Category Archives: Real Estate

Lend Me Some Sugar! I Am Your Neighbor!

Dunstan_HNYI became a realtor to help preserve what makes the San Francisco Bay Area such a great place: our communities! I want every client I help to say, “Lend me some sugar! I am your neighbor!” *

I was born and raised in Saratoga and my roots go back 5 generations in California. I have seen our communities evolve as people from across our nation and the world come to the Bay Area to live and work. Remember, the technology developed here changes the world. How great is that!?

I depend on all of you for referrals to colleagues and friends who need support in relocating their families to a community that best meets their needs.

Please email me at eric@dunstanproperties.com if you, or someone you know, need a tour of the Bay Area, a referral to a trusted lender, insights into local schools or traffic patterns. I’d be happy to share my unique local perspective and market knowledge.

Thank you for your continued support and friendship. May 2016 bring you and your family much happiness!

– E

* Be cooler than cool. Reply on Twitter to @ericdunstan with the song/artist reference and be entered to win a Starbucks gift card.

Check out “The Hawaiian House”

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My son, Cole, was inspired by a recent trip to Maui to design his own beach house. The result is his “Hawaiian House” complete with palm tree. Enjoy!

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Renters, it may be time to buy a home!

Screen Shot 2014-09-17 at 11.29.14 AMI was reminded again this week by how red hot the residential rental market is in the San Francisco Bay Area. Over lunch with a few friends, discussions quickly turned from the quick “what are you doing now” update to rants like “I am spending so much on rent…and my landlord is going to increase it again this year!” This statement is quite common for renters in non-rent controlled areas like Palo Alto or San Jose.

Finding a decent place to live in the Bay Area has always been a challenge, but it seems over the past 2-3 years the search has become even more formidable. However, with rents so high, the BIG $1M QUESTION is now does it make sense to continue paying high rent or is it better buy a house (or condo) and put the money towards a mortgage. Interest rates are so low now that monthly mortgage payments could actually be lower than paying rent! Yikes. The barrier to explore this option, however, lies in finding at least $200K in cash for a down payment. No matter your income level, obtaining that amount of cash is not easy and requires discipline. As I mentioned in a previous post, don’t buy that BMW M series with your options. Buy the house first!

Screen Shot 2015-11-22 at 6.45.36 PMI have been asked this “should I rent or should I buy” question several times recently. I am fan of buying a home as a longer term, 5-7 year play. I reached out to a mortgage broker friend to help build the business case for home ownership taking into consideration economic factors including home appreciation, tax benefits, etc. Of course, the analysis is positioned within the context that anyone considering buying a home should consult a CPA or financial planner to understand the implications for their specific circumstances. Come on guys, you know I had to say that!!!

Following is a rough analysis that focuses on the tax advantages of home ownership. The numbers used are for illustrative purposes only to explain the concepts. Feel free to manipulate the equations as needed. Or run a few calculations yourself using a “rent vs buy” calculator.

OK, let’s get to it! For example, let’s assume someone makes $120,000/year and is in a combined state and federal 30% tax bracket and will pay $36,000 in taxes.

Now, let’s assume a $800,000 home is purchased with a 20% down payment of $160,000 and with a $640,000 loan at 4%. The monthly payment breaks down as:

Monthly payment: $3,055.46

Property taxes: $833

Insurance: $80

Total Monthly Payment: $3,968

The same home could be rented for $3,000 per month, BUT don’t forget that the mortgage interest and property taxes are tax deductible. The high tech salaries being so high in the Bay Area this benefit is potentially HUGE. The annual interest paid on the loan in this example is about $25,000 and annual taxes are $10,000. As a result, taxable income has been reduced by $35,000. The buyer will pay $10,500 less in taxes, or $875 less per month, or the equivalent of $3,093/mo ($3,968 – $875).

But wait, there’s more to this. Now hear me out. Let’s assume the property value increases by a modest 5% per year. Over a 5-year term, the $800,000 property will be worth $1.021 million. Not bad, right?

Let’s assume rent increases by a modest 5% per year when in reality it has increased by much more!! Given the $3,000/mo rent in this example, rent will increase to $3,828 per month by year 5. Keep in mind that any renter (tenant) is at the mercy of a landlord and the laws that govern the local rental market as well. A renter could be asked to leave if, for example, the landlord wanted to sell the property.

Again, this scenario is designed to introduce the basic concepts to understand the benefits of buying a home vs renting. There are a ton of other factors to consider beyond the quantifiable including emotional benefits. We all have our hot buttons for what makes us happy.

Personally, I find happiness in home ownership from the remodeling and interior design perspective. I love that stuff. My mom spent many years as an interior designer and it rubbed off. Many family meals include conversation around what projects we are working on or what great home interiors we’ve seen. However, I have friends who are SCARED TO DEATH of any home project and prefer to just rent and let a landlord take care of it. To each his own.

However, my goal is to share with others the great opportunities, benefits and risks of home ownership to empower them to make their own decisions for what works best.

Kirk out.

Please send me an email (eric@dunstanproperties.com) or call me (408-674-2825) if you have any questions.


Buying the first home means not buying the sports car

Screen Shot 2015-09-03 at 9.29.22 PMThe explosive growth of the Internet brought a lot of money to the San Francisco Bay Area and the Silicon Valley in the late 1990s. Many of my work colleagues and friends cashed in their stock options and bought high-end cars or lived BIG in San Francisco during those go-go years. Many of us younger employees did not know the difference between paper wealth and actual wealth. Unfortunately, the paper wealth quickly disappeared as pro-forma balance sheets fell out of fashion and stocks plummeted. Easy come, easy go.

Fortunately for me I did not get sucked into the craze of buying a BMW M5 and renting an apartment in the Marina. My Mid-West style upbringing made me far too frugal (or cheap!) for such “extravagance.” Fortunately I was able to same-day sell a chunk of my ISO options and chose to just sit on the cash. I continued to drive the 1988 Toyota Carolla I owned in college and rented with a roommate a two-bedroom apartment in less than trendy Sunnyvale. I was also able to have my company pay for a good portion of the MBA program I attended to avoid taking on massive student loan debt.

Yes, I experienced a ton of peer pressure for not living in the city. “Come on, Dunstan! Move up to the Marina with us. You won’t have to make the long drive home to Sunnyvale late at night…and “Social Safeway” is just crawling with honeys.” Many a tale has been told about love found in the produce aisle.

Screen Shot 2015-09-03 at 9.43.19 PMWhy didn’t I cave to the peer pressure or buy-in to the spendy trends at that time? I wanted to buy a house. That was my goal. Even back then, living in San Francisco was expensive and many of my friends there lived paycheck to paycheck. Several work colleagues graduated with an MBA and $100K+ in student debt. I graduated with no debt. Shortly after I started my first job after business school I was able to purchase my first house. Goal accomplished.

The San Francisco Bay Area housing market is even more competitive (read “expensive”) now than it was in the early 2000s. Buying a home or condo takes a significant cash down payment to meet the more stringent lending requirements. A hefty monthly cash flow is also required to take care of the trappings of ownership…namely property taxes, insurance and then basic living expenses. Home ownership gets expensive. Fast. But I think it’s SO worth it!

First time home ownership is still possible in the Bay Area despite the gloom and doom affordability market data. Sacrifices have to be made and savings goals have to be achieved. Life style choices have to be made too. The process of saving for the first home may take some time and may require renting with a roommate in a less fashionable area to amass cash. Building a monthly and annual budget is a great tool to help analyze where the monthly paycheck goes and decide what changes are to be made to funnel more cash to savings. I highly recommend Alexa von Tobel’s book, “Financially Fearless” to help with building a budget and savings plan.

Buying what type of house and in what neighborhood will also be defined by company stock performance and salary compensation. People make a lot of money in the Bay Area. However, how well one manages money will play a key role in the home purchasing power of the individual. Keep in mind that most first time home buyers will NOT be able to buy a home in a top neighborhood. Be OK with that. Buy what you can afford in the best neighborhood possible. How this is done will be discussed in future posts. Start small and gain equity to then move up to the next house/neighborhood. This is all very possible. It takes time, commitment and money management. I did it. So can you.

Please send me a note on Twitter (@ericdunstan) if you have any questions.


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