Category Archives: REAL ESTATE

Ways not to screw up a 1031

May 31, 20191031, Capital gains, REAL ESTATE, tax1031, Capital gains, REAL ESTATE, taxchallenyee

Hey BNB peeps! Let’s talk more about saving money when selling an investment property in order to buy another one.

You don’t want to end up like the poor rabbit in the painting.

More about 1031s

Here is a little detail you want to keep in mind when calculating how much capital gains you could get stuck with in selling your property, after all, the reason you are doing a 1031 is to avoid paying taxes on capital gains (CGs).

If you determine that you are not going to have any taxable gains, you do not need to do a 1031.

Simple formula to remember to estimate the amount of gain that will be subject to CGs: Sale price minus Commissions and escrow costs minus Depreciation value of the home.

Key thing: You do not deduct your mortgage from the capital gain calculation.

Another Key thing: The value of your sale does not include your Depreciation.

For example: If you sell a home for $1,000,000 ($1M) and your commission and escrow are $50,000 and your depreciation is $400,000, your Capital Gains would be… $550,000.

BUT, the value of your sale would be …. $950,000

This calcalation is important to get straight in your effort to think through your 1031.

You do not want to underestimate your sale price of your “relinquished property” when you are trying to conduct a 1031 Exchange.

Again, a 1031 Exchange is designed to help people who are selling an investment property to buy another investment property while protecting them from paying taxes on their capital gains.

Now about calculating the value of the relinquished property, there is a qualification for a proper 1031: You must buy into a property that is at least EQUAL OR GREATER VALUE.

So take the previous example: If you are going to purchase a “replacement property” for $750,000, you will need to either buy another property within 180 days or buy another qualified investment property so that your total reinvestment meets or exceeds $950,000 to have a valid 1031 transaction.

In other words, if you only plan to spend $750,000 to purchase a replacement and you think you are done – PLEASE think again. This one transaction will not qualify the 1031.

Better yet, go and talk to a 1031 Exchange Officer for a reputable 1031 firm and ask him or her these important questions ( DISCLAIMER: I am not a professional or certified 1031 dude, but I want you to make sure you’ve got all your facts together).

Worst comes to worst, you can park the remainder of your unused 1031 funds into a special 1031 “fund” that will be the equivalent to buying a replacement property if you cannot find the right property to purchase and use all of your proceeds, but it would be helpful if you have all the numbers figured out before you begin the process, especially if you are only intending to target one investment property.

A last note for today: If you decide to do a 1031, be prepared for some escrow delays as doing the necessary paperwork or setting up LLCs is extra work, requiring special contracts, registering LLCs, and often requires some additional government oversight (more paperwork).

Please like, share, comment, follow my blog or contact me if you have any questions, or if you’ve got some nice tips.

CKY

To Party or not to Party

May 29, 2019BNB, HOSTING, PALO ALTO, REAL ESTATE, SILICON VALLEY, TRAVELBNB, BUSINESS, HOSTING, REAL ESTATE, TRAVELchallenyee

Have you ever wondered if it was worth lending your house to someone who wanted to have a one-day “celebration”?

Especially if you do not have built in book-end days before your next potential booking, meaning that you only have a few hours to clean between different bookings, here are 8 reasons why you should NOT book to guests wanting to use your house for their party space:

People just do not care as much about being clean when they don’t have to live there. Especially all the extra guests who don’t plan on staying over night who are not signing an agreement to any house rules. I’m not saying that people are necessarily bad, they just do not have as much at stake to keep things clean.
A party will fill your garbage cans quickly with smelly rotting food mixed with alcohol to smell just like a back alley sewer in San Francisco.
Large amounts of alcohol result in inebriated people who spill liquids, make floors sticky and harder to clean, along with your arm chair, sofa and tables.
Inebriated adults cannot supervise young children.
The responsible adults are policing the inebriated adults, and are not watching their children, or they are watching their children and are not watching the inebriate adults. Hell, they could be inebriated, cause, hosts just want to have fun.
You can attract unwanted attention by creating a parking lot in front of your place.
Especially if you have a no-shoes-in-the-house rule, which one-day guest/host is going to police their one day visitors to take their shoes off as they go in and out of your house wth a tray of food and drinks?
Remember, outdoor shoes carry floor destroying micro and macro matter and have stepped through many public bathrooms. Enough said.

The end result is, even if you charge extra for cleaning, you will have to spend more time cleaning and risk damages that you have to go through the process of proving, not to mention the anxiety wondering if any of this is true.

Please like, share, comment, follow my blog or contact me if you have any questions, or if you’ve got some nice tips.

CKY

Tips on Saving Time in Escrow (REVERSE 1031)

April 20, 20191031, BNB, escrow, REAL ESTATEBNB, escrow, REAL ESTATE, Reverse 1031challenyee

Hey BNB Peeps!

Here’s some thoughts about how you can save time in Escrow involving a Reverse 1031.

Most people may not be aware of how a 1031 affects an Escrow, so you can be sure that even less people know the effect of a REVERSE 1031.

A REVERSE 1031 requires the creation of an LLC for the Exchange Accommodate TITLEHOLDER , also known as the EAT, where the title of the replacement property is held.

In the regular 1031, CASH is held in a special account, but since I have not done a regular 1031 yet, I will not say whether it is an LLC or NOT. In a Reverse 1031, the TITLE is held in a special account. An EAT is specifically for a REVERSE 1031.

TALK TO YOUR 1031 ADVISOR about this LLC detail and how it may affect the purchase agreement.

THEREFORE, you real estate lawyers and escrow officers, the Purchase Agreement must have an amendment to accommodate the LLC of the buyer. If you know this ahead of time you can get the real estate attorney to prepare the amendment to the purchase agreement ASAP, before he or she decides to take a week off without his lap top and cell phone.

Sometimes it takes so long to nail down a purchase agreement, it just helps to know this detail beforehand to smooth things out when you think everything is supposed to be on autopilot.

BTW, Buyers have the option of keeping the LLC after the escrow is closed, so buyers need to carefully consider the actual name of the LLC that is created.

My second thought about saving time in escrow, is working with a LAW GROUP or at least a legal professionals who have a backup in case they need to go on vacation or get sick, run off to Jamaica, or anything else that can interfere with getting work done when needed.

Is it ever possible that lawyers can work together in a way that is collaborative and to save time? Ugh.

Even if your Escrow officer and you 1031 Exchange Officer are from a Title/Escrow company and its affiliate, do not assume that days will be saved based on what I just tried to explain to you.

ANYWAY, the next time you find yourself in a 1031 situation, I hope his little information will help.

Please like, share, comment, follow my blog or contact me if you have any questions, or if you’ve got some nice tips.

CKY

What is a REVERSE 1031?

March 29, 2019BNB, REAL ESTATE1031, BNB, PROPERTY MANAGEMENT, REAL ESTATE, Reverse 1031challenyee

In your efforts to secure a property for your BNB you may run into a situation where you are selling an investment property to obtain a replacement investment property.

For those of you who do not understand what a 1031 Exchange is, here is a brief summary.

You can defer capital gains on selling an investment property if you set up a 1031 carefully (adhering to all 1031 rules) pipe it to another investment property of equal value or greater.

It can be any kind of real estate to any kind of real estate, anything from undeveloped land, to commercial property, as long as both are qualified Investment properties.

Normally, you sell an investment property, use the proceeds from that sale to fund the purchase of your new replacement investment property.

WHAT IF, you need to purchase the replacement property (i.e. with cash) before you can sell the relinquished property to fund the new acquisition? You are totally screwed, right?

What I discovered, someone in their infinite wisdom created a 1031 instrument called a “REVERSE” 1031.

This way, the title to the replacement property is held in a special Exchange Accommodated Titleholder (EAT) until such time you can close the sale of your relinquished property thereby accomplishing the desired deferring of capital gains.

Please speak to a qualified 1031 Exchange Intermediary or Agent to get the full details as there are different costs involved and other requirements that I have not covered in this blog article.

Good Luck.

Please like, share, comment, follow my blog or contact me if you have any questions, or if you’ve got some nice tips.

CKY

Pay Mortgage on or after the 1st.

March 26, 2019BNB, MANAGEMENT, PaloAltoBNB, REAL ESTATEaccounting, BNB, PaloAltoBNB, PROPERTY MANAGEMENT, REAL ESTATEchallenyee

Hey all, Just a short accounting tip for your BNB and to let you know that we are still alive and running our BNB.

In the meantime, here’s an easy accounting tip.

If you are making mortgage payments for your property, it helps cleanup your accounting if you do not make your payments before the 1st of the month that your payment is due for.

In other words, if you need to make a mortgage payment for April, make the payment April 1st or sometime after that and before the date that you will get charged a late payment. If you want to make January’s payment, do it in January.

For example, even though you might get anxious and send out some kind of bizarre positive thoughts into the netherworld of computerized mortgage transactions, maybe trying to earn some kind of imaginary digital karma, better not to make the payment on March 29 since your accounting software may want to apply all charges to the month you actually make the payment – this gets more complicated if you have any compounded charges on your mortgage like your landlords or flood insurance… and it looks goofy on your annual summary.

Essentially, this is helpful is when you do your tax accounting for the year everything just makes more sense. Your payments correspond to the appropriate month and if you’re talking about January’s payment, the correct year.

Please like, share, comment, follow my blog or contact me if you have any questions, or if you’ve got some nice tips.

CKY

Learn by jumping into chaos

January 25, 2019BUSINESS, MANAGEMENT, PaloAltoBNB, REAL ESTATEBUSINESS, PALO ALTO, PaloAltoBNB, PROPERTY MANAGEMENT, REAL ESTATE, SILICON VALLEYchallenyee

OR “How I got involved in property management”

My current work involves Acupuncture and Oriental Medicine to being an out to pasture IC Layout Design Engineer, and I definitely did not become a property manager by seeking it out – it unceremoniously yanked me in.

I was drawn into property management to save my mom from trouble and by extension, our whole family from trouble back in 2007. Sound melodramatic? It may have been dramatic, but definitely not mellow.

When I graduated from the Masters Program in Traditional Chinese Medicine (TCM) in the Spring of 2007 from Five Branches Institute (Santa Cruz, CA) the last thing that was on my mind was becoming a property manager or dealing with problem tenants.

Part of my Chinese and Western Medicine library

The biggest thing on the mind of a TCM graduate is studying to successfully pass the California Licensing exam for Acupuncturist. I had self-sponsored my way through this multi year process and just had about two months to prepare and with hopes of being able to focus on my studying to take that exam in Sacramento. I was ready to embark in my dream of a new life’s work.

I had left my Silicon Valley engineering career on the last day of 2002 and I had completed my Master’s! It was… awesome! It was a mountaintop experience, just having spent 4 years with some of the most kind and amazing people who were the students and teachers. I thought I could just begin a life of a health hermit helping people with their health problems and put the stress of Silicon Valley life behind me.

But NO, fate had another deal waiting for me.

Little did I know that in the previous couple months before my graduation, my mother who managed her own investment properties, was having problems obtaining back rent payments and then received a letter from the tenant complaining about the condition of the property.

Mom, who was about 83 years old at the time, was a kind landlord, though a bit too trusting in her tenants to help take care of her properties, and things were looking a little too legalistic in this one tenant’s written complaint that was carefully worded with some nefarious implications. In other words, it wasn’t just a simple, “Hey, our hot water’s out , could you send a plumber?”

The week after I graduated from Five Branches, I was set to study for my Licensing exam, so I did not go with my mom to visit the property and the tenant. She asked me if I wanted to go, but I wanted to begin studying. I wanted focus, be at one with my studies 😉

To cut to the point, when I heard how the visit went I was bothered. I knew just enough about how things should go to agitate my concern.

Having spent several years working with my parents, helping them with their businesses, full time in the late 1980’s and on my free time in the 1990’s. Spiritually and emotionally, I hardly had time to breath the fresh air, it felt like I was being recalled to military service. (C.K. YEE, we need your ass back out in the front lines, forget your Zen Meditation crap. You better get your seabag loaded on the boat, we’re getting underway) ;(

Considering I was not into property management before this event (though in 1989, I almost went for my real estate license), I am not sure why I was so willing (albeit a bit grudgingly) to take up the burden of dealing with this tenant for my mom but I immediately made clear that I would deal directly with the tenant. I wanted to make sure that my mom (and our family) would take this situation more carefully and so I took the matter into my own hands.

Looking back, I cannot tell you what I saw in myself, to think I was any better qualified to deal with this except, maybe, I would be willing to sit an listen to the tenant like I had practiced so many times with patients…. It’s not that simple though.

Over the next 5 months, I worked with the tenant. Ultimately, they understood they had to move out because we planned to work on the house, which was in need of repairs and that for their safety, they needed to vacate the property.

In the process, I developed a close relationship with a local realtor, who is the most savvy realtor related to East Palo Alto that I’ve ever known, as well as an eviction attorney’s office whose paralegals were God’s gift to mankind, all of who I received valuable advice on landlord-tenant rights and property management.

It was not an easy process. Somehow, I figured out how to navigate the problem which included a few face to-face meetings, many attempts to communicate and even an offer for them to purchase the house, which they chose bail out of the opportunity.

The repair process took over 6 months to finish.

In June 2007, when I graduated from Five Branches, I weighed 150# and by August 2007 , when I took my Acupuncture licensing exam, I weighted 135#. I lost 15 pounds from anxiety and depression at the same time I was studying and managed to pass my Licensing exam. When I learned I passed the exam, it should have been a big-time celebration for me, but it was overshadowed by the ongoing tenant situation.

I received my Acupuncture License in October 2017 and soon began working out of a clinic in nearby Los Altos.

As I recall, there was talk by the Acupuncture Board that we might have to retake the exam due to some alleged cheating by some fringe group, but fortunately, I was saved from that insanity.

Not quite the way I would have planned it but I did it. I DID IT.

Ever since that time, I have been involved in property management. However, due to the hard times of 2008 had to (and was able to) reenter the market as a engineer for several years more (while pursuing Chinese medicine part-time), but that’s how I get started as a property manager.

Please like, share, comment, follow my blog or contact me if you have any questions

CKY

What about shoes and wood floors?

January 15, 2019BNB, DECOR, Flooring, Hardwood, PALO ALTO, PaloAltoBNB, REAL ESTATE, TRAVELBNB, DECOR, DESIGN, FLOORS, Hardwood, PALO ALTO, PaloAltoBNB, SILICON VALLEY, TRAVELchallenyee

We absolutely love the look, feel, and maintainability of wood floors, but do you take a chance in a BNB using them with so many different people coming and going?

We request our guests to not use their outdoor shoes in the house.

We offer them indoor slippers or let them know it’s okay to walk around in their socks, but slippers are best.

Vintage 1950’s era oak plank, refinished. Photo by Challen

SHOES ON?

When I grew up in Palo Alto, we did in an Americanized way especially since I worked out of the house for several years with my father’s roofing and industrial electric vehicle companies. Coming in and out of the house was done with shoes on.

As a result, we usually had pretty worn carpets and a floor that would probably make the traditional Chinese housewife go into mental convulsions.

CHANGING HABITS

It wasn’t until after I married my wife, who grew up in China, that she helped me realize how atrocious it is to wear outdoor shoes in the house (assuming you keep a clean floor). Well, you think about it, the germs and grime caught on your shoes from every public bathroom you’ve walked through is not something you really want transferred to your home floors. Moreover, the amount of dirt that is tracked into the house is quite significant, greatly increasing the wear and tear on flooring whether carpets, hardwood or even ceramic tile.

KEEPING THE FLOORS CLEAN

When we clean up our BNB we always vacuum and do a light mop (well rung) with a bit of mild soap to refresh the floors. It’s nice to keep any allergens down too which having carpets would just make too difficult and takes longer to clean.

I don’t meet every guest, but sometimes I get an opportunity. It’s always an exercise in ambassadorship and tact when you meet a guest who didn’t quite get that “no shoes” House Rule but the people we’ve met realize their error quickly enough with usually a slight blush. Usually you just do it (take your shoes off) and the guest gets it. By accommodating our rule, they participate in the enjoyment of a cleaner environment.

2017 Natural Oak, 3/4 x 3.5 inch planks – photo by Challen

TYPE OF WOOD FLOOR

As for the hardwood its self, since the house is not on a slab foundation, we used finished ¾” solid wood* (oak) throughout except for in the bathrooms where we used porcelain tile. We used finished planks for the convenience of not spending a week to finish, but still have the option in the future for custom professional refinishing.

It was a big decision not to use tile in the kitchen where the chance of water damage is higher, but since our floorplan is relatively small, keeping consistent flooring across the common area makes the living space feel larger, cleaner, brighter, and better designed. Additionally, because of our smaller space, we used a “natural” white Oak instead of something lighter or darker. Too Dark colors make your space look smaller and less energetic, while too Bright colors, or something with less wood grain like Ash or Maple, are less forgiving and harder to keep looking clean as a result of any possible scratches or dings.

We almost went with a really bright Ash plank to make a modern look statement but chose not to, as Ash wood is also a bit softer than Oak and therefore more apt to damage. Although natural Oak and natural Ash or Maple, could be a similar in color, it’s the grain of the wood that can help hide imperfections while still offering a brighter result.

*Before installing wood planks, the product needs to adjust to your house’s environment by airing out for several days before installation. Ask your dealer for details.

Please like, share, comment, follow my blog or contact me if you have any questions

CKY

Starting a BNB? 8 Reasons you didn’t think about

January 7, 2019BNB, BUSINESS, PALO ALTO, REAL ESTATE, SILICON VALLEY, TRAVELBNB, BUSINESS, PALO ALTO, REAL ESTATE, SILICON VALLEYchallenyee

So you are thinking about starting a BNB, eh?

A floppy bunny sleeping on the wall, A fine oil painting from a Renaissant or Medieval BNB, 😉 from Stanford Cantor Arts Center – photo by Challen

Here are 8 reasons you may not have thought about yet. Well, maybe you thought of them but you could still use some moral reinforcement.

You do not want a long-term lease. Not only do you not want one, it may become an obstacle. The future of your property is in question and you as a property owner do not want to get caught in a long term lease during a time where you may want or need to sell the property or you may need to move into the home yourself.
You want to maintain the property in excellent condition. You may be a complete anal-retentive owner and want maximum control over the condition of the house by avoiding long term leases. As responsible as a long term tenant may be, they are unlikely to keep the house in as good a condition or correct problems in the same manner as you would.
Your house is better designed for short-term occupants or guests. Most people staying long term have long term storage needs, including for the natural accumulation of stuff. If your place does not have much storage without significant remodeling or improvements, the lack of storage becomes an obvious disadvantage to get the highest lease rates but as a BNB with guests staying less than a month or a day or two, it is not an issue.
You love hospitality. Your long term tenant may think you are a nice responsible property manager, but you are not expected to be responsible in anyway to provide multiple “tenants” with their situational accommodating, being involved with opening the door, responding nicely to people at all times of the day or week, be concerned what impression they get when they see your prepared beds, picking out a guest menu – like what kind of coffee you have ready for their quick breakfast, or if the TV can get a particular movie channel. But you thrive on this kind of work and enjoy helping responsible people make sure they have a nice experience.
You can accept inconsistencies. Not every guest that signs up, stays signed up. You will get cancellations on occasion. Not everyone responds to you the same way. You will get some people who will bend the rules or are not quite as clean as you would hope. On the other hand, you will find where your own routine needs to be more efficient, whether it is how you followup with guest inquiries or how you go through your place to prepare it. After several guests, you will get intended and unintended feedback. No plan starts out perfect nor does it remain perfect. It takes some faith that things work out despite the inconsistencies.
You are a bored panda. It could be in your particular phase of life, you need the daily responsibility of managing a property, maintaining your listing site, website or the marketing strategies you are going to employ.
You have teflon skin. In other words, maybe not what you thought … You can tolerate some jealously, even hatred, from others. Anytime you try to do something that most other people do not, you may incur some adverse reactions for doing something that has the appearance of being successful even though it takes real work to get things going and keeping it going.
You value setting your own destiny. By being in the driver’s seat to make decisions, you control your own destiny and that brings you more peace. This one takes some experience, for example, balancing making money from accepting a variety of guests versus being willing to politely screen out those who don’t meet your standards. If you accept a person who may have triggered your scrub alarm instead of leaping effortlessly over your Shaolin-monk-worthy guest criteria (even if they needed some gentle persuasion), you could likely subject yourself to the hell of wondering what’s going to go wrong until they arrive and leave (assuming they don’t cancel at the last minute). Hence, you may be able to hit the abort switch to be at peace rather than make a few more bucks.

So why does running a BNB appeal to you?

Please like, share and comment. Contact me if you have any questions

CKY

PaloAltoBNB: 2018 Post Summary

January 1, 2019BNB, Facebook, PALO ALTO, REAL ESTATE, SOCIAL MEDIA, TRAVELBNB, DESIGN, Facebook, PALO ALTO, REAL ESTATE, SILICON VALLEY, TRAVELchallenyee

University Avenue, Downtown Palo Alto – Dec 2018. Photo by Challen

Have you ever stayed as a guest in a BNB? How was your experience?

Are you interested to learn more about starting a BNB? What kind of questions would you like answered?

I’ve been posting on my Palo Alto BNB (Bed and Breakfast) Page since December 17th, 2018, been involved (among other things) in the operations of this hospitality business since October 2017, and was directly involved with the renovation of the family-owned property prior.

2018 POSTS

Instead of bombarding you with real time posts on my personal daily social media feed, I’ve summarized my first 8 posts for your convenience. If you’d like to see them real-time, please go “like” my Facebook Page “Palo Alto BNB” or follow my website at www.paloaltobnb.net

There you can learn about some of the issues running a BNB and the area of Palo Alto and some real estate details of surrounding area.

Begin with a vision – Dec 17

Why Here? Why Now? – Dec 19

Hosting Fears: Do guests trash the house? – Dec 20

Hosting Fears: Screening your Guests – Dec 21

Compelling Reasons for a Stay – Dec 23

10 Thoughts on furnishing and equipping a BNB – Dec 25

What equipment is special to a BNB? – Dec27

A Tale of two Palo Altos – Dec30

Please like, share and comment or contact me if you have any questions

CKY

A Tale of two Palo Altos

December 30, 2018BNB, East Palo Alto, PALO ALTO, REAL ESTATE, SILICON VALLEY, TRAVELBNB, SILICON VALLEY, PALO ALTO, TRAVEL, Facebook, REAL ESTATE, East Palo Altochallenyee

BNB’s are a popular choice in the San Francisco Bay Area and Palo Alto is not exception. With the rise of locally headquartered companies like Apple, Facebook and Google, and other companies small and large attracting thousands into the local work force they provide a regular stream of professional transients from around the nation and internationally who perform their business in synergy with the local economy.

Facebook is particularly interesting because despite the prestige of being associated with the City od Menlo Park, which is one step north of the ubiquitous “Palo Alto”, Facebook headquarters is actually adjacent to one of the lowest income-per-capita residential areas on the San Francisco peninsula (though not particularly low on a national scale). The City is East Palo Alto is part of San Mateo County, unlike the internationally-known City of Palo Alto which is the northern most city in Santa Clara County. Only a highway, for the most part, separates the two cities of common name.

Stanford University looking towards Palo Alto from Hoover Tower. Photo by Challen

Santa Clara County also includes Silicon Valley cities like Mountain View (Google), Sunnyvale (Lockheed Martin), Cupertino (Apple), Santa Clara (Intel), Palo Alto (Stanford University and Hospital, Hewlett Packard, Tesla), Los Gatos (Netflix), the behemoth city of San Jose (Cisco) and other smaller and often more affluent communities stretching into the beautiful foothills of the San Francisco peninsula.

To give you just a bit of the contrast between Palo Alto and East Palo Alto, in 1990-92 East Palo Alto earned the dubious distinction of being the “murder capital” of the United States.

Criminal and illicit drug dealing activities were so rampant in this decades-old lower socio-economic area, residents and commuters were frightened to drive down main thoroughfares for fear of being car-jacked by brazen criminals. Moreover, the homicide rate was so intimidating (in 1992, there were 42 homicides) it made my law enforcement friends who worked in Compton, CA balk at the prospects of having to jump into the fray.

Fortunately for the community, the state and local law enforcement agencies did step in and with sweeping campaigns putting the area on the right track removing entrenched drug crime elements. Nearly 20 years later and steady progress has made the East Palo Alto a much safer place to live and to work, the future prospects continue to look bright.

Image source: Peeryfoundarion.org showing the boundary of East Palo Alto in relation to two corporate giants.

The potential of the area of East Palo Alto is probably best evidenced by Facebook’s Menlo Park move (2011) and breakaway expansion plans which paralleled more major anti-drug actions in East Palo Alto bringing even more substantial changes to the peace of the community in the last few years.

While the recent high-flying developments in the real estate market are widespread in the San Francisco Bay Area, including East Palo Alto, the area still has a deep community of lower income residents and home owners who are proud and happy to be established there. Progress continues to be made to improve living conditions and it attracts more companies like Amazon, a recent addition to the business landscape of East Palo Alto in addition to investor-philanthropists like the Zuckerbergs and Laurene Powell Jobs, both residents of Palo Alto.

A sharp contrast still exists, however, as highlighted in a recent article, a particular zip code in Palo Alto has registered the most expensive average real estate prices in the country.

From a financial investor standpoint, rental rates per home value ratios are often more favorable in East Palo Alto, where properties can still be found for under $1M, when compared to Palo Alto despite Palo Alto’s safer, quieter, established neighborhoods and highly-regarded schools. For example, a 3 bedroom 1 bath home in East Palo Alto, valued at about $1M may rent for about $4000 per month where as a similar Palo Alto home (humble based on trends in home building) may only rent for $6500 per/month but cost $2.5M.

Downtown Palo Alto on a Winter day. Photo by Challen

Although this previous example of rental rates is only an single snapshot (rents can be substantially varied and higher in both cities, especially in Palo Alto, given more valuable properties) the demand for rentals remains strong. This could be reinforced by the fact many professionals are assuming not to buy properties (in the Bay Area) but rather opting to rent or lease believing their long term plans will take them out of the area (where property is less expensive among other reasons) or that their investments are better situated outside of the real estate market.

What makes BNB popular, nevertheless, is not so much related to the real estate values, it is better linked to the professional transients in the area with the proliferation of business activity, Stanford University, Stanford Hospital and the others variety of needs for temporary accommodations in this hub of Silicon Valley where a home is preferred.

Please like, share and comment

CKY