[Wine Friday] April – $15 Challenge

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This time we brought the house down with 35 people — our biggest turnout yet!  Special thanks to Rick for generously volunteering to make a wonderful display of food to pair with our eclectic wines — it was outstanding.  He also managed to hit our Wine Challenge right on center by also bringing the best wine!  This time we had 2 winners tie for first place, Andy’s “cooking wine” Syrah made the top of the list as well.  Here is the complete lineup:

042508_wine_friday_21) 2005 Liberty School Cabernet Sauvignon (Tied First Place 7 votes)
2) 2005 Zig Zag Zin Mendocino Zinfandel (3 votes)
3) 2005 Robert Hall Merlot (3 votes)
4) 2003 Luna Di Luna Italian Merlot Cabernet Blend (4 votes)
5) 2006 Pepperwood Grove Syrah (Tied First Place 7 votes)
6) 2002 Ballentine Old Vine Syrah (3 votes)
7) 2005 Avalon Cabernet Sauvignon (3 votes)
8) 2005 BV Zinfandel (2 votes)
9) 2007 Pascual Toso Malbec (5 votes)
10) there was no ten (hey, after 9 wines I was confused, give me a break! Did anyone even notice?!)
11) 2005 Gallo Sonoma Cabernet Sauvignon (1 vote)
12) 2004 Edna Valley Cabernet Sauvignon (2 votes)
13) 2005 Frei Brothers Syrah (no votes)
14) 2003 Fox Brook Chardonnay (no votes)
15) 2004 Mad Dogs Monastrell, Cabernet, Shiraz Blend (1 vote)
16) 2006 Louis Jadot Beaujolais (1 vote)

Thanks again to everyone for joining our $15 Challenge, I hope everyone had a wonderful time.  See you again next month!

-Mark

For more photos, please click HERE.

[Deal of the week] Saratoga Golden Triangle, $1.388M

This week we have a hidden gem in one of the most sought after areas of Santa Clara County. 

Details:
MLS# 782476 (SOLD for $1.468K)
20281 Saratoga Vista Ct, Saratoga, 95070
3 / 2
49 years old
1540sf
8000sf lot

Listed $1.388K

Why is it a good deal:
SaratogaGreat schools always speak for themselves.  All 3 elementary schools and the middle school for Saratoga are phenomenal; not to mention this home is walking distance to Saratoga high school, one of the best high schools in the area!  Anything in the Golden Triangle under $1.5M is rare.

Another piece of good news is that this home has not been marketed for sale very well.  There are no interior pictures on MLS or the flyer; the flyer is single-sided black and white photocopied — sellers should expect more effort to sell one of their most valuable assets.  It also has a tenant living inside which means it takes an appointment to see it and with a greater number of easily available homes on the market this one may not get chosen.

This home has been listed for 40 days without an offer.  Directly across the street is another home that just went Pending after only being on the market for 9 days.  It was listed for $1.488M but it has been totally remodeled and shows like a new home, which means it may be possible to negotiate an even lower price for 20281 Saratoga Vista Ct.

What is the risk:
The 8000 lot is probably the smallest lot size that Saratoga allows so your growth rate may not be as attractive as other nearby homes.  It was recently used as a rental home so the condition may not reflect the care that a typical homeowner would provide, but of course a full inspection should discover any hidden problems.

To move-up buyers: You may be thinking that now is not the best time to sell your home, but if that’s true then it might mean that now is a good time to buy a home.  If you cannot afford to keep your existing home AND move up to this one, consider that you may take a little haircut on your sale, but you are giving a bigger haircut (dollar-wise) when buying this one!  Give me a call if you are interested so I can share with you my thoughts in more detail.

-mark

Use Your Home Equity Line or Lose it

If you have an unused home equity line but have plans to use that money for something in the near future, right now may be the time to take some action.

Home equity lines of credit (HELOC or ELOC) are a great way of tapping into the equity in your home to make improvements like remodeling or landscaping.  Unfortunately, it has become more common over the past 10 years to buy consumables or even pay off credit cards with ELOCs since the interest rates are much lower than credit cards.  Time Magazine reported that Americans tapped into the equity in their homes at an astounding rate from 2004-2006:

Eloc
As the credit market gets tighter, equity lines are the first to feel the crunch.  These credit lines are the banks most risky notes because if the home they are connected to goes down in value, it is possible that the homeowner will not want (or be able) to pay.

We are now seeing banks taking some surprising actions on existing equity lines.  One client of ours who was not using her $100,000 ELOC received a letter telling her that the equity line has been closed for no reason.  I have also heard that other lenders have suddenly reduced the equity line limit to the existing balance, which means you cannot draw any more money.  These moves will reduce the bank’s risk.

So, what should you do now?  If you are planning a project that will need the money from your equity line, you should immediately check the status of your ELOC.  If it is still available, it may be a good idea to write a check against the ELOC and deposit into your savings or money market account.  I know, you are paying interest on the ELOC and not even using the money.  However, if the credit market continues to tighten, it is possible that your lender will reduce or remove your ELOC before you have a chance to use it, and you are going to face the fact that you might need to find another way to pay for your remodeling project. 

-mark

Home vs. Inflation

It is often said that buying a house is your best ‘hedge’ against inflation.  I didn’t really understand what that meant until recently.

Inflation is the yearly increases we feel in the prices for everyday items we need or use in our daily lives.  As an example, the Costco roasted chicken was one of the best values in the store at $4.99 for a whole chicken, ready to eat.  I noticed a few months ago that they raised the price to $5.99 and just this past week I noticed it is now up to $6.49.  That is a 30% price increase in less than a year and I’m sure you can find similar stories about other products that you buy regularly.

If inflation is kept “in check” by the Feds, it will likely be around 2.5%-3% per year and generally speaking, we all get pay raises at or above the inflation level.  This helps us feel like we are not paying more for daily life as a percentage of our income.  Essentially there is nothing we can do to control the prices of gasoline, cereal, or pizza — but there may be something we can do to control a big percent of our monthly expenses.

When renting a home or apartment, the monthly rent will increase according to inflation and sometimes even higher.  Most of the time I see 5% per year on average and this is what we coach our investor clients to expect from their rental properties.

Moneyhouses
Lets say you rent a place for $2,000 per month.  With 5% increases each year, this same place will be renting for $2,550 after 5 years — this seems believable.  As for your income, lets say you make $10,000 per month now and only see 2.5% raises each year.  You will be making $11,314 per month after 5 years — again, this is probably believable.

Since housing is the majority of our monthly expenses, it makes sense that if we can control the increases in our housing expenses it will provide the biggest relief as inflation increases other prices each year.  This is where buying a home comes in. 

It’s hard to go to your landlord and say you won’t allow them to increase your rent (but I never tried so let me know if it works for you.)  But when you buy a home that is exactly what you are doing.  If you use a standard loan program like a 30-year fixed mortgage or a 7/1 ARM, you are essentially locking in your payment at today’s rate for at least 7 years.  So in our example, if your $2,000 per month rent was a mortgage payment instead, it would still be $2,000 per month after 5 years and the extra $550 per month would stay in your pocket.

Dollar_toilet_2
This is why buying a home is considered a big step toward reducing your exposure to inflation since the biggest monthly expense (housing) is controlled as prices of other items continue to increase.  I do believe that it takes a somewhat “long-term” viewpoint because most people won’t think that a $100 per month increase in rent is a big deal, but after 5 years, it is a big deal.

That’s how it works.  Are you in control of inflation or is it controlling you?

-mark