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Why Savvy Real Estate Investors Are Now Licking Their Chops…Especially In Places Like Antioch, Fairfield and Vallejo

September 5th, 2008 categories: Buying, Contra Costa, Foreclosures / Short Sales, Investors, Market Update, Solano, Vallejo

Four or five years ago, when prices were skyrocketing month after month, buyers often lamented about being in the wrong place at the wrong time.

These Antioch homes are all more than 2,200 sq. ft. and below $300,000

These Antioch homes are all more than 2,200 sq. ft. and below $300,000

I’d pull up a property’s history and when they saw that the home they were about to pay $600,000 for had been purchased a dozen years earlier for $210,000, they’d say “if I’d only bought several homes back then when I had the chance.”

The ‘good ‘ol days, were long gone, with prices outpacing rents by such a long shot that any savvy real estate investor didn’t even have to crunch the numbers. Unless they were in it for a quick flip, they knew that the numbers didn’t come close to penciling out when a $550,000 home would only rent for $1,500/month.

No one expected those good ‘ol days to return anytime soon. But thanks to the subprime mess and fire-sale pricing on many bank-owned properties, in some Solano and Contra Costa communities, we’re once again at a point where the numbers are indeed penciling out again.

All you need to do is look in places like Vallejo, Fairfield or Antioch and you’ll find scores of homes in well-kept neighborhoods where current prices are down low enough to where investors are again licking their chops.

In Antioch, for example, right now there are 82 homes on the market below $350,000 which were built in the last 10 years and are at least 2,100 sq. ft. in size (more than half are over 2,500 sq. ft. and an even dozen are at least 3,000 sq. ft.).

Just a few years ago, many of these homes were selling for $600,000-plus. Most of the homes in these upscale neighborhoods are nicely landscaped, well-maintained and located amidst attractive parkways and boulevards. Some have views of rolling hills or the Delta.

And this isn’t just limited to Antioch. In Vallejo, for example, there are 67 homes on the market priced below $400,000 with at least 2,100 sq. ft. In Fairfield, there are 75. And another 24 in Vacaville.

Five years ago, if you wanted to buy something in that price range, you probably were either looking at a major fixer-upper or a small 30-year-old condominium or townhome in a complex that needed some TLC.

When the market finally turns around, homes like these in Antioch, Vallejo, Fairfield, Vacaville or Pittsburg should be well-positioned to attract buyers looking for the latest housing amenities, which could mean huge equity gains for those who recognize the opportunities that exist today.

Let’s say you invested $100,000 in a $300,000 home and were able to rent it out today for about the same as your payments. If prices go up to $350,000 five years from now, that’s a 10% annual return on your investment. If prices go up to $375,000, that’s a 15% annual return – or 75% of your money back within 5 years. Try to find another investment with the potential for such a huge upside.

Now of course, as with any investment, there always are plenty of “ifs.” Perhaps it takes 7 years for prices to go up that high. But then again, maybe it only takes 3 years. Obviously, nothing is for certain, but it only stands to reason that once the huge inventory of bank-owned homes work their way on and off the market, prices should then start moving back in the direction from which they came.

No one knows how fast they’ll go nor how high they’ll go. But it’s hard to imagine that many of these homes won’t be worth at least $400,000-$450,000 within the next 5-7 years. To me those numbers seem very reachable and VERY conservative, too. I wouldn’t be surprised to see some of these homes back in the $500,000s within the next 7-10 years.

And if that happens, as Yogi Berra says, it will be “déjà vu all over again.” Just like those buyers from 2004 and 2005 who bemoaned the opportunity they missed back in the early-to-mid 1990s, when the next housing boom finally arrives, many buyers then will be wishing they’d had the foresight to invest in real estate in 2008 and 2009.

If you ever want to explore the numbers and see what’s really available out there, as long as you don’t already have an agent, give me a call or send me an email and I’ll be happy to pull them up for you.

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This entry was posted on Friday, September 5th, 2008 at 1:53 pm and is filed under Buying, Contra Costa, Foreclosures / Short Sales, Investors, Market Update, Solano, Vallejo. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

  1. Ron Cai said at July 11th, 2009 at 5:28 pm

    Bob:

    I will be in the Bay Area July 25 through 31 and hope to buy some investment proerty in Vacaville or Vallejo, Etc. Hope you can help. Thanks!

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