I am considering an off market deal in San Jose Lynbrook area . Its a tear-down on around 6500 sq ft lot. Planning to tear down and build a home of around 2800 sf. Asking $1.4M. It is on busy street though. Estimating around $600K for design and construction and around 18 to 24 months to complete.
I am new to San Jose area and so not sure if its a decent deal to pursue. I’d appreciate any guidance.
Not sure if yours is related to this. The one is a tear down one just closed: https://www.redfin.com/CA/San-Jose/1017-Miller-Ave-95129/home/794307
I think 600K for 2800 sqft might be a bit low. I haven’t done my own building, but I have been advice to budget at least 250 / sqft, but preferable around 350 / sqft.
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I think that miller Ave one is far from a tear down. Just cosmetic fixes will do. West San Jose is not the place to perform grandiose designs. Only if you want to be a pioneer in this neighborhood.
It apparently has half the amount of foundation pillar than it supposed to have or something like that. Seller was only accepting cash offer.
Negatives like this always scare me away. Cars whizzing by would be noisy and at night car lights might be an irritation. I don’t personally know San Jose well but maybe you can divulge at least the main drag that is the busy street so that folks like @Jil or @manch and others can chime in since they know the area. If you have kids, a busy street would be a turn-off since they can’t play safely in the street (and only on the property which is good size sounds like). Also, depending on how you plan to place your garage relative to the busy street, will it be difficult to back up and out onto the street?
Teardowns work in $1000/sf neighborhoods. … $500/sf neighborhoods fugetaboutit
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Just checked, WSJ Lynbrook side hardly one home is on market (5766 W Walbrook Dr SAN JOSE, CA 95129)
Avoid these streets, car back ups are tough and children can not play or by mistake can not come out to the street.
Johnson(Lynbrook Side south of bollienger)
Bollinger
Tantau Ave
Rainbow Drive
Prospect Road
Miller Ave
Blaney Ave
Deanza Blvd
Know the lot size and SJC setback limit. I think you need front 25 ft, back 20 ft and sides 6ft and 12ft (or 5 ft and 10 ft) from the fence clearance. With 6500 lot, you may need two story home. If it is triangular lot, avoid it as you can not effectively use the land.
As many suggested, 2800 sqft home may go between $300/sqft onwards. Higher the finish materials, higher the cost. My friend spent $50k in kitchen finish materials alone. If you have full cash to build home, you can think. If you expect loan or any other lending, it is hard.
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I just wanted to say that I have read some investors here, and one of them said something about risking and scalded others for not doing it. What happened?
Think ahead of your time. Flying cars are coming, you won’t need to back out of your driveway. 
Busy street - does this busy street have any redeeming qualities or is it only viewed as a negative.
IMO, pass on the deal if it’s cheap because it’s on a busy street. It’s value post build will be affected by it more than it was prior to the build. In a hot market you might be able to get away with it, but it’s not advisable. It’s better to pay for a better location.
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This is a off-market deal directly from my friend’s friend but i am not that familiar with the area. So I am looking for a guidance on asking price of $1.4M as after build value of around $2 to $2.1M for 2800 sf seem to be good based on zillow/redfin recently sold home prices. Assume i am fully aware of inconveniences and resellability of busy street.
Planned personal use or resale?
If it’s planned personal use and building your own house at this location makes you happy, then do it! Financial rationale doesn’t have to be the deciding factor. Don’t let naysayers hold you back.
If there is a financial motivation, and your post build value is accurate in today’s market, the deal sucks ass. Perhaps you are saying 2-2.1 is your post build cost. Then it’s a different ball game, it depends what post build value is. Personally, I would spend the extra 100-200k to buy a better location within the target neighborhood. If you were my buddy that’s what I would beat you over the head with. Now if the extra 100-200 prevents you from being able to execute on your vision that is a different story, well not really. I’d tell you to save up!
If your location is similar to Myo’s Miller Avenue example, I’d say buying lot value at 1.4 seems like market value. No insider deal here.
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You buy low and sell low at traffic streets. As long as you hold for 5 or more years, you always gain in Cupertino Schools area. Apple complex is very near to WSJ Lynbrook area.
Hanera and wuqijun also own homes in WSJ area. I lived almost 10 years in WSJ Lynbrook side. I have listed those traffic streets.
Johnson(Lynbrook Side south of bollienger)
Bollinger
Tantau Ave
Rainbow Drive
Prospect Road
Miller Ave
Blaney Ave
Deanza Blvd
If the home is not falling in those streets, you are fine.
If the home in those streets, you need to absorb the hassles. Since you plan to build new home, you may be living there for a longer period. Whether you can tolerate car back up issue and children can not play or run into streets etc, extra noise during night time etc. This is what you need to review.
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Jil is correct about the traffic and noise issues.
Do this experiment - before you commit any money spend a few hours on the busy street at different times - say 8 or 9 am, then again at 11 am , 4 pm, 6 pm , 8pm. The idea is to try to drive in and out of your driveway at different times. Do it in different ways. One way directly drive into the driveway and then wait for 2 min and try to reverse out. Another way - reverse into the driveway and then try to drive out into the street. Once you do this at least 5 times you will get an idea for how tough it is to enter or leave your house.
I did this twice with a house on Miller - once on a Friday morning and Friday evening. By the end of that I gave up on the house. It’s not worth it to get hit by cars that down slow down. It’s even worse to think about what happens if the front door is open with no adult supervision.
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Don’t do it on a high traffic street! You are accepting higher levels of risk as it will fluctuate more quickly and wildly versus low traffic streets. It is a better idea to spend more money upfront.
I agree with Jill in general but I guess Blaney on Lynbrook side (not Cupertino side) is OK. At least, much better than Bollinger, Johnson, Miller, Prospect and DeAnza.
Rainbow Drive has one lane per each direction and better than above 5 although still undesirable.
It has many stops instead of traffic signal and quite wide bike lane.
Thus, cars tend to be slower on Rainbow than above 5.
The simple test I make is this way. During day time, visit morning or noon or evening, just stand near by road, count 5 secs interval. If a car passes every 5 seconds, or less, looks to me traffic road or connecting road.
I have a house on busy street, it is a rental. I did buy lower than the comparables without the traffic. However, you can always remodel it appealingly when you are ready to sell to offset the discount from the traffic.
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And that’s the only reason to buy on a busy street. I would discourage flipping on a busy street.
Location location location.
One of the flips I saw fail was in Menlo park–good school district–but the location sucked–near Caltrain and behind a 7-11. It was a dumb purchase in my opinion. House didn’t need flipping–already had double pane windows and updated kitchen, but it sat on the market at a good price ($1M for a 3-2 1700? sq ft), but the location was bad. Someone bought it, flipped it (replaced kitchen I think and updated to triple pane windows) and failed to sell. Maybe they’re renting it out now…
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Unless one is truly getting a real sweetheart of a deal, avoid homes/lots with big warts like busy streets, nearby train tracks or right on top of you plane flight patterns. For the most part, these things are not ever going to change. The analogy is again the case for using a Club to secure your vehicle against theft. A good thief can probably steal your car with the Club on it but all you want to do is make him/her move on to an easier target. Same lesson here: move to an easier target.
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I fail to see the benefit of buying on a high traffic street. This should be a blanket rule with only a few exceptions. You get in at a discount, but your exit will also be at a discount. Your ARV will never be on par with an equal house in a better location. You should be getting less rent and more turnover. Don’t take the extra risk unless you are being compensated for it. 10% does not cut it.
Don’t forget the OP plans a large build on the lot which cannot have a deep setback. That makes this an even less attractive proposition.