Homes in Fremont: A Realtor’s View

I had a buyer recently ask me about whether home prices in Fremont and Union City had declined to the point where they could generate positive cash flow right away. Except in rare exceptions, the answer is no. I wanted to at least highlight a scenario for you by looking at recent home sale prices in the Fremont and Union City area:

Example: Non REO property in Union City: 4BR, 2BA home in Union City; 2200 sq. ft, 4500 sq.ft lot, 10 years new: $700K

Assume a 6.6% interest rate on a 30-yr fixed rate, but tack on an additional 0.5% as an investor. Total interest payment = 7.1%.

With a down payment of 20%, the loan balance would be $560K. Multiplying this by the 7.1% rate results in a monthly mortgage payment of $3750.

A glance on Craigslist and HousingMaps to view rental property prices in Union City tells us that a rental property of this size would rent for about $2800/month. (Note that I don’t see a rental home in the same community, so I’m looking at comparables). Net-net, there’s a delta of $950/month on the rent, or about $11K per year. Factoring in property tax of 1.2% would result in another $8.4K, or about $19K per year.

In the event you could get such a property at a 20% discount or more, then certainly the financials get more interesting and rent gets closer towards mortgage payment. But at current price and interest rate levels, as you can see, one would run a cash flow loss on a monthly basis and as an investor, would bet on an increase in home values in the future or a decrease in interest rates to re-finance at more attractive terms.