SLO LIFE Winter 2010

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| real estate leverage A powerful tool if you know how to use it. Despite the recent correction in the housing market, it’s no secret that real estate remains the greatest source of wealth creation nationwide. SLO LIFE Magazine set out to ask local real estate professionals: “Why is that?” And, while the answers were varied, every single person we talked to touched on the power of leverage. Leverage, as it pertains to real estate, means “borrowing money” and derives from the word “lever,” which, of course, can be used to create a tremendous amount of force. Here is how it works: Let’s say you buy a $400,000 home with a 20% down payment ($80,000) and the bank loans you the remaining 80% ($320,000). The word “leverage” is appropriate because, like the strength you gain by using a lever, you have gained more purchasing power by borrowing money. You essentially buy a $400,000 asset for just $80,000. Of course, now you have to repay the bank, but here is where the power of leverage kicks in. Let’s assume that real estate continues on the same trajectory it has been on for the past 100 years and it gains in value of 2% over the rate of inflation (this is the average of all the bubbles and recessions during that time frame). So, just by living in your home and not including any improvements you may make, your investment creates $8,000 ($400,000 x 2%) of wealth in the first year alone. When measured against the original down payment, that is a 10% return on your cash investment ($8,000 / $80,000 = 10%) which is pretty hard to find these days. Now, imagine that you live in this home for 20 years, through the magic of interest compounding at an annual rate of 2% that same $8,000 will turn into $194,379. After 30 years, the gain would be $324,545 plus, by then, you would have probably paid off the original principle balance. All of this is made possible by leverage, which is the borrowing of money to make the purchase possible. Of course, we all got carried away with the use of excessive leverage during the bubble, but now may be a great time to revisit the concept. You can continue to track what the market here in San Luis Obispo is doing by watching the numbers below, but your best bet is to find a house that you will be happy to live in, make a significant down payment (20%), be happy, live the “SLO Life,” and let power of leverage and compounding interest do their thing. SLO LIFE the numbers at a glance Comparing the last four months to the same period last year (07/01/09 - 10/31/09 vs. 07/01/10 - 10/31/10) Home Price $100,000 - $500,000 2009 2010 +/- Home Price $500,001 - $1,000,000 2009 2010 +/- Home Price $1,000,001 - $2,500,000 2009 2010 +/- 1. Total Homes Sold 30 31 3.33% 51 45 - 11.76% 2 4 100% 2. Average Asking Price $447,565 $430,861 - 3.73% $684,163 $687,993 0.56% $2,322,500 $1,876,750 - 19.19% 3. Average Selling Price $431,982 $416,984 - 3.47% $658,063 $659,909 0.82% $2,087,500 $1,643,750 - 21.26% 4. Sales Price as a % of Asking Price 96.52% 96.78% 0.26% 96.19% 95.92% 0.27% 89.88% 87.58% - 2.30% 5. Average # of Days on the Market 73 69 - 5.48% 83 111 33.73% 393 247 - 37.15% SOURCE: San Luis Obispo Association of Realtors 38 | slo life magazine
Our approach to real estate is about much more than property… it’s about people. The Payne Team Iconic 1930’s Mission Style Home. Featuring 3 bedrooms and 2 baths, this home is the epitome of historic San Luis Obispo. Featuring hardwood floors throughout, remodeled bathroom and a fireplace in the living room. Located on a large parcel, close to downtown, shopping, schools and all the core of what San Luis Obispo has to offer. Visit www.1253Peach.com. Reduced to $659,000 by Gavin Payne. 64 Acre Estate. Just a few minutes from Downtown SLO! Beautifully remodeled in 2009, this home offers a wonderful warmth inside with modern appliances and wood flooring throughout. Expansive outdoor decking wraps around the home to take in the vistas over the 4.5 acre vineyard and spring fed creek. New barn built in 2008 has 2 bathrooms, compressed air, dust collection system, floor drains, horse facilities and much more; ideal for winery or shop use. Extensive well system for irrigation. www.7480TassajaraCreek.com. Offered at $969,000 by Gavin Payne. SLO Garden Home. Let the fabulous garden spaces on this property sweep you away. Three bedrooms, two full baths, swimming pool, wood and tile flooring and a spectacular atrium that brings in an abundance of natural light. A very unique home not usually found in SLO. View this listing at www.1700jalisco.com. Offered at $699,000 by Gavin Payne. Fantastic Home on Cul-de-Sac. This remodeled 3,200 sq. ft. residence has 4 bedrooms, each with their own bath, making this a wonderful family home. The private walkway to the front door has a calming water feature and gardens. Cherry hardwood floors and a grand fireplace in the living room, a separate formal dining room and wonderful family room. Offered at $719,000 by Gavin Payne. www.1736LeeAnnCt.com SOLD PENDING Stunning Views from Mediterranean Estate. Built in 2007, this 4 bedroom, 4 bath plus office, craft room and separate media room totals 4300+ sq. ft. Fabulous modern kitchen featuring granite counters, butlers pantry and entertaining bar. Open floor plan featuring Travertine floors, Cherry hardwood and multiple fireplaces. Offered at $1,699,000 by Gavin Payne. Avila Beach. Spacious 2700 sq. ft. luxury penthouse with three comfortable suites complete with private bathrooms. Private entrance directly off Front Street, meticulously furnished, amazing white water ocean and beach views. Large patio is complete with built-in BBQ and refrigerator, patio furniture and ceiling mounted gas heaters. Includes private off-street parking and 2 car garage. Offered at $2,969,000 by Gavin Payne. Gavin Payne 805-550-3918 Cheryl Priolo 805-459-0200 Adam Quaglino 805-748-3995 962 Mill Street San Luis Obispo, California 93401 www.HomesofSLO.com slo life magazine | 39
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Page 11 and 12: Over 15 different styles of Patagon
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Page 17 and 18: Upgrade Your Healthstyle EXPLORE TH
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Page 23 and 24: Experience the frasier fir sPeCial
Page 25 and 26: intRoducing ER Watch Real time info
Page 27 and 28: SLO Moped Gets a Makeover Even in t
Page 29 and 30: understand that ‘SLO’ stands fo
Page 33 and 34: San Luis Business Center Furnished
Page 35 and 36: “We have a car, but don’t drive
Page 37: TiMeLeSS filled with books, photos,
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