On Balancing Gratitude With Action

In this time of giving thanks, it is staggering to consider the many lives and homes lost during the past few weeks in the midst of the worst fires on record in our state. This year there is a special level of gratitude for the roofs over our heads, however humble or grand they may be.
 

And while the fires up North may have temporarily grabbed the headlines, all around us are tragic conditions for others who have lost their homes as a result of being unable to hold down a place to live. The thing is, it’s not just their problem—it also becomes our problem if not responsibly addressed.
 

As we reflect upon the year, it should be our goal to balance the gratitude for what we have been able to achieve and enjoy, with the moral obligation to be unsatisfied with that which remains to be improved in our world, starting with our community.
 

Several recent initiatives voted on in this past election focused on housing issues. Two of these, Proposition 10 and Measure M, favored rent control. And while well-intentioned, they would likely have created yet another kind of disaster, destroying the very housing they sought to protect. I for one am grateful for the collective wisdom of the local voters who were able to heed the damaging impacts of rent control on other communities who have suffered its unintended consequences.
 

On the other hand, it was disappointing to witness the failure of Measure H, which would have provided a means for those who have property to help those without property. This measure would have created up to $140 million in general obligation bonds at an estimated tax rate of $16.77 per $100,000 of assessed value to fund housing for those with median and low income, veterans, seniors, and persons with disabilities, mental health disorders, and substance abuse disorders.
 

It was estimated that these bonds would have generated $8.6 million annually, with 100% of the revenue staying in Santa Cruz County, compared to the low 12% of our regular property taxes that the State leaves for us once it takes its share.
 

In all, Measure H would have allocated: $105 million (75%) toward construction of 1,041 rental units and accessory dwelling units; $21 million (15%) toward homeless facilities and year-round shelter; and $14 million (10%) toward loans for first-time homeowners. And while it fell short of the 2/3 super majority that was needed to pass it, the Measure did get support by a 52% majority of voters, showing that there at least exists a “moral majority” among us, which I see as a positive application of a term once coined by a televangelist.

Bringing Home Solutions for Housing

In addition to my ongoing efforts to educate people on the multiple dangers of rent control in its unintended impacts on tenants, I have resolved to also explore ways that I can help facilitate solutions which both sides of the rent control argument can agree will help renters, regardless of whether or not Measure M passes.

In a recent segment that I hosted for the local real estate show, YouTube: BTS Presents Santa Cruz County and Silicon Valley Real Estate Behind the Scenes, a colleague and I made a friendly bet to see who can be the first to help a group of tenants pool their resources and take control of their destiny as homeowners instead of remaining renters in perpetuity.

Here’s how we envision it could work:

Based on the median housing price of $900,000, three housemates coming up with a 20% down payment (at $60,000 each) would end up with total monthly payments (including the mortgage, property taxes and insurance) of about $4,900 per month (that’s $1,634 each), of which about $3,700 would be tax deductible, while another $1,000 or so per month would go towards paydown of the principal, instead of going out the window to the landlord as rent.

To qualify for those payments, each housemate would need to earn upwards of $47,000 per year by my estimate, putting them in the 22% tax bracket. This would need to be confirmed by a CPA, but for sake of discussion, this would likely result in tax savings that would bring their net effective cost down to around $1,000 per month for each housemate after factoring in deductions and principal paydown.

Granted, they would need to be responsible for repairs and maintenance above and beyond their monthly costs, but they would also get the additional homeowner benefits of depreciation and even more significantly profit from market appreciation whenever property values go up, so they can be included in our region’s economic expansion instead of getting left behind.

Another solution I am working on to make a difference in our housing crisis was brought to me by one of the investors in the real estate fund that I help manage. The fund currently holds assets in 6 different states, but the investor expressed an ideological wish if we could find opportunities here in our hometown that could provide our investors with a good return while also helping provide low-cost housing solutions for the working poor in our community.

We looked into it and discovered that in fact this kind of investment has become much more viable through the recent creation of several Federal Economic Opportunity Zones in our area along with changing rules for housing density bonuses being offered by the City. We are now in active discussions with several local developers to partner in several low-income housing projects that will bring much-needed rent relief and we are actively seeking additional members of the community who would like to participate in the funding of these ventures.

Based on our preliminary projections we see potential returns comparable to what we have been able to attain in other parts of the country right here in our own community, and our vision is to achieve the best of both worlds where local investors can get viable returns while bringing their investment dollar home, where it counts the most.

I invite you to reach out to me directly if you would like to be a part of it.

A Plea For a Sane Approach to Rent Control

By the time you read this column, the Santa Cruz City Council will have conducted the First Reading of their proposed Exorbitant Rent Increase Ordinance which they intend to have take effect in the event that Measure M does not go through in November. With a little luck they will have continued its discussion to subsequent meetings and you can join in the discussion before they unilaterally pass it.

Here are my thoughts on the topic, which I recently expressed in an open letter to them, echoing some of the sentiments that have been expressed by the local group Santa Cruz Together:

Honorable Council Members,

I have become aware of your upcoming proposal to limit rent increases to 10% in any given year and 15% in any two-year period. As a housing professional who manages over 150 rental units, I am in support of such measures as they are in compliance with accepted standards of practice of good taste recognized by CAA and other organizations who promote healthy landlord-tenant relations.

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What is not in compliance with such standards are concepts such as “just cause” eviction provisions which provide a disincentive to housing providers and create a negative impact on the already sub-standard supply of rental housing stock in our community. In fact, I have had multiple clients who own rental property in Santa Cruz who have asked me to provide current opinion of market value in anticipation for selling their properties off in the event that Measure M or even a toned-down version of any ordinance containing just cause eviction measures goes into effect, which would constitute a wrongful taking of their property if it were kept as a rental.

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In order to avoid this impact, each of these property owners would respond to by selling the property off, which in all likelihood under the Ellis act would displace their current tenants for a period of TEN YEARS, to be replaced by homebuyers who generally need a Silicon Valley income to be able to afford the prices around here. And while I would certainly profit from every rental property that that each of these clients sell off, I feel the overall effect would be a negative impact on our community by taking away places for tenants to live, thereby increasing long-range commuting and the probability of homelessness amongst the entry-level workers of our community.

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Housing policy is complicated and tremendously important to the future of everyone in the city of Santa Cruz. Any ordinance beyond this added tenant protection requires a thorough process of community input combined with a serious and complete study of impacts. It would be reckless to make fast changes that affect the future of Santa Cruz housing and the quality of life in Santa Cruz. For example, “just cause” eviction provisions that supersede lease terms will drive people away from providing rental housing.

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I applaud the work you are doing in seeking ways to effectively address the high cost of housing and sincerely hope you will not consider any last-minute changes to your housing policy without involving the community and including all interested parties.

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For more information on the effort to preserve rental housing stock and explore rational ways to address the issues of affordability in our area you can learn more at www.santacruztogether.org and to express your concerns to the City Council you can write them as well at citycouncil@cityofsantacruz.com

The Troubles With Rent Control

Santa Cruz is facing a potential ordinance on the ballot this November that proposes rent control and just-cause eviction measures in the city. Trouble is, the way the ordinance has been written, these measures would do more harm than good, in many cases harming the very people they were designed to protect. And there is no changing the ordinance now that it has been drafted into its final form for petition.

There is no question we are in the midst of a dire housing crisis that is driving everyday people out of the area. Our well-meaning civic leaders have recognized this crisis and have responded to it, but if you pay attention to what has already happened in other Bay Area communities who tried rent control, there are many grim examples of how it backfired with unintended consequences.

One of the key factors missing in the ordinance is any type of “means testing” to confirm whether the person living in the rent-controlled unit is the rightful beneficiary of below-market rent. Consider the judge in San Francisco who was still in law school back when his apartment became rent controlled.

He now earns a comfortable six-figure salary and still enjoys low-cost housing with no incentive to move out, while there are poor families on the street—far more deserving of such assistance—who could really use such a break but have none.

The proposed just-cause eviction measures in Santa Cruz would disallow property owners to ask a tenant to move out unless they meet one of 12 narrowly defined valid reasons (spoiler alert: the end of the lease, even a month-to-month lease, is not one of the valid reasons). And one rule in particular, designed to protect those age 62+ or handicapped with lifetime tenancy, is already backfiring as middle-aged or disabled renters looking for a place to live are now worried that it will become difficult to find rental housing if the ordinance passes, since home-owners will not want to create a situation where they cannot move back into their homes.

In response to the rent freeze passed in February, multiple housing providers took immediate steps to withdraw their homes from the rental market to put the properties up for sale as owner-occupant residences. Under the just-cause eviction rules, both the old and the new owners have to certify that the home will not be rented out again for the next 10 years unless first offered back to the displaced tenants at the same rent they were paying, even if the home is substantially remodeled. Where are those displaced tenants going to live for the next 10 years?

Realistic projections put the annual costs of administering this kind of program in the millions of dollars. As I see it, the biggest trouble with the proposed rent control ordinance is that not one dollar of those millions will be spent to provide even a single home for the homeless or a single unit of housing for the low-income members of our community. And frankly, if we are going to spend that kind of money, I for one would rather see it go to a program that could provide that kind of housing.

A Real Estate Retrospective

50 years ago this week I showed up in this world, a product of the Summer of Love. From my humble beginnings as a hippie kid, it is doubtful that anyone back then would have guessed that - of all things - I would now be passing the milestone of having spent more than half my life in real estate.

Considering that, when I was growing up, real estate wasn’t a profession I knew even existed, it took a series of fateful coincidences to land me in the career path that has shaped my adult life and brought me levels of success and fulfillment that I likely could not have attained otherwise.

After an 8-year college career with little direction, I had returned to the Monterey Bay area to dabble in my father’s construction business in Monterey, but the physical rigors of construction didn’t feel like a match for me after years of scholastic learning and I much preferred the culture of Santa Cruz, so I decided to move up here instead.

On the other hand, his investments in real estate intrigued me greatly. I was impressed with the concept that you could buy a property and have rental income carry your mortgage while the property’s value increased over time. I got a real estate license to learn more about such practices and also because it seemed a good opportunity to be able to earn commissions along the way as I learned about investment.

Looking back on my first real estate interview, it proved to be formative if somewhat traumatic experience at the time. Within a few minutes of meeting me, the broker had said, “I’ll give you a job here, but you’re going to have to cut your hair, ‘cause you look like a damn hippie and nobody is going to

buy a house from you.”

I thanked her for her time, bought a tie at Mervyns on the way to my next interview to prop up some semblance of a professional appearance, and got hired later that same day at a larger firm across town. From there, I made it my mission to prove that broker wrong. In the process, I became their Rookie of The Year and won their top agent award multiple times over the next 10 years—all without cutting my ponytail.

Early on, the thrill of competing with my fellow agents, and being able to earn the trust of clients to represent them in the largest purchase of their lives kept my attention wrapped up with the profession of real estate. But over time, the example set by my father eventually brought my focus back to the basics of investment in real estate as a means of building a portfolio that can build a stable financial future.

Along the way, I have managed to build not just a career but also an amazing circle of family, clients, friends, peers, and teammates. And with every passing year as we continue to figure things out and improve our outlook, we improve our level of enjoyment, our contribution to each relationship and to each situation in which we participate. In the words of one of my early mentors, “As long as you learn as you go, it just gets better.”

HOTELS GET THE LAST LAUGH

Homeowners in Santa Cruz County have a long tradition of finding creative ways to offset the high cost of housing here. One common way they have managed this is through vacation rentals to help maximize the earning potential of a second or third home. Another lesser-used variation of this is the hosted short-term room rental of rooms located within a home, generally with the owner present.

Hosted short-term rentals fill a useful niche for the less-than-affluent traveler, with their rates locally averaging a relatively low $133 per night during the high season. And since the activities of the guests are generally in close quarters with the owners, there is a nice system of controls built in to mitigate potential negative impacts on the neighbors. Worldwide, the benefits of home-sharing have seen great popularity, with Airbnb reporting 4 million listings in 191 countries, a figure that surpassed the top 5 Hotel companies combined. But not in Santa Cruz, it would appear.

Over that past few years, both City and County legislators have taken a sudden increased interest in controlling how property owners rent their homes out, re-categorizing the practice of home-sharing as a commercial enterprise and making the argument that short-term rentals deplete the inventory of long-term rental housing, which they contend drives rents up. But when you look at the numbers, they just don’t seem to add up:

The County Planning Commission recently drafted an ordinance to limit Hosted Short-Term Rentals to 180 nights per year with additional limitations, despite the results of their own survey counting only 169 HSTR’s in operation within the unincorporated areas, with less than 10 percent of these being used in the past for long-term rental. If anything, the results of the survey seemed to indicate (ironically) that hosted rentals pose more a cure for the high cost of living than a cause, when looking at their room rates compared to hotels.

What’s more, the survey revealed that a majority of short-term rental hosts are older property owners relying on the supplementary income of the rental as their primary motivation to host, while also benefiting from the flexibility, privacy and ability to retain their independent lifestyle as reasons why they wouldn’t consider long-term tenants even if they couldn’t host a short-term rental.

A more logical correlation appears when you read elsewhere in the news that there are 3 hotels with 390 rooms under construction right now in the county, with 6 more hotels with 519 rooms in the pipeline, and posted rates for a room with a King bed plus sofa bed running at $259 per night. With Transient Occupancy Taxes tied directly to money paid, it would certainly make better business sense for the County to back the hoteliers with their higher room rates over mom-and-pop vacation rental owners—but it just seems a bit unfair if that’s what’s actually happening here.

Their draft will get its first public reading at the Board on December 5, and if this ordinance is passed, we would become the only County in the State to impose a limit on the number of nights that a hosted rental can rent out a room in their own house, which many see as yet another clear step in the wrong direction.

Trick or Treat?

Halloween is upon us, and while this is the season when you get to see the masks that people put on, it also provides a good reminder for us not to just take things at face value the other 11 months of the year.

The Internet has become the way most people search homes now. Not surprisingly, it has also become the way many agents build their presence. And, as with most things, there are straightforward ways and not-so-straightforward ways this is achieved.

The organic way an agent ends up with a presence on the Internet is by listing a property on the MLS, which is then propagated via the RETS infrastructure to consumers via third-party sites who provide access to all the available properties out there within as little as 15 minutes from when they are put into the system. That is the treat part. The tricky part can be when the consumer tries to reach the agent for more information on the property, which can often be misleading to say the least.

On the two leading consumer sites—which happen to be owned by the same company—the user is given 4 choices of agents to contact, one of whom is the agent who actually listed the property, along with 3 other agents, referred to as “Premier Agents”, who paid to be on the page. And since they paid for the promotion, quite often their bios are far more elaborate and impressive than the Listing Agent, despite how ever they might compare in the real world.

Another leading site narrows down your options to just one agent, and that agent isn’t the listing agent at all. Instead, viewers are provided a link to the site’s “Partner Agent” for additional property information. The listing agent is relegated to a non-descript, single line statement “Listing Provided Courtesy of…” buried in the text of the main body of the listing, but you are on your own to try and track down their contact information.

Why is this so? In short, it is endemic to the business model from which these sites profit, which is primarily by charging agents anywhere from hundreds to thousands of dollars per month to promote themselves to the consumers who use the sites to find homes on the market.

Clearly the model is working for agents who use it to their advantage, as evidenced by the fact that several top agents in our county spend literally tens of thousands of dollars each month promoting themselves on these sites. That’s not to say that the agent who popped up on your search isn’t necessarily a good agent, but you may want to dig a little deeper to make sure you are dealing with the agent who will serve your needs to the level of care that you would ideally want before simply accepting the paid promotion they have put in front of you.

These promoted agents range locally from a newer agent who has 15 positive reviews despite having only 3 sales in her entire career to a “Top Producer” with a team of 7 assistants who will handle a dizzying number of transactions per month alongside yours.

In this age of mass media and fake news, where paid and boosted content often eclipses the real content or people you are looking for, it is more important than ever to verify the information you are being fed and look for the telltale signs of what kind of professional you are dealing with before you press that button.

A Tale of Two Cities - Part 2

Given the freedom of choice that accompanies the latest technological advances, it isn’t surprising that increasing numbers of workers in the tech industry have decided to set anchor here. And while the reception by the locals hasn’t always been exactly hospitable, the tech money - and everything that comes with it - is definitely here to stay.

You no longer need to go to Palo Alto or San Francisco to buy a $9 smoothie or a $300 pair of shoes. And the $5 per square foot rate that the new shops are paying at Abbott Square - with percentage rent provisions to boot, while certainly a contributing factor to the rising price of blended fruit - is also pumping money back into the economy by giving the local owners of those properties more money to spend back into the community.

Our interaction with Silicon Valley bears resemblance to the love-hate relationship shared between the locals of any number of tourist towns with the outside visitors whose dollars fuel their economies. The difference here is that many of the outside visitors have come here to stay full-time, and are now becoming the new locals. And like it or not, along with the emerging new breed of locals, the standards for education, recreation and housing have risen as well.

The challenge for the old guard - at least, those dating back to ancestors who displaced the Ohlones - has been to find ways to adapt and to tap into the economic wellspring that has swept into the area in order to able to keep pace with the rising cost of virtually everything, as things continue to grow and evolve. And with the tide starting to shift increasingly from NIMBYs to YIMBYs involving key issues like housing density and infrastructure, it will be interesting indeed to see how things continue to transform over the course of the next 25 years.

I would like to believe that through the process of intelligent growth, we can at least retain some of the core characteristics that ‘Keep Santa Cruz Weird’ and that we can make it possible for the maximum number of people who live here be able to stay, while not losing the essence of what drew us to this beachside town in the first place.

Exploring just how we can achieve that is the challenge that lies ahead.

A Tale of Two Cities

When I moved here in 1992, Santa Cruz was still recovering from the effects of the Loma Prieta earthquake:

Many of the downtown merchants were still operating out of the temporary “Tent City” that was erected in the wake of the widespread destruction in and around Pacific Garden Mall. Most of the houses that I toured as a young agent back then had the tell-tale diagonal cracks in the sheetrock over their doorways, and those with fireplaces generally had that characteristic break at the shoulder of their chimneys that served as a reminder of the 7.2 magnitude jolt that had hit the area.

The town was also recovering from the economic crash of 1989, which had actually preceded the earthquake by several months, with the earthquake serving as the final knockout punch that landed Santa Cruz on their list of beleaguered Counties where FEMA poured in many Millions of dollars in repairs and low-interest loans to help struggling homeowners get their lives back in order.

Housing prices reflected the crippled economy, and although I was just starting out and didn’t have enough money to buy anything at the time, I am still reminded every time I drive by that row of old houses by Schwaan Lake of the place that I could have bought, if only I could have scraped together $169,900 it would have taken to have owned a house that looks directly out over the beach.

What a difference 25 years makes.

Today that house has been fixed up and you couldn’t touch it for 8 to 10 times that price. And while we certainly had our share of commuters who made the daily drive to Silicon Valley back then, in the time since—just as the proverbial mountain was brought to Mohammed—Silicon Valley has also come to Santa Cruz in a big way:

Companies like Pintrest, Google and Amazon opened satellite offices here alongside local successes like LightSurf and Lookr. And the Santa Cruz New Tech Meetup has become a hotbed of innovation and opportunity that regularly gathers at the Cruzio collaborative workspace, where a whole generation of workers have built companies and careers run out of offices that they share in common with scores of other companies. Or, with the advent of high-speed Internet at home, many now manage to build a career or a company without any office to commute to at all.

Given the freedom of choice that accompanies such technological advances, it isn’t surprising that increasing numbers of the tech industry have decided to set anchor here. And while the reception by the locals hasn’t always been exactly hospitable, the tech money—and everything that comes with it—is definitely here to stay.

You no longer need to go to Palo Alto or San Francisco to buy a $9.25 smoothie or $300 shoes. And the $5.00 per SF rate that the new shops are paying at Abbot Square—with percentage rent provisions to boot, while certainly a contributing factor to the rising price of blended fruit, is also pumping money back into the economy by giving the local owners of those properties more money to spend back into the community.

Our interaction with Silicon Valley bears resemblance to the love-hate relationship shared between the locals of any number of tourist towns with the outside visitors whose dollars fuel their economies, the difference here being that many of the outside visitors have come here to stay full-time, and are now becoming the new locals. And like it or not, along with the emerging new breed of locals, the standards for education, recreation and housing have risen as well.

The challenge for the old guard—at least, those dating back to ancestors who displaced the Ohlones—has been to find ways to adapt and to tap into the economic wellspring that has swept into the area in order to able to keep pace with the rising cost of virtually everything, as things continue to grow and evolve. And with the tide starting to shift increasingly from NIMBYs to YIMBYs involving key issues like housing density and infrastructure, it will be interesting indeed to see how things continue to transform over the course of the next 25 years.

I would like to believe that through the process of intelligent growth, we can at least retain some of the core characteristics that ‘Keep Santa Cruz Weird’ and that we can make it possible the maximum number of people who live here be able to stay, while not losing the essence of what drew us to this beachside town in the first place.

Exploring just how we can achieve that is the challenge that lies ahead.

Ways to Keep Housing Costs Down

It’s no secret that housing costs in Santa Cruz County are amongst the highest in the world, but fortunately there are multiple ways as the population ages that folks are able to keep the spiraling cost of living at least partially under control as they transition into retirement.

One of these tools that enables aging homeowners to do this is to transfer their tax base, one time only, under Proposition 60 or Proposition 90 on their primary residence. In order to qualify for a Prop 60 tax base transfer, a few criteria must be met:

First, either you or your spouse must be age 55 or older when the original residence is sold. Second, the market value of the replacement residence must be equal to or less than the market value of the residence sold. Third, the replacement residence must be purchased within two years either before or after the current residence is sold.

In order for a Prop 60 claim to be approved, the purchase must occur within the same County in which the first residence was sold. And your claim must be filed within three years from the date the replacement residence is purchased or newly constructed to receive full relief.

For those who decide they would like to move elsewhere, Proposition 90 allows the tax base transfer to be moved to a new county, so long as the new county allows it. A quick look online indicates that the cooperating counties are Alameda, El Dorado, Los Angeles, Orange, Riverside, San Diego, San Mateo, Santa Clara and Ventura.

Some decide not to sell at all, but rather to age in place where they have lived all along. This can often include redesigning the home with accessibility in mind. Sometimes the design includes adding an independent entrance and living quarters to one of the guest bedrooms to accommodate a caregiver, or to rent out in order to bring in a little extra income.

Going a step further, others take advantage of the loosening rules on “granny units”, and build an Accessory Dwelling Unit to rent out for a little more extra income. And some end up moving into the Accessory Dwelling Unit and renting out the main house to bring in a lot more income.

Another strategy is to get off the ownership merry-go-round altogether and just take the $250,000 or $500,000 capital gains tax exemption, pocket the equity and pay to live somewhere else. This might involve moving into a group living and care environment. I can also take the form of moving in with your children which can be done with increased privacy and independence by either the parent or the children paying to put in an Accessory Dwelling Unit on the family’s property. Or it might lead to the decision to move out of state to some other place where the cost of an average home isn’t on the high side of three-quarters of a million dollars.

Whichever direction you decide to take, the most important thing to realize is that you should consider the full range of options available before making a decision. And you should seek out the help of qualified people you can trust along the way to help you sustain a living situation where you can continue to enjoy life to the fullest.

AN AFFORDABLE ALTERNATIVE?

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The following question was recently asked by a long-time client of mine who is considering a condo to broaden her options in the midst of our current market of record-high prices for real estate:

Q: After getting the Homeowners Association documents you sent me, I realize I’ve never purchased a home that’s part of an HOA. That’s a lot of reading material! Anything I should be aware of that’s out of the ordinary?

A: Living in an HOA-run complex could be characterized as becoming part of a small village of nosy neighbors who have shared authority over how the outside of your place gets painted and when. That said, there is some advantage to having someone else handle details like the hazard insurance and exterior maintenance of your home and the common areas, even though it does come at a price of HOA fees, which are not tax deductible.

The complex you are looking at is generally known to have a particularly well-run Homeowners Association from what I’ve heard, and their management team has a good reputation for handling their maintenance issues proactively.

The last time I handled a sale in there, the HOA dues did not cover replacement of roofs (which is not common) or windows (which is common)but that may have changed and could be looked up in the Homeowners Association docs you were sent.

The Rules and Regulations are set by the Board of Directors and are subject to change from time to time as needed to best serve the needs of the residents. If you don’t like how things are getting run you can always join the board—just when you thought you didn’t have enough on your plate!

As far as special things to be aware of, probably the main risk in buying a condo is the potential to get tied up in construction defect litigation, which can make financing difficult to get until settled and temporarily drive prices down.

Something like 7 out of 10 complexes nationwide end up in litigation during the first 10 years after construction but that association had their lawsuit settled a long time ago.

Another risk is the potential for getting hit with large lump sum assessments for major repairs to the complex for matters which may or may not directly impact the unit you are looking at, so you will want to carefully review the operating budget and recent meeting minutes to see if anything is coming up that wouldn’t be covered by the reserves.

Choosing to purchase a condo or townhouse can indeed provide a reasonable option in these times where housing prices are becoming less accessible, but it is all that more important to do the additional research to help make sure that your affordable alternative stays affordable, taking into account the extra moving parts that are involved as a member of a Homeowners Association and everything that comes with it.

We Live, Work and Play in Santa Cruz

By Datta Khalsa, Broker 

If are seeing this in a Good Times Visitor Guide, chances are you’re visiting the area.  And whether you’re experiencing Santa Cruz for the first time or for your 100th time, no matter how many times you visit a place, nothing compares to actually living here:

The things you read about in the newspaper become more relevant to your own life as you start to recognize more and more of the people and places in it. And the news hits home at a whole different level when you have a stake in the outcome, whether it’s the politics, the sports or the births, obituaries and business announcements. In short, it’s personal.

Somewhere in the midst of all of this, a real estate agent’s ties deepen in the community to the point where they are not only a skilled practitioner but where they have also become respected and active in the community.

As local agents, we live, work and play here. So what we provide runs far deeper than just having the right team of experts to bring to the table. We also have a decided edge in getting you the back story on whatever place or business you are considering, in order to apprise you of less obvious factors that may be relevant to your decision, including rumors of possible upcoming changes planned for the area, which could impact it in the future.

The best agents also function as a kind of concierge with local knowledge and insights ranging from the schools, restaurants, social and recreational facilities to the broad array of active groups in the area—like the local birthing and parenting communities, and our vibrant food, music, arts, theatre, sports, yoga, religious and other social groups, to name a few. And we draw from the first-hand perspective of our own involvement in these communities as well as through our networks of friends and clients. 

When the right agent gives you their card, you gain access to all of their knowledge—not just of real estate, but also the perspective of a trusted friend and ally. You gain an advocate who knows the players and opportunities in the marketplace, who can help you make the right decisions at every step, and who can safeguard you from potentially costly oversights or errors along the way.

I started Main Street Realtors after 10 years in the business with the vision of providing an agency completely vested both in the community and in our clients’ interests, where we have the multiple skill sets necessary to handle each aspect of their real estate needs, at every step of the way. I am pleased 13 years later to see it fully developed, to embody the very best that a Real Estate agency can offer—and where we get to Live Work and Play in this wonderful place that we call home.

Escape From Santa Cruz?

Here’s a little story that happened recently in Santa Cruz County. The names have been changed to keep the privacy of the parties involved.

Our protagonists, let’s call them Jack and Jill, bought some land in the hills in 1977 with a couple of old barns and corrals and over time they turned the property into a small vineyard.

Jack and Jill didn’t have enough money to build a new house, so they took the larger barn and made a house out of it, where they lived happily for the next 10 years, permit-free. In 1987 they decided to build a real house, so they had the County come out to evaluate where a septic tank could be put and in the process the old barn got red-tagged. That was the first and last time they had the County come up to the property until 18 years later, in 2001 when they decided to do a second remodel, this time with the help of an architect and a builder, adding a kitchen and a bedroom, and finally got the red tag removed.

After the inspector left, they expanded on their home within the original footprint, adding an upstairs with a second bedroom and bath plus a yoga room. They connected the existing decks, and also added a detached 400-500 SF art studio with a deck, which never quite got finished out. These kinds of things happen up in the mountains. Pleased with their improved living space, Jack and Jill also expanded on the second barn, turning it into a wine processing room and tasting room with an office, adding a couple sinks along the way. As with the other building, they stayed within the footprint, but raised the roof and added an upstairs, along with a deck in the back.

Time passed and they eventually decided to sell their happy home and let the proceeds fund their retirement. Their idea went largely according to plan, with the home drawing multiple offers, and selling last July for well over a Million Dollars. This left them free to drive off into the sunset in their RV to explore the country as nomads and settle down somewhere less expensive, unfettered by the cares of real estate ownership in Santa Cruz County—like high property taxes for instance. Jack and Jill had successfully escaped the cost of living amidst increasingly expensive economic conditions here and had moved on to the next phase of their life…or so they thought.

Then in September, they started receiving notices from the County Tax collector that they owed something called “Escape Taxes” for unpermitted improvements that they had added to the property. Apparently at some point while the home was on the market, or during the course of the Buyer’s due diligence process, the Assessor became aware of Jack and Jill’s industrious add-ons to the property and concluded that they had added value above and beyond what they were paying taxes for. What’s more, according to statute, the Assessor was billing them retroactively for their past 4 years of untaxed improvements. (To Be Continued…)

Due to space constraints, we are unable to print the full article in this week’s issue of Good Times. To view the conclusion of this story, you can email Datta, visit his FaceBook page or wait until his next column is published.

Living in The Best Place on Earth

It isn’t hard to see why Santa Cruz is such a great place to live. Even after travelling to many of the world’s most exotic destinations, I always feel fortunate when I come back here to call Santa Cruz my home. We are known as a beach town first and foremost, enjoying near-perfect climate with our south-facing location on the Monterey Bay, but equally intrinsic to its unique character are the scenic Redwoods, Oaks and Madrones that rise up from our coastal plains.

I sometimes wonder, what is it that makes this place so cool? Despite our town’s amazing natural beauty, I would maintain that it is the community who make Santa Cruz truly awesome. And over the years I have also seen our area evolve from its reputation in the 60’s and 70’s as a town of mostly surfers and hippies to a more cosmopolitan blend where the counter-culture co-exists alongside Silicon Valley neophytes, and everything in between,

What seems to tie us all together is a common love of world-class music, food, wine and brewing, with emerging talents in theatre, arts, education, sport and music, along with being a world destination for alternative healing arts. And behind all of this is a solid bedrock of families from a growing array of religions and walks of life who through their participation at the local level actively yet quietly continue to make Santa Cruz a place where people will want to live for years to come.

But then, living in one of the best places in the world does come at a price: With our cost of home ownership at 104.8% and cost of rents at 67.0% of monthly wage, Santa Cruz County was recently recognized as the 4th least affordable housing market in the world, after Hong Kong, Sydney, and Vancouver. In fact, according to CAR statistics, only 17% of the population in our town are able to afford to buy a home here. Studies of unaffordable markets worldwide show a direct correlation between restrictive land-use regulation and lack of affordability, highlighting the delicate task to find the balance between increasing affordability and preserving the things that made these desirable places to live in the first place.

So what is being done locally to respond to the market forces and meet the demand to make it sustainable for more of the population to be able to afford the high cost of living? Well for one, the Santa Cruz County planning department is now in the process of overhauling their Accessory Dwelling Unit ordinance inviting input from the public to allow ADU’s to be built on parcels under an acre, so long as the parcel can support a septic system sufficient to serve both the main house and the ADU.

We may never be able to come up with all the answers to the question of how we can help more people be able to afford to live here, but along the way we can continue to become a better community for trying to make it possible.

Of High Surf Advisories and Other Things

Sitting down to write this month’s column, I look out the window at Verve downtown and think how similar the scene outside looks to Seattle or Portland, but maybe that’s just the smell of the coffee carrying me to distant lands in the Northwest.

Then again, with the record levels of rainfall we have had, with our rivers and reservoirs overflowing and road and power outages dominating our daily routine, I find myself getting homesick in my own town for the Santa Cruz we used to live in, back when all the talk was about the drought.

The impact has been just as dramatic along the coast, with trees down along West Cliff Drive and waves covering the road at Moran Lake as the sand recedes into the ocean and our beaches are covered in driftwood and other debris from this constant onslaught of storms that have hit the area.

The normal seaside images where surfers, junior guards and tourists play amidst the scenic beauty of the central coast have given way to a stormy scene where a few hardy souls and their dogs pick their way through the flotsam and jetsam, while others make random forts out of the pieces of wood and seaweed that have washed up on the beach.

But as the saying goes, where there is disruption there is also opportunity, and amidst these images of coastal turmoil, an unusually high number of ocean front homes are available for the adventure-some few who might want to take a look.

A quick scan of the MLS reveals no less than 11 ocean front homes currently on the market, compared to only 1 in escrow, and just 2 sales in the last 3 months (both in the $2.2-$2.3 Million range), which indicates a higher supply of sellers than buyers in this segment.

The current selection of front-row homes ranges from a 3-bedroom condo in Pleasure Point for $1,925,000 to a 7-bedroom estate in La Selva Beach for $13,888,888, so you could certainly say that the surf advisory isn’t the only thing that is high around here.

Then again, with the shelf life for these listings averaging 170 days on the market and counting, I have to think there may finally be some room for negotiation in the average asking price of $4.9 Million (or $1,687 per SF) to live on the sand or on the bluff.

The latest weather reports are predicting 10 days without rain once this current front has passed, making now perhaps the ideal time for anyone who has been on the fence to brave the elements and check out a few of these listings before things return back to Santa Cruz normal. And if you’re willing to settle for something a block or two away from the water, prices get exponentially more accessible.

In the meantime, as I glance back out at a fresh downpour pelting the cars and pedestrians passing by, I could also be tempted to say “put a bird on it” and call it good.

The Big Picture for 2017

This column comes out on my Birthday, which serves as a checkpoint to see where things are compared to where they were a year ago. It also gives a sense of where things are headed for the coming year, and this year perhaps more than any other it appears the future is upon us in a big way:

Amazon is delivering packages with Drones. More people have smartphones than not, and software has irreversibly disrupted old paradigms of business on a broad scale. Uber doesn’t own any cars, yet they are now the biggest taxi company in the world. Air B&B is now the biggest hotel company in the world, although they don't own any properties. Last year, more solar energy was installed worldwide than fossil fuel power. The best-selling luxury sedan—for all categories, fuel-powered or electric—was the Tesla, and with self-driving cars from Google and Apple expected to enter the car market in force within the next few years, the majority of our kids may never get a driver’s license.

In the real estate industry, Zillow and other portals are increasingly placing real estate data and marketing in the hands of the consumer, transforming the identity of the real estate agent from the historic role of property hunter and salesperson into more of the advocate and analyst. And with consumers becoming more sophisticated, agents have had to raise the bar to keep pace with a clientele who want to feel truly understood, and who want to be helped on their terms, on their time.

In the midst of all these changes, out of necessity a new and more adept type of agent has emerged: One who truly “gets it” and who has the tools and the agility to make “it” happen for their clients while balancing their needs against the backdrop of the flurry of technology that is all around us. With artificial intelligence supposedly poised to overtake human intelligence by as early as 2030, what will keep our services relevant?

The answer lies in the fact that there will never be a substitute for an experienced ally who can empathize and properly handle the personal nuances involved in a real estate transaction, because in the end real estate is about much more than buying or selling a property. It is a process that impacts the lives and environment of the people involved, in what is quite often a transformative event in their personal story.

After 49 years on the planet, I am excited to embrace the changes that lie ahead in a way that will continue to work for the good of my clients by remaining focused on the human element that lies at the heart of even the most complex transactions and technological advancements. For that is the only way to bring true progress in the midst of a world of change.

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Something to be Thankful For

I was all set to write a typical real estate column talking about things to be thankful for in the current market, which could have proven a controversial topic depending on which side of the equation you are on amidst the current housing crisis.

And then something much more important came up: We had a health scare with our dog Zoe Coconut, who had to get emergency spinal surgery last week.

Anyone who’s been to Main Street Realtors has probably met Zoe, and has most likely been greeted by a cheerful wag and a wet nose, along with a little nudge for a pat on the head or the occasional belly rub. She and our other office dog Sapphire provide a kind of comic relief amidst the stresses that a real estate office can at times be host to, and I have always appreciated the therapeutic relief that their presence brings.

Over a very short time frame, Zoe had been losing the use of her right rear leg due what an MRI eventually revealed to be a ruptured disc in her spine. Fortunately, our local vet Dr Condreay and the team at Chanticleer Vet Hospital had the insight to refer us to the SAGE clinic in Campbell, where they were able to perform a Hemilaminectomy procedure that took longer than usual due to her having more extensive damage than was initially thought.

I am happy to report Zoe is now recovering nicely. We checked in with the surgeon after he had a chance to assess her post-op condition, and he was pleased at her progress just 24 hours after the operation. She was able to walk under her own power again, even running a little, and he expected to release her for home care on Monday, back to her loyal support circle of friends (Carol, Mike, Scott, Karen and the list goes on) who surround her with so much love and care when we are away that we sometimes wonder if she even misses us.

The prognosis for Zoe is basically bed rest for the next month, followed by a month of relatively light movement. Her surgeon predicts, based on what he's seeing, that she will make a full recovery by month three, when she can return to running, playing, catching balls and basically being her usual happy self—as long as we avoid jarring impact of movements like having her jump in and out of the car, which I wish we had stopped long ago (take note other dog owners!).

We feel fortunate to have gotten her under the best care available as soon as the symptoms showed an acute problem and we are overjoyed that Zoe will be able to lead a happy and pain-free existence where she can continue to spread joy and love to everyone she meets. Feel free to drop by and give her a pat the next time you’re in the neighborhood at Main Street, and she’ll no doubt be happy to give you a wag in return.

Something to be Thankful For

By Datta Khalsa, Broker

​

I was all set to write a typical real estate column talking about things to be thankful for in the current market, which could have proven a controversial topic depending on which side of the equation you are on amidst the current housing crisis.

And then something much more important came up: We had a health scare with our dog Zoe Coconut, who had to get emergency spinal surgery last week.

Anyone who’s been to Main Street Realtors has probably met Zoe, and has most likely been greeted by a cheerful wag and a wet nose, along with a little nudge for a pat on the head or the occasional belly rub. She and our other office dog Sapphire provide a kind of comic relief amidst the stresses that a real estate office can at times be host to, and I have always appreciated the therapeutic relief that their presence brings.

Over a very short time frame, Zoe had been losing the use of her right rear leg due what an MRI eventually revealed to be a ruptured disc in her spine. Fortunately, our local vet Dr Condreay and the team at Chanticleer Vet Hospital had the insight to refer us to the SAGE clinic in Campbell, where they were able to perform a Hemilaminectomy procedure that took longer than usual due to her having more extensive damage than was initially thought.

I am happy to report Zoe is now recovering nicely. We checked in with the surgeon after he had a chance to assess her post-op condition, and he was pleased at her progress just 24 hours after the operation. She was able to walk under her own power again, even running a little, and he expected to release her for home care on Monday, back to her loyal support circle of friends (Carol, Mike, Scott, Karen and the list goes on) who surround her with so much love and care when we are away that we sometimes wonder if she even misses us.

The prognosis for Zoe is basically bed rest for the next month, followed by a month of relatively light movement. Her surgeon predicts, based on what he's seeing, that she will make a full recovery by month three, when she can return to running, playing, catching balls and basically being her usual happy self—as long as we avoid jarring impact of movements like having her jump in and out of the car, which I wish we had stopped long ago (take note other dog owners!).

We feel fortunate to have gotten her under the best care available as soon as the symptoms showed an acute problem and we are overjoyed that Zoe will be able to lead a happy and pain-free existence where she can continue to spread joy and love to everyone she meets. Feel free to drop by and give her a pat the next time you’re in the neighborhood at Main Street, and she’ll no doubt be happy to give you a wag in return.

Things That Scare Us

By Datta Khalsa, Broker  

Our little corner of the world has a well-deserved reputation for attracting a broad array of colorful characters, and it is generally acknowledged that Halloween represents the unofficial national holiday for the People’s Republic of Santa Cruz.

More than anywhere else (outside of the Playa at Burning Man, perhaps), people here generally express their freedom to dress any way they like, so much so that you often can’t tell on Halloween night who’s wearing a costume and who simply showed up wearing what they normally wear on a holiday that celebrates many of the things that define Santa Cruz. At its heart, Halloween celebrates diversity and freedom of expression, and the uniqueness of every individual. And alongside Dia de los Muertos, it also celebrates an attitude of laughing in the face of the things that scare us, which could certainly be seen as a Santa Cruz tradition as well.

So what are a few of these things that scare us?

At the worldwide level, the struggle for peace and economic stability for all nations continues, against the greater backdrop of overpopulation and global warming.

At the national level this season we have witnessed arguably the most vicious presidential race ever, revealing amongst other things an undercurrent of ignorance and hatred in our country that at least we in the People’s Republic had generally thought was behind us.

And here at home, the issues that scare many of us the most are the spiraling cost of living, led by housing prices and rents that have continued to climb at an alarming rate to the point that several of the local candidates are running on a platform advocating rent control and low-income housing.

It is hotly debated by both sides whether or not these kinds of measures are effective in the long run and both renters and property owners alike fear an outcome that they feel is opposite their interests. But when you consider the related issues of homelessness and the greater good and safety of everyone, nobody disagrees with the importance of finding a solution.

In the end, election cycles come and go, and life will go on either way. And in the meantime, during this holiday we can at least celebrate our diversity in the face of all of the adversity and do our best to make a positive difference for those whose lives we touch.

Where Information Meets Knowledge

By Datta Khalsa, Broker  

In these times where information is often as available to the consumer as it is to the professional, there was widespread speculation that the Zillows and Zip Realtys of the world would drive down the value the services provided by real estate agents, with the eventual result of eliminating the need for real estate agents altogether.

Oddly enough, the opposite happened—we got even busier. Why? Because in a world where so much information is available, people still need someone to turn to who can make sense of it all and help guide them to good decisions with that information. I have found in my own practice that my role as an agent has evolved increasingly into that of a general practitioner who handles the broad range of transactions (from residential to commercial to business opportunity sales and beyond) while drawing from an increasingly complex network of specialists in each area handled.

This includes memberships in different professional organizations and knowing the right types of contracts, lenders and escrow holders to use for different types of transactions. It means being able to draw from different pools of inspectors depending on what type of situation is being evaluated. And it means having  familiarity with the cast of characters and practices amongst the different fields and regions to be able to successfully navigate through whatever waters a given project may lead.

In the end, it comes down to having someone you trust on your side. There is value to having a reliable source to turn to who has the needed level of experience and familiarity to make for better series of decisions and better results than you could achieve trying to go it alone.

It would be a tall order for one person to have the skills to be an expert in each of these fields, but by serving more as a conduit to the right resources for each situation that our clients face, the modern agent has become a kind of concierge for their clients, who knows the right blend of resources to bring in for any specific situation.

A Yelp review is no substitute for a qualified reference based on past personal experience on other similar projects. And a self-driving car won’t be able to tell you a fraction of the community insight that a local knows about the commercial or residential neighborhood you are looking at moving to.

In short, it helps to know the right people.

Local Investors with a National Reach

By Datta Khalsa, Broker and Fund Manager

​

With local real estate prices at record levels, it has become increasingly difficult to find profitable properties, which is driving many real estate investors to look elsewhere for better returns. The trouble with going out of town is that most investors don’t have the bandwidth to pursue and manage the properties themselves. This was a core reason for the formation of a small pool investment fund that I help run, where we handle multiple investments in other markets where the returns are better. Recent acquisitions include several homes that the fund is flipping in the Phoenix area, with targeted yields of between 30-40%, as well as an off-market apartment complex that we currently have in escrow, which shows a similar profit potential of between 30-40%, while simultaneously presenting a back-up option as an 8% Cap rate investment as a long-term hold. We also have a large development project in Fresno that we acquired earlier this year with excellent carrier cash flow with in-place rents at a 9% Cap rate. That property is now in escrow for twice what we paid for it with a developer who has proposed a mixed-use project there. All of these investments are in line with our general strategy of choosing properties with both upside potential and positive cash flow to help minimize risk in the event that any given market turns. And they have the added benefit of being diversified across multiple markets. In other news, we recently partnered with a group who specializes in researching tax lien auctions across the country, and we have begun picking up the rights on multiple holdings in Houston and Philadelphia. The selection process involves driving literally hundreds of properties in preparation for each auction, putting bids in on only the ones that meet our targeted criteria of the face value of the tax lien being at 20-40 percent of the property value. The majority of these tax liens pay out with 10 to 25% of face value guaranteed return, with rights to collect in-place rents, and redemption periods varying from 3 months to 6 months in the states we are tracking. The upside lies in the properties that do not get redeemed, at which time we can sell the property at its current Fair Market Value. We are also exploring opportunities in Florida where ownership is immediate with no redemption period and are likely going to enter that market as well. It has been exciting to be a part of the growth and success that the fund has enjoyed as we continue to raise additional capital to pursue these and other opportunities that we have been able to find and facilitate. If you are interested in learning more, you are welcome to contact me to explore whether joining a pool such as ours could be a match for your investment needs as well.

Minimizing Taxes in Real Estate

By Datta Khalsa, Broker

​

As we approach the later stages of life, finding ways to avoid giving up a large chunk of whatever wealth we have managed to accumulate to taxes becomes a common preoccupation. It is also when most people are looking to cut back on their daily worries. In terms of properties, this translates to what a client summed up best when he counted his real estate wealth in terms of the number of toilets that he owned.

Two of the more significant government-driven tax incentives in Real Estate include the Capital Gains Exclusion on primary residences and the Tax-Deferred Exchange that allows income properties to be traded into other income properties while postponing or even ultimately avoiding Capital Gains taxes as long as they meet required guidelines. Tools for achieving the ideal balance between wealth and workload can also include hiring a good Property Manager, or exchanging from multiple higher-maintenance residential properties into a few larger low-maintenance holdings such as NNN leased commercial properties, which tend to have much lower turnover and their maintenance built into the lease terms.

But what do you do when you want to get off the real estate merry-go-round entirely? Some property owners simply choose to bite the bullet and pay the 1/3 or so of their accumulated proceeds to taxes, while others use various strategies such as exchanging into an investment property and then converting its use into a primary residence after a few years to be able to get up to $500,000 of their capital gains excluded. Others choose to do an installment sale and carry a note to give them a source of fixed income while deferring the Capital Gains taxes until the Principal is paid off.

One of the most valuable tools in terms of protecting a family’s investments and passing them on from generation to generation is setting up a Revocable Trust, which should be handled through an attorney who can structure it correctly for each family’s unique needs. In most circumstances the property gets a stepped basis on the death of the parent so that prior capital gains are eliminated.

There are multiple other ways to eliminate capital gain, such as through the use of a Charitable Trust arrangement, which is powerful but very complex, and too complicated to go into here. Another common issue for cases where one sibling wants to buy out the others is the increase in property taxes on the purchased interest, which can be greater than most capital gains liability. There is a very narrow way to prevent the reassessment, which involves the use of a short-term hard money loan to the trust or estate to buy out an interest.

The bottom line comes down to planning ahead to develop the best plan for minimizing your tax consequences. The strategies I have outlined here are just a few general tools, and there are exceptions to every rule. And of course, any strategy should be handled with the help a qualified professional, and I can recommend several locally, depending on your particular situation.

#ChooseSantaCruz

by Datta Khalsa, Broker

The City of Santa Cruz recently put on a State of the City presentation at the Hotel Paradox to a packed room. Those in attendance were treated to a look back at the 150 years since Santa Cruz was first incorporated, followed by a look at current issues and a look towards the future through a strategic plan that is being implemented from 2015 through 2020.

Santa Cruz has an image and impact worldwide that far exceeds the 64,632 people who live here year round. This is in large part thanks to the many prominent companies who started here, along with a growing number of national companies choosing to open offices in Santa Cruz in the past few years.

Powered by our unique cultural identity and natural beauty of the Central Coast, our biggest draw continues to be a strong tourism industry (with the Boardwalk alone bringing well over 3 Million people annually), and the City is rising to meet that demand with 801 new hotel rooms either recently opened or approved. Most prominent among these is the La Bahia, which will be a 165-unit hotel with conference and banquet space, restaurant, retail space and spa facilities.

With our median price for homes at $798,000 countywide, and the average cost of a 2-bedroom apartment at $2400 per month, the cost of living is another priority being addressed through the robust approval of no less than 10 multi-residential projects currently under construction. These include several which are specifically designated low-income housing for those not fortunate enough to be members of the less than 30% of the population countywide who can afford to buy a home here. There are also at least another 10 projects approved/waiting to be built and at least 10 more pending applications.

A few of the larger projects include an assortment of 3 and 4-story mixed use developments of as many as 94 residential units Downtown over street level commercial space, a project on the Westside to add 400,000 SF of industrial space plus 248 residential units, several live/work developments, a 51-unit senior/memory care facility on Jewell St and a 63-unit affordable housing development on Ocean St with 6700 SF of commercial space. There are also multiple commercial and cultural developments in the approval and construction process, including an 8,405 SF commercial use on Ocean St and the new venue for Shakespeare Santa Cruz being constructed up by Delaveaga.

For those interested in development, or in opening or moving a business here, the City’s Economic Development office is an excellent resource (@SantaCruzEDO, #ChooseSantaCruz or ChooseSantaCruz.com), and for my part connecting the developer and entrepreneurial community with the many emerging housing.

Earth Day in the People’s Republic of Santa Cruz

By Datta Khalsa, Broker

​

Earth Day was first celebrated in 1970. Originally a statement of intent by a relatively small group seeking to save the planet from environmental collapse, it has steadily grown since then to be observed today by over 193 countries, including the People’s Republic of Santa Cruz.

Since the original Earth Day some 46 years ago, remarkable progress has been made in protecting the environment through changes in how we treat housing. Amidst growing costs and dwindling resources, things are increasingly geared towards water and energy conservation, such that LEEDS compliance and solar powered homes are quickly becoming more the norm than the exception.

Ironically enough, much of this change been achieved in ways that unexpectedly made allies of environmentalists and big industry alike, once (a) big industry figured out that there was money to be made (and saved) by doing things in an environmentally responsible way, and (b) environmentalists figured out that their vision could be implemented and spread in ways that were still socially responsible yet also profitable for them.

When it comes to housing, government still tends to have the largest impact in our interaction with the environment through its policies and laws, and regardless of which way the pendulum swings, each approach taken has not been without its share of controversy.

Santa Cruz County was an early adopter of protectionist efforts that pervaded much of the 1970’s and 1980’s with a growth management philosophy that was led by politicians like former Supervisor Gary Patton. Their interpretation of “smart growth” was embodied in bills like Measure J, designed to prevent urban sprawl and to provide affordable housing through imposed quotas on builders.

Since then, in the midst of the spiraling housing prices and the increasing sea of red tape plus costs like drainage remediation, traffic and environmental impact fees, the interpretation of “smart growth” by developers in cooperation with entities such as the Santa Cruz Planning Commission has evolved towards taller and denser buildings, particularly along the city’s main traffic corridors. And not surprisingly, there has been a widespread mixture of both support and opposition to this latest trend as well.

Time will tell if the environment, along with the character and quality of the community we love, will be able to be preserved while continuing to add housing to meet the growing population while trying to balance the escalating cost of what it takes to afford a place here. Whatever your political leanings may be on the housing issues, if you are one of the lucky few who live in Santa Cruz County, I hope you will be able to make the time to celebrate Earth Day by taking a walk, a ride or a paddle out to enjoy the simple pleasure of being here in one of the most wonderful places on Earth.

The Best (And Worst) of Our Housing Market

By Datta Khalsa, Broker

​

The average and median housing prices in Santa Cruz County hit all-time highs in February, which struck me as apropos to report in a Best of Santa Cruz Issue…for those who already own a home here, at least. But the feeling is different for others, as shown in several excerpts from a recent thread on a local online neighbors group:

It started with a post:“Room for rent in a large (2600 SF) home. Available bedroom suite (200+SF) with large private bathroom and built-in closets. Rent is $1000/month. Move-in expenses are: first month's rent plus a security deposit equal to one month’s rent. (Total of $2,000)”. [later added] “The landlord said that it would be $300/mo more for 2 people.”

This prompted responses ranging from: “That is so much money for a one bedroom. Is this really what rooms are going for now days? I own my home so I am out of the loop but wow that's crazy”, to: “I hate to be a Debbie downer but how have we all accepting this ridiculousness about housing!!??? $1,300 for a sublet if there are two people is out of this world!!!! $1,000 for a bedroom no matter how nice it is, is still ridiculous!! I've lived here my whole life, going on 34 years, and I've never seen it so ridiculous!!

To which the original poster replies:“I agree that rents today in Santa Cruz are insane. I am a renter so I am well aware of that fact. If I may offer an aspect that we are opening our house to share our beautiful kitchen, dining room, living room, and deck...I ask you to consider how much your privacy is worth - just how much would you ask for if you had to open your house to share with others?”

This drew wide support from others who pointed out (correctly) that Santa Cruz County has the 5th most expensive rental market in the US, and the following perspective was offered by another:“I have a very nice little three-bedroom two-bath and I just rented out the master bedroom and bath (private with walk in closet) for $1600! I agree with you it's kind of crazy but mortgages are high too. I'm in a position right now where I couldn't pay the mortgage by myself without the roommate so I am charging market value”.

When you see that the average price of homes sold in our county just hit $951,758 (with the median not far behind at $874,000) in February, it helps put in context that many folks, homebuyers and renters alike, are getting hit hard by the strong Silicon Valley economy.

For better or for worse, supply and demand is an unstoppable force, and the secret seems to have gotten out amongst people with money that we live in one of the most awesome places on the planet. And now many among us, some of whom were here first are driven to figure out increasingly creative ways for people to afford to live here.

Countywide BeachHouse Update

By Datta Khalsa, Broker

​

Kiteboarders, Windsurfers, Eastsiders and Westsiders alike agree that our county beaches are host to some of the best surf in the world. So naturally for the Good Times Surf Issue, it made sense for me to do a piece about homes where you can walk to the waves.

What does it cost to live close to the water? As you might imagine, it’s not exactly cheap, but depending on how close to the water you have to be, you might be surprised to find that there are options available that won’t necessarily break the bank.

Here are statistics for listings in the beach areas in the various categories over course of the past year:

• Looking at Condos, there are 21 active listings on the market within a few blocks of the beach at an average price of $712,143, ranging from an oceanfront unit in Capitola for $2,250,000 down to a 1BR unit in Seascape Resort for $320,000. There are only two listings in escrow for this category and 46 sales during the past year at an average price of $712,204.

• For Townhomes near the beach, things are a little tighter with only 3 listings available at an average price of $1,245,667 compared to an equal number of listings in escrow, and 17 sales in the past year that closed at an average price of $897,147.

• There are currently 28 houses on the market in the county within a few blocks of the beach with the average price at $2,585,767, compared to 10 homes in escrow, and 111 sales in the past year that closed at an average price of $1,480,874.

• At $12,500,000 and $3,250.98 per SF, 735 Las Olas in Aptos has both the highest price and the highest price per SF in the County amongst the properties currently on the market, and the highest sale in the past year was 63 Geoffroy in Live Oak for $6,395,000, but that distinction may soon be taken by 1570 Prospect Ave in Capitola, currently in escrow with an asking price of $7,995,000.

• The distinction for least expensive home on the market where you can walk to the waves is led by the diminutive 1-bedroom 208 Saxon cottage in Capitola at $795,000 edging out the 3-bedroom home at 122 Sacramento in Santa Cruz in second at $889,000.

To provide a venue for tracking beach home sales, I recently created a live IDX page at SantaCruzCountyBeachHomes.com that shows the current inventory of any listings in the County within a few blocks of the beach in real-time as they hit the market. And of course you can get in touch with any good local agent for a custom report and a tour of any homes close to the surf that you would like to see live and in person.

Yes, we can do that…

By Datta Khalsa, Broker

One of my favorite things about running an independent brokerage is the range of real estate services we can offer, and each of the categories of projects that we take on brings a set of skills and experiences that are uniquely satisfying in remarkably different ways.

For Residential transactions, our connections to the NAR and CAR via the local Santa Cruz County Association of Realtors is tantamount. Under the REALTOR® trade organization, the Code of Ethics provides the professional infrastructure for the effective representation of buyers and sellers through the powerful tools of the MLS, Broker Tours, and Lockbox system through which we network with our fellow residential agents. Not to mention the tie-ins to popular consumer-facing search engines like Zillow, Trulia and Redfin.

In Commercial transactions, surprisingly little happens through the MLS, although it occasionally serves as a crossover link to the more traditional residential agencies in town whose agents may dabble in the occasional commercial deal. More often, the deals are done through direct networking with the other commercial offices in the area, and commercial searches and marketing are primarily conducted on national sites like Loopnet and CoStar, where stiffer membership fees pose a barrier to casual practitioners and where agents and serious investors mingle on more common footing with one another. And commercial leases present a unique set of challenges and triumphs when you are able to successfully coordinate the formation of a lasting contractual bond between a building owner and a business owner.

Business Opportunities occupy an even more nebulous realm, where often the identity of the business is kept confidential from the public and even the employees while the owner explores the possibility of finding a Buyer. And while the occasional Biz Op will find its way onto the MLS, the majority of the searches and marketing for these deals occurs on CraigsList or specialized sites like BizBen and BizBuySell. For these deals, we network with other practitioners primarily through California Association of Business Brokers, which also provides a good system of forms specifically geared toward Business Opportunity transactions.

For our property management division, we do most of our marketing through CraigsList for monthly rentals and on Homeaway and AirBnB for vacation rentals. The majority of our property management networking and legal forms are transacted through our membership with TriCounty Apartment Association, and transaction management and bookkeeping is handled through Appfolio software suite. Our bond with our owners is a particularly satisfying one since they entrust us with the task of safeguarding their property and maximizing their income, while our relationship with tenants can be an equally satisfying one that is attained by cultivating a mutual environment of fairness and respect.

In the end, it all comes down to relationships built on trust and parties upholding their side of the deal. And that is the universal bond that ties us all together regardless of what kind of deal we are doing.

The Power of Possible

By Datta Khalsa, Broker

Change is never an easy thing, but it is usually the quickest way to make progress in life. Main Street Realtors grew to remarkable levels of success last year while still managing relatively balanced family lives. This happened largely with the help of one of the best employees we have ever had the pleasure to work with.

Jesse came with the qualities of being likable, friendly, reliable, organized, efficient, a positive self-starter, and with a way of making problems just go away. The logical impact of such an individual creates the smooth and successful operation of a business with happy clients whose expectations are consistently exceeded.

So you can imagine the sense of loss we felt when he relocated to Austin to be closer to family.While we were happy for him to follow his heart, we knew that it would be tough if not impossible to replace him. But having witnessed how he had completely transcended the definition of his role had opened our eyes to the possibilities, and we could not accept less moving forward.

In life you get what you ask for, so we decided to raise the bar and ask for more than just a transaction coordinator in seeking his replacement: Instead we marketed for an “office portfolio manager”.

Giving the position a broader title better conveyed the multiple roles that we were looking to fill. In return we get a more diverse and talented group of candidates for the position, but as expected an exact replacement wasn’t to be found. In the end, since we couldn’t find one person exactly matched the broad range of skills that we were looking for, instead we hired two.

In the month since our next generation of team members came on board we have discovered skills they have which can help the business evolve and grow in ways beyond what we could have imagined had we limited our vision only to what we experienced before.

Both Peter and Sage have almost unlimited potential, and it is pushing me to new heights as a manager and mentor to teach them the business, while expanding upon the new perspective that each of them brings from their diverse backgrounds.

To be certain, the training process has not been without its challenges, but our eyes are set firmly on the future. As the saying goes, where there is confusion, there is opportunity. And as we look to the year ahead I am excited to help mold their growth and share the impact that these two remarkable individuals are capable of by embracing the power of what is possible.