the outside, the inside was a different matter. It wasn’t the square footage that killed it for me, but the floor plan. The house itself was in moderate condition, but there was 70 square feet of wasted space at the entry of the home, and another 80 square feet wasted to get to the bathroom. Wasting 150 square feet in a 670 square foot property is painful. Certainly with some floor plan modifications, the home would show itself in a better light. But floor plan changes triggers alarms for me. Remodeling is cheap, moving walls is expensive. Not only is more construction involved, but it takes longer to complete. Time is money, and a vacant home doesn’t produce any money! I’ll take an old, beat up house with a good floorplan everyday over a home in good condition that requires moving around walls to make it marketable. Once more, a small home with the right floorplan, can feel big. And, a large home with an awkward floorplan feels small. At a list price of $369,500 I would easily sink $50,000 into the home to remodel and improve the floorplan. This means the rental options looks much less appealing. And to fix and sell the house looks worse. By the time, I would sell the home, I would be into it the house $450,000 with all the costs….much too high a number for this home.

In the end, what appeared to be a screaming deal, turns out to be overpriced for a RealSmart investment by at least $50,000. Speaking of smart investments, the RealSmart Fund is a fantastic vehicle to allow all investors to invest in a pool of properties….it's a mutual fund of Peninsula real estate. You can get more information at our website http://www.realsmartgroup.com/  or just contact me directly.