100-Percent Appreciation in Just Over Five Years
By Ken DeLeon, ESQ. | Founder
Due to the very strong Silicon Valley housing market, I find that most first-time buyers cannot purchase their dream home immediately. Since it is likely they would have to settle to some degree when purchasing their first home, some buyers consider delaying their purchase and saving to eventually purchase their dream home in the future. Other buyers consider acquiring a spacious townhome instead of a modest single-family home, even though they may see a lower level of appreciation when selling it.
The strategic recommendation that I give to my clients is that, if you have to compromise on your first home and cannot yet buy your dream home, focus primarily on making an exceptional investment that will allow you the highest rate of appreciation to maximize your profit. With this high profit, you can then focus on soon purchasing your forever home.
Some great clients who completely listened to my advice made over 100-percent appreciation in just over five years. The made this extraordinary profit of over one million dollars by following my guidance on what city and neighborhood to focus upon and on what home to put forth an offer. After enjoying their home for five years, my clients moved out and again completely followed our recommendations when selling to maximize profit to fund the purchase of their dream home. There is a specific chronology to follow in order to optimize your home purchase and sale to maximize profit.
Buy in the City with the Most Appreciation
Due to my quantitative background in mathematics and economics and having been a college professor of real estate economics, I have the analytical tools necessary to always be analyzing market trends. Additionally, since the DeLeon Team works with more Silicon Valley buyers than any other agents or teams, we know first-hand how buyers’ preferences are always evolving. With this insight, I provide all of our buyers with detailed analyses and even videos on what cities and neighborhoods I project will have the most appreciation.
In 2011, the city I was most bullish on was Palo Alto, while I had appreciation concerns for Woodside, since it is very hard to develop an estate home there. Since 2011, Palo Alto has appreciated at more than four times the rate of Woodside. My analyses and conclusions are always evolving, and now I am more bullish on Woodside and up-and-coming cities like Redwood City and Mountain View, which have stronger upsides than ever before. But in 2011, when my clients asked me what city to buy in for the most appreciation, I directed them to Palo Alto.
Buy in the Neighborhood with the Most New Construction
The rate of appreciation for a neighborhood is accelerated when it has the right ingredients for redevelopment and improvement. A relative ease of building requirements and no environmental issues provide an ideal environment for new homes being built in a neighborhood, adding to the area’s rate of appreciation.
When my clients asked what neighborhood had the most upside in Palo Alto, I told them that I was most optimistic on Midtown’s continued upward growth. This is because Midtown is out of the flood zone and does not have any historical restrictions or prohibitions against two-story homes. I projected that this neighborhood would see a lot of newer homes being built in the future. One of my clients was a little dubious since there were not yet any new homes on her street. Yet, as projected, several new custom homes were built on her block in the last five years, and the neighborhood now has more architectural variety and uniqueness. Of all the neighborhoods in Palo Alto, Midtown has appreciated more than any other neighborhood since 2011.
Buy the Best Deal
Using data science and my background in econometrics, I have created an algorithm that spots what variables correlate most heavily with homes that sell for below market value. Price drops and inexperienced agents are two of these variables. I directed my buyers to a home that already had three price drops and was listed by an agent who sells very few homes. I personally knew the seller due to us both being attorneys at Wilson Sonsini together and, when we came in even below the reduced list price, the seller accepted our offer since she liked me from when we worked together.
Do the Most Strategic Remodeling
When my clients asked me about improving the home, they asked which upgrades will provide the greatest return on investment. I recommended that they focus on their kitchen, as busy Silicon Valley homebuyers appreciate a remodeled kitchen above all other upgrades. Thus, these upgrades will get the best profit while improving the clients’ quality of life.
Optimize Selling the Home Through Perfect Timing and Pricing
After living in their home for five years, my clients called me up, excited to sell their home. When our listing team met with our client in December to discuss selling the property, we recommended that we list their home in March to optimize market timing, selling during the strong spring market with the highest demand and lowest supply of homes.
To further optimize selling their home, the clients moved out for a short period, allowing us to make strategic improvements and then letting DeLeon Realty stage their home at our expense. With these improvements, the home showed beautifully and, through being vacant and staged, it was very easy for agents to show the home to buyers. In addition, our clients took our advice on pricing their home at just below market value, allowing us to generate multiple offers and create an auction dynamic.
Through completely following our advice, our clients received ten offers. Our negotiations resulted in an outcome that was both beyond their hopes and approximately double the rate of appreciation of alternative neighborhoods or cities where they could have bought. With this exceptional investment and making well over a million-dollar profit from their first home (nearly half of it tax-exempt due to the tax advantages of homeownership), these clients were then able to purchase their dream home.
