Untapped equity waiting for you to tap in Mountain View
$1,499,999
Beds: 3 Baths: 2 Sq. Ft.: 2,029 $/Sq. Ft.: $739 Lot Size: 5,750 Sq. Ft. Property Type: Detached Single Family Style: Traditional Stories: 2 View: Neighborhood Year Built: 2007 Community: Downtown County: Santa Clara MLS#: 81033665 Source: MLSListings Status: Active On Redfin: 24 days Beautiful custom Craftsman style home built in 2007 and located in highly sought after Old Mountain View Neighborhood. This home was designed for maximum space and features an open floor plan. Filled with premium features and skylights throughout. Serene backyard with custom built playhouse. Nearby amenities include CalTrain, lightrail, and walking distance to vibrant downtown Mountain View!
Thanks to Burbed reader S.L. for this find!
S wanted to call attention to this curious statistic:
Wow! Look at all the trapped equity waiting in this… uh… non-fixer-upper!
As we all know, real estate operates in a 5 year cycle – so if you buy this today, it should definitely resume the $1.8M price by… July 11, 2012! Boom! Instant riches!
Thanks for the investment advice!
August 16th, 2010 at 7:29 am
Damn. $1.5 mil for non RBA? Pfththththth I’d rather get a up the road on the right side of Middlefield.
Hell, this house isn’t even in the same time zone as Middlefield.
PS. burbed, you communist, my offer of $50 still stands for this lousy website.
August 16th, 2010 at 8:58 am
$750k to $1,800k in under 3 years? That’s over $1,000k profit on $750k. Forget the home, I’m looking to tap that seller, especially if she’s an Asian redhead.
If I were interested in the home, I’d probably sell it for $3.6M in 2017–this seller should know that the home needs those extra years to go from $1.5M in 2014 to the $3.6M in 2017.
August 16th, 2010 at 9:14 am
That first sale was before the house was built.
August 16th, 2010 at 9:33 am
So how much do you think it cost per sq.ft. to build this gem?
August 16th, 2010 at 10:52 am
sonarrat- I didn’t notice that. It was a raze and rebuild. We need to subtract the cost of the construction.
maryjane- Let’s compute the “value added.”
I’ll use the 2,029 square feet in the listing. Who knows how accurate this is, but it’s the only number I have. Next I’ll assume that the value added was $1.05M.
$1.05M/2,029 Square feet = $517.50 per square foot.
Now let’s move forward to profit, which is not going to be as easy.
Including removal of the old, lot preparation, landscaping, how much did it cost the person who owned the property to get this house built, on a per square foot basis? As always, fair pricing should include pricing various risks related to construction, overhead.
Keeping in mind that I have no inside information on this property–in fact I didn’t even notice the new home was constructed in 2007, but I am going to make a guess, and once again this is only a guess, as to what happened.
My guess:
The person who purchased the home in 2007 did not have the financial means to actually construct a home. I do not know this person, nor do I have any information about his or her financial condition, now or then.
But this is a classic game. Lenders will lend the big bucks on a constructed property, but they generally do not want to fund construction loans, except to professionals. Thus the person who purchased the property likely had both the financial ability and willingness to buy the completed property, but, as my guess goes, did not have the financial ability to buy a property and have a new home constructed.
Think of the tax deduction! Think of the added housing price appreciation–who wants a $750k home?
[On the tax deduction issue, I drove by a development which there was a big sign that said, "3.875% financing." I'm not sure if that's good or bad. On the one hand, who wants to pay more interest than is necessary, but on the other hand, doesn't that minimize the mortgage interest income tax deduction. And while I am sure some people reject the idea that the selling price is actually more if the interest rate is artificially low, I'd rather pay a lower purchase price. We know that these basic concepts are too complicated for some Real Estate type people, but isn't that what makes life so interesting? You know, the principal balance does not matter when you are never going to move, until you move to the RBA cemetery.]
August 16th, 2010 at 12:20 pm
SEA@5
There is a set of people who want to minimize the mortgage interest deduction. Or perhaps more precisely, don’t worry too much about the mortgage interest deduction: Those who are subject to the AMT.
Because the AMT removes significant amounts of the MID, that changes the calculation on how you figure the offset.
Of course, in the RBA everyone wants both high prices and is subject to the AMT–viola! no issue there. Who cares about the reduced prop 13 tax basis for the rest of your life? That sort of stuff just doesn’t matter to the googlers.
August 16th, 2010 at 2:20 pm
Gallileo- Whenever I discuss interest, I’ve always discussed Net Cost of Capital. If the net cost of capital is below your personal discount rate, then the capital is cheap.
That said, so many people love to pay $1 to get 0.15 back from the IRS. It’s like they think it’s free money, even if the net is 0.85 paid in interest.
With risk-free rates near zero, I’d love to hear why a wage earner thinks 5% (net cost, as always) is such a good deal.
Oh, that’s right, housing always goes up by at least 7.2%, on average.
August 16th, 2010 at 3:04 pm
SEA, re #5 – the house was already built when the current owner paid $1.8M for it. Check the Redfin link now – it’s been delisted and now shows the (sold) listing from 2007.
August 16th, 2010 at 3:08 pm
With risk-free rates near zero, I’d love to hear why a wage earner thinks 5% (net cost, as always) is such a good deal.
These are people who are going to buy a house (or already own one). Therefore, if you were willing to pay 6-7% interest anyway, then 5% is better. 4% feels like free money. (Even though we know it absolutely is not.)
August 16th, 2010 at 4:24 pm
nomadic #8- Yes, so the former owner built the place.
In 2004 the old home was present. In 2007 the new home was built.
Just before the old home was torn down, in ~2007, we had some selling value, part structure, part land. It’s tough to know what the home would have sold for before it was torn down, and how much of that would have been attributable to land. So what I did was made an assumption that the 2004 sale price was the value of the land, with structure removal to be added to the cost.
The basic idea is that the land had appreciated in value during the period 2004 to 2007 so that it matched the 2004 purchase price.
Alternatively, we could say that the 2004 purchase was for land only, and the discount rate is zero.
In regards to #9- I guess I should probably concentrate on cash flow. You know, when someone refinances to a lower rate, it’s like free money every month, and then when you get the tax money back, it’s even better than free. I mean the alternative is to pay rent without getting the tax benefit, right?
All of this is notwithstanding the AMT, as Gallileo correctly pointed out.
August 16th, 2010 at 4:53 pm
You know, when someone refinances to a lower rate, it’s like free money every month, and then when you get the tax money back, it’s even better than free.
Now that is the RBA spirit. It’s as though the house is paying its owner for the privilege of putting a roof over his/her mortgaged head. lol