All of San Carlos has watched the construction of 1001 Laurel Street over the past few years. At long last, it appears near completion. The project is a powerful one. Just by its size alone, it represents an eye-catching addition to downtown San Carlos. There are many interested spectators. Most of San Carlos is wondering about price points and just how fast the units will sell. However, the most interested spectators are not San Carlos residents at all. They are residential and commercial real estate investors and they are taking a close look at some possible big changes in the lower Howard Park area. Over the last year and a half I have been speaking with two such groups who are going to monitor the success of 1001 Laurel Street. They believe there is a group of buyers who will pay a decent amount of money for higher-end multi-family complexes just west of Laurel Street. These are not your everyday multi-family projects. They will be complete with infinity pools, green building standards, spacious units and a rich architectural design. One of them will have a Melrose Place-feel, for those of you who used to watch the television show. As the projects get closer to starting, I will post designs and more details.
In the mean time, let’s take a closer look at 1001 Laurel Street. 1001 Laurel Street is made up of 90 condominium units starting in the $500,000s. From everything I have seen so far, the complex appears to be well built, stylish, a great courtyard and the location is city-central. It has a lot going for it. So let’s take a look at who they are most likely targeting as possible buyers:
(1) Entry Level Home Buyers. A new home starting in the $500,000s…..not likely in San Carlos, however, it is a possibility at 1001 Laurel. New construction, maintenance free and a more manageable price point should attract some younger home buyers who were previously unable to afford San Carlos.
(2) San Carlos Families with an Older Parent(s). In my discussions with the other pending San Carlos projects, we isolated this as a key buyer group. I think it is much more prevalent than many believe. There are many San Carlos families that have an older parent, not living in the area, who they would like to move closer to their San Carlos home. 1001 Laurel may give those families the opportunity to do just that. 1001 Laurel is reasonably close to most homes in San Carlos. By its location alone, it would be easy for many elderly folks to walk Laurel Street and the units are mostly maintenance free.
(3) Investment. With a slowdown in the market, lower price points, and the maintenance-free new construction, some families may view 1001 Laurel as a very solid investment. Purchasing a $700,000 condominium with a $350,000 down payment would allow the owner to come very close to covering his full mortgage payment each month, given a reasonable rental value.
For more complete information on the 1001 Laurel Street project, please click here.
8 Comments
More 1001 Laurel-like developments? Yikes…
Hi PR,
I should have made it more clear that the other two projects are much smaller….roughly 1/3 the size of the 1001 Laurel Street project.
Bob
Do you know are the schools for 1001 Laurel?
Hi Rob,
According to the address guide provided by the SCSD, 1001 Laurel is slated for Brittan Acres and Central. However, I would highly encourage anyone to call the district ahead of viewing 1001 Laurel to make sure that their listed assignment is correct. Additionally, with all of the impacting problems for fall in White Oaks, I would not buy any property without first calling the district to confirm.
Bob
I have lived in San Carlos my entire life, and as soon as the construction was far enough along for this development to realize its size, I was appalled. It really goes against the San Carlos small town feel. I just hope that the San Carlos Transit Village project is smaller and does not seem like such a monstrosity.
“(3) Investment. With a slowdown in the market, lower price points, and the maintenance-free new construction, some families may view 1001 Laurel as a very solid investment. Purchasing a $700,000 condominium with a $350,000 down payment would allow the owner to come very close to covering his full mortgage payment each month, given a reasonable rental value.”
Jeez, Bob, if you paid 700K cash, then it would be a “profitable” rental, right? Retuning maybe 20K a year on 700K invested isnt much of a return.
Buying one of these condos might be a good investment, but the argument that putting down 50% lets you “cover the mortgage” isn’t a meaningful insight. There will have to be considerable appreciation for the investment to pay off.
Hi Econguy,
Yes, good call. I went back and re-read (3)….not terribly insightful. I should have given a a far more extensive answer with that statement.
First, the key to the investment is found in the very last line of your comment, “There will have to be considerable appreciation for the investment to pay off.”
Certainly, front loading an investment with 350K is not appealing when there is not an immediate return. Stepping back for a moment and taking a look at the bigger picture, I would offer the following:
Since 1960, the average home in San Carlos have tended to double in value every 10-12 years. For the purposes of this analysis, let’s take the higher number of 12 years. If the property were to double in value in 12 years, you would have a gain of $700,000. Let’s also factor in a cost of 5% as the amount needed to dispose of the property which will mostly be comprised of real estate fees. On a 1.4M property, this amount would be approximately $70,000, leaving you with a profit of approximately $630,000 over the 12 years. At the end of those 12 years your $350,000 would have earned the equivalent of 15% each year ($52,500 x 12 years). Obviously, a drawback to this type of investment is that the 15% is not paid annually and cannot be compounded.
Other factors that will carry some weight with this type of investment:
(1) Property will be held under Prop 13 (barring any type of legislative changes).
(2) More than likely, at some point during those 12 years you will be able to increase the rent, which will slightly accelerate the overall investment return.
(3) This particular property is new construction, which is covered by fit and finish warranties as well as the 10 year new construction warranty, thus eliminating many of the upkeep costs and possible HOA assessments that normally plague investment properties and reduce the amount of the return.
Like all investments there is a certain amount of speculation that is involved. The entire premise for this type of investment is built around the fact that the property is going to increase in value at a similar rate to properties over the last 50 years in San Carlos.
Thanks for the post.
Bob
If we’ve learned anything from this year’s kindergarten enrollment it should be that San Carlos residents are guaranteed enrollment within the San Carlos school district – nothing more, nothing less. The days of buying a property in part due to it’s “assigned” school are over, at least until the board re-sets the school assignment boundaries.