April 24, 2009

House for rent or to buy in Menlo Park

269 O’connor St, Menlo Park, CA 94025 MLS# 40393829 – Property Details

269 O’connor St, Menlo Park, CA 94025 – 5 Beds, 4 Baths, $1,595,000

2007745942-269
Gorgeous new construction built in 2008. Graciously designed home W spacious open floor plan. Craftsman residence feature 5BR & 5BA. Gourmet chef’s kitchen W granite counter & top line stainless steel appliances. Home equipped W alarm, intercom, entertainment, central A/C & vacuum system. Excellent serene neighborhood. Close to Stanford. Shopping & Highway.Rental is available for $6,500 per month

Hey this house is in Menlo Park? Why would it need a security system if it is in a serene neighborhood?

Burbed reader sonarrat has an explanation:

next block over is E Okeefe which is a whole bunch of rent-controlled apartments in East Palo Alto.

Oh. So maybe that’s why it’s just $609 per square foot and not a more healthy $750 per square foot.

But here’s the real question: is it better to rent this or to buy? Or to buy and rent it back out?

Come on finance wizards! I know its Friday, but come on, you’ve been laid off from your I-banking jobs so that’s why you’re in Silicon Valley, catching up on greentech. Until you land that job at the Next Hot thing, please help us out with your analysis!

Comments (46) -- Posted by: burbed @ 5:59 am

46 Responses to “House for rent or to buy in Menlo Park”

  1. UnrealAlex Says:

    Conveniently close to da EPA so your housekeeper/gardener/burgler can walk right over.

  2. A. Lewis Says:

    Back of the envelope calculation #1:

    Price/Monthly Rent ratio = 245.

    By national standards, it’s way too high (should be 100-200, depending on your personal housing religion).

    By RBA standards, that’s modest.

    Of course, that’s b/c the rent is, well, a lot of freakin’ money.

    I’ll let someone else do the rent. vs. own calculations.

    Why should the listing title say 5/4, but the listing details says 5/5? Can’t they get it straight?

    The maid must get tired of cleaning 5 bathrooms every week. Maybe one is just for the cats – so they don’t have to have a fire-hazard cat-door cut in the garage like me (see other thread to get this joke).

  3. A. Lewis Says:

    Can anybody find a comp rental to tell us if the owner is dreaming at this rental rate, or likely to actually get it?

    Let’s just say you could afford it – would you pay this much to rent/buy here?

    I think it’s too much.

  4. BuyersAreIdiots Says:

    Based on my albeit hasty calculations:

    Assuming 20% down. (A paltry $300,000; I am sure Real Excreter has that much in his sofa cushions)

    At a jumbo loan rate of 6.2%:
    The montly payment is: $7,443

    Assume 1% property tax rate; monthly property tax is: $1250

    Total cost to own per month: $8693

    Versus renting at $6500

    I know I didn’t take into account the tax deductions but I also didn’t include the maintenance fees or insurance. Just doing this calculation at a fundamental level.

    Looks like a bargain to me!

    Also, this person is on glue if they think they can rent that for $6500 a month. Here is a rental on craiglist with a golf course view close to Stanford going for $4300 a month:

    http://sfbay.craigslist.org/pen/apa/1132503856.html

    Then again, it is the ‘Real Bay Area’. (I think) So it may not be subject to the laws of economics or physics.

  5. A. Lewis Says:

    Read this:

    More CR analysis of Existing Home Sales with Media Commentary

    Note this: The first “signs of stability” in the housing market will be declining inventory (see 3rd graph here), a bottom in new home sales (see previous post), and the gap between new and existing home sales closing.

    Now to try to apply this to the RBA, there’s some important things – first, there are VERY few new homes in the RBA, so mostly we must watch and discuss the existing home sales.

    But we should still look for A) declining inventory, B) a bottom in sales.

    I would say, in an aggregate way, that we still have rising inventory in the RBA, so we haven’t gone very far into the cycle yet.

    As for a bottom in sales – it’s confused b/c there was a huge slowdown over the winter, partly due to so many people holding their stuff off the market – and only very small numbers, if any, of REO’s/short sales in good neighborhoods. Was that the bottom in sales?

    So I expect that when prices drop further, there will follow an inventory glut which will feed it, and finally a modest amount of REOs/shorts, leading to true capitulation on pricing – during the fastest falling there will be a huge drop in sales as people realize they can wait and get it cheaper next month, and sellers realize they better drop prices fast to get out.

    Eventually, the corner is turned, buyers decide prices ARE low enough, and sales pick up nicely. That will be the end of a 2nd bottom in sales.

    Maybe.

  6. SanMatean Says:

    My calculator says monthly cost of pwnership comes in at $6.8K-$7.5K (depending on your AMT status, insurance, maintenance, mortgage, taxes inclusive; 20% down, 6.2% 30-yr mort)

    Agree with BAI: $6500 in rent seems out of touch for this area. There are places in Los Altos Hills and West Menlo going in this range.

  7. SiO2 Says:

    I wouldn’t buy or rent at this price. The house is very nice, and big (for here) on a good lot. But the location is not great. And Menlo Park schools are kind of funny in that the elem is very good, but the highschool, well, not so much.
    For this $ you could get a less-nice or smaller house in Los Altos or Saratoga. Saratoga may be a too far commute depending on where you work, but Los Altos and MP commutes are pretty equivalent. Or Palo Alto for that matter, although there’s not too many 10k lots in PA.

  8. nomadic Says:

    I think #1 summed it up quite well. I have some friends who rent on Menalto around the corner; one has been robbed twice. I wouldn’t buy in that neighborhood. Just too close to EPA.

  9. BuyersAreIdiots Says:

    Here is a rental in Los Gatos. Also a 5 bedroom but it’s on 3 acres.

    http://sfbay.craigslist.org/sby/apa/1138226083.html

    They are asking $5000 a month.

  10. anon Says:

    So, just to clarify, the rental BuyersAreIdiots linked is for a 4,300sqft home.

    Today’s trash is 2615sqft.

    For renting, that’s $1,500 less for 1685 more square footage. Around 40% more house.

    These people are idiots, and they are absolutely an FB. I would imagine their pricing model is what they have to do in order to cover their costs.

    Too bad the market doesn’t give a shit about their personal situation.

  11. BuyersAreIdiots Says:

    For renting, that’s $1,500 less for 1685 more square footage. Around 40% more house

    Not to mention that the house I linked to is on 3 acres.

    Then again, we officially surmised a little while ago that Los Gatos is no longer part of the Real Bay Area. It appears Menlo Park still is. :-)

  12. anon Says:

    Hm. There appears to be nothing real about this owner’s wishing price.

  13. A. Lewis Says:

    Hmmm – it’s too newly built to appear on PropertyShark – I guess there isn’t much to learn about it’s history – built new last year.

    That’s worth something, certainly, I wonder how well-built it is. I wonder what it cost them to build it.

  14. A. Lewis Says:

    Here’s a new line of thought – there are like 3 empty lots near each other that are for sale in the East Bay:

    $125k for 2,700sqft
    $250k for 5,009sqft (recently reduced from $280k
    $300k for 0.46acres (20,000 sqft), still on a real street, but I think the other ones are more level, and might have electric or sewer more ready to go than this.

    Otherwise, the 3rd one seems like one hell of a deal. It has an awesome view, etc.

    See it here:

    0.46acres on Redfin

    How does buying the lot for $250k-$300k, and building your own house compare to buying an existing home in your minds? Which is a better investment?

    How long does it take to get a house built? What do you think it costs? How much extra does it cost to build on a steep hillside, a not-so-steep hillside, and a flat lot?

  15. nomadic Says:

    9 & 10 – I wouldn’t get too excited about that house. Not only isn’t it RBA it isn’t even “real” Los Gatos. It’s in the mountains down at the southern tip of Lexington reservoir. If that place wasn’t a 15 minute drive to LG it would rent for at least $6500.

  16. A. Lewis Says:

    I’m starting to see REO’s in the better neighborhoods now – all the homeowners around the home I list below would say ‘prices haven’t really dropped – we’ve been very insulated’ – but they’re fooling themselves. Houses are sitting on the market. Price drops right and left b/c owners still start with wishing prices.

    Here’s a nice looking REO that foreclosed in Nov. ’08, on Redfin 107 days, now the bank is dropping the price! It’s a 5/3, 2,123 sqft on 0.3 acres. Entire 9-room ‘bonus area’ (not permitted, I guess) you could make into a full in-law unit. Good schools. Almost no crime.

    993 Contra Costa Dr 94530

    Looks like some kind of in the family deal for $615k in ’05, refi for $750k in ’06 (bagholder – World Savings – or probably you and me, now).

    If it sells at the $640k listing that is a drop of 15% since ’06. Crack-smoking appraisers.

    And people are trying to sell 1500 sqft. 3/2s in the vicinty for $700k+. I mean, they’re nice enough 3/2s, but this is what they’re up against now – giant 5/3s from the bank. Prices…will drop.

  17. nomadic Says:

    14 – Figure about a year to build a house. Some people in my ‘hood tore down the house they just bought 11/07 and were moved in for Christmas 2008. Flat lot and they didn’t have to do a foundation so maybe it would take a bit longer to start from scratch. A big variable is how long the permit process takes.

    Building on a steep lot can probably double your costs for a moderately priced house. If you know what you’re doing I think you can make more money getting a house built on a vacant lot than buying a comparable house in the same area.

  18. A. Lewis Says:

    I had a discussion with the spouse about building a house on an empty lot vs. buying an existing home.

    She thought maybe we’d just argue incessantly and never agree on all the million building choices, b/c we have somewhat different tastes in architecture, styles, etc. We’d both envision a dream house, different from the other, and it would be hard to give up, say, 100 sqft. of kitchen she wants for that extra bathroom I think would be nice, or something like that.

    Do you think you could agree with your spouse on how to build your dream house?

  19. Real Estater Says:

    A. Lewis,

    Under the current environment, it’s very hard to get a construction loan. You may be getting yourself into a lot of trouble if you can’t build the house and have to hold on to the lot.

  20. Real Estater Says:

    The other negative with building a house is that construction costs are still too high. Contractors have ways of squeezing every last dollar out of you as the project progresses. Since El Cerrito is a pretty average area, you should be able to negotiate prices on a house some seller is eager to sell.

  21. nomadic Says:

    Do you think you could agree with your spouse on how to build your dream house?

    Absolutely. They weren’t “dream” houses but I’ve done it twice (not in California). Our tastes are very similar though.

  22. A. Lewis Says:

    So is getting a construction loan a lot different than getting a mortgage?

  23. nomadic Says:

    Yes, but I’d talk to a loan officer rather than taking any advice from our resident self-appointed “expert.”

    :-)

  24. Real Estater Says:

    Do you think you could agree with your spouse on how to build your dream house?

    If you’re going to go that route, the best approach is to have an agreement up front that she can provide input, but all decisions shall be made by you. That’s how things operate in a company. You can’t have multiple decision makers.

  25. Real Estater Says:

    nomadic says,
    >>Yes, but I’d talk to a loan officer rather than taking any advice from our resident self-appointed “expert.”

    Did I say he should not to a loan officer? Are you disputing my statement or just trolling?

  26. Tallysmom Says:

    Re. 24 — way to break up a marriage.

    Best way is know what you can’t budge on and have him know what he can’t budge on and come up with a house design that suits you both. In my view, rarely have they been the exact same thing.

    It’s called compromise and good marriages (like ours of 25+ years) so that all the time.

  27. anon Says:

    24 has to be a joke even excreter isn’t that stupid…

  28. nomadic Says:

    #25 – Your lack of data in the past tells me the odds are high you don’t know squat about the availability of construction loans at this time. I am not disputing your statement; I am highly skeptical of it.

    Further, your tone to A. implies you just wanted to shut him down.

    Oh, and if you get a good contractor and write a good contract, he won’t squeeze “every last dollar out of you as the project progresses.” I speak from experience, do you?

  29. Real Estater Says:

    #26,

    Actually, quite the opposite. If you want to preserve your marriage, it’s best to be frank up front. You can’t afford to have your wife interfere with a construction project. She can certainly have a role in picking the finishing touches and in decorating, but the roles ought to be clearly defined. Your best chance to achieve success is to be totally professional about it.

  30. Real Estater Says:

    nomadic,

    You have no experience. What you did out of state is not applicable here. Not the same game. If you don’t believe me, just ask around. See how many people got into dispute with contractors, and how many projects ended up being over budget. In this environment, why bother? Isn’t everyone here saying there’s high inventory? Just go out and find the home, then negotiate from a position of strength. You don’t have the same kind of leverage against a contractor.

  31. Real Estater Says:

    >>It’s called compromise and good marriages (like ours of 25+ years) so that all the time.

    There’s no one way to have a good marriage. You can do it through compromise, or through leadership.

  32. nomadic Says:

    #30 – good to know all the bad contractors are here in California – and by his logic, we can also conclude there aren’t any in other states. (My vote for libel of the day too!)

    #25 – my answer should have been: it takes one to know one.

  33. anon Says:

    “See how many people got into dispute with contractors, and how many projects ended up being over budget. ”

    This is applicable if you are an amateur. Someone like real estater would encounter this problem.

    “That’s how things operate in a company. You can’t have multiple decision makers.”

    You are wrong. The fact that you believe this to be true shows your limited perspective – stemming from the fact that you are a low man on the totem pole. Were you a ‘high scorer,’ as you put it, you would know that most (if not all) companies have decision making bodies. At the very least there is the board of directors. You just aren’t privy to their decisions because you are a worker bee.

  34. DreamT Says:

    now we also know that RE’s not worth a cent as a marriage counselor. :)

  35. nomadic Says:

    24 has to be a joke even excreter isn’t that stupid…

    Either he is or his wife is (if she even exists).

  36. R Says:

    Construction prices are plummeting and will continue to fall with home prices; lots of contractors in need of work. If one decides to build, enter a guaranteed max price contract. Time + Material = trouble.

  37. Real Estater Says:

    anon says,
    >>24 has to be a joke even excreter isn’t that stupid…

    A single guy shouldn’t be commenting on marital matters, just as a guy who never attends open houses shouldn’t be talking about the market.

  38. DreamT Says:

    ..just as a wife shouldn’t “interfere” with house construction projects. Does anybody even find RealEstater funny?

  39. Pralay Says:

    A single guy shouldn’t be commenting on marital matters, just as a guy who never attends open houses shouldn’t be talking about the market.
    —–

    What about construction loan, RealExcreter? Should you talk about construction loan? Or real estate investment? You never did either of these.

  40. Pralay Says:

    There’s no one way to have a good marriage. You can do it through compromise, or through leadership chauvinism/patriarchism.
    ——–

    That explain why a father of two kids has so much time to troll 24×7.

  41. Pralay Says:

    Does anybody even find RealEstater funny?
    ——

    I have a theory. Either this guy is a single (or course have no kids) or he has no respect for his spouse.

    After all he is a proven liar. His claim of being married and being father of two could be lies as well.

  42. Real Estater Says:

    More conspiracy theories! A. Lewis please weigh in!

  43. Real Estater Says:

    Liar! Liar! Pants on fire!

  44. Pralay Says:

    More conspiracy theories! A. Lewis please weigh in!
    —-

    Does RealExcreter know the meaning of “conspiracy”?

  45. Pralay Says:

    At the very least there is the board of directors. You just aren’t privy to their decisions because you are a worker bee.
    —-

    But at least he signed a NDS. :)

    But again that could just another lie.

  46. Pralay Says:

    Either he is or his wife is (if she even exists).
    —-

    How does it make RealExcreter stupid? You mean while RealExcreter is trolling here 24×7 (and acting as marriage counselor), his wife is enjoying her life with her boyfriend?


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