17 Ashbury

This Panhandle TIC unit has a lot to recommend it. It is an established TIC, all owner occupied. If you are a newcomer to TIC ownership joining a group that knows the ropes can be beneficial. There is no Ellis and no evictions, which means the building, once it qualifies, has a shot in the condo lottery. It has views, is tastefully done and includes one space parking. It's only been on the market two weeks, asking $575,000. If you are looking, check it out.

Fractional Financing Update

My building recently researched fractional loan offerings. We are a six unit TIC that was formed in 2000. We have a group loan and over the course of nearly seven years have never missed a mortgage payment. We have about $1.5 million in outstanding debt, about 50% of what the property is worth. All our TIC members have stable jobs and excellent credit. At 7% annually, our lender would be making $105,000 per year profit on our loan. For doing, uh, nothing except sending us a bill every month. You would think that banks and brokers would be knocking down our door to offer us financing.

But we have found that it is IMPOSSIBLE to get a fractional loan at a 7% rate, which is about 1.5% higher than the average 30 year fixed. We were quoted rates of nearly 8%, with all kinds of onerous ARM reshuffles after certain amounts of time and prepay penalties up the wazoo and other unsavory, unattractive brouha and so on. And all this in addition to the 1 point refi charge and other closing costs and all the rest that goes along with a mortgage refi.

Why are banks and brokers sticking it to TICs? Because they can.

My group has decided to wait. Perhaps competition will drive rates down. Perhaps a secondary market will open up for TIC loans. Let's hope things look better for fractional loans in 2007.

Here is an update on fractional loans published in the San Francisco Apartment Association magazine.

2007 Condo Lottery

We just received our first announcement from the City regarding the '07 condo lottery. Because the Board of Supervisors have not yet re-enacted the one year '06 ordinance that gave precedence to buildings that have been in the lottery the longest, we are, until further notice, back to the previous system. Which is... Pool A, from which 100 units will be selected, consists of all the units that have participated unsuccessfully in the lottery three times or more. Pool B, from which another 100 units will be selected, will include all the losers from Pool A and all other applicants.

If you live in a TIC that has been Ellised, take note. The first 175 units selected in the lottery must be able to certify that no senior, disabled or catastrophically ill tenant was evicted on or after November 16, 2004. Since only two hundred units are selected annually, the odds of being given permission to attempt a conversion are far, far lower for units that have a history of these types of evictions.

The condo lottery rules are subject to change at any moment. So if you are a participant, pay attention. Read any notices you receive in the mail from The Department of Public Works or The Bureau of Street Use and Land Mapping. Check the SFGOV DPW website regularly between now and the date of the drawing - February 7. Even if the supes vote to change the rules that are in effect at present, the requirements for qualifying and purchasing a ticket will not change. Make sure you have completed all your paperwork and purchased your ticket/s no later than January 26. It's easy. If you have any questions go to 875 Stevenson Street, Room 460 or call (415) 554-5810.

Where Does the Time Go?

Can it have been twenty days since my last blog entry? Phew. Perhaps, with Chris Daly winning District 6 after all I was feeling some post-election blues. But one must carry on.

My own supe, Ross Mirkarimi, has announced something he calls ROOTS legislation. (Can the allusion to Alex Haley's book about African slave ancestry be coincidental?) ROOTS is an acronym for the "Real Ownership Opportunities for Tenants Program."

The jist of it is that the City will take $1 million out of the $20 million allocated for "affordable housing projects" and apply that as grants to properties where the land is owned by a non-profit and the structure is owned as a cooperative by at least 60% of its residents. Those owner residents must earn no more than 80% of the "area median income." The residents' shares in the cooperative can never be sold at market rate. Resale restrictions in 99 year terms ensure "affordability in perpetuity."

I've seen both sides of this kind of legislation. I once met a family in Santa Barbara, where the median price of a home is $1 million. The father was a local high school teacher and the mother stayed home, caring for three children, one of whom had Downs syndrome. They lived in a lovely three bedroom town home in a central location. They paid about $150,000 for the place and if they ever chose to sell it the price would remain more or less the same and it would be available only to other local residents with similar income restrictions. It was a fabulous deal for them - the equivalent of a million dollar government subsidy allowing them to live in one of the world's most desirable communities.

On the other hand, I've seen people work that system. I met a man in San Francisco who was able to purchase a similarly subsidized home years before he became a successful engineer banking over $300,000 per year. His two bedroom condo in the Diamond Heights neighborhood had fabulous views and indoor parking, where his Porsche sat conspicuously next to his neighbors' working class automobiles. A committed bachelor, he had long ago paid off the mortgage and had no qualms about squatting in his "affordable housing" for the rest of his natural born life. Certainly this is not what the beneficent supes of the past intended when they bankrolled his building.

I think home ownership is a privilege, not a right, and a responsibility, not a gimme.

But regardless of that sentiment, I cannot fathom why my supe would draft this kind of "home ownership" legislation but vote a resounding no on ordinances promoting TICs.

Early Returns

When you are a property owner you pay (more) attention to election results. I am heartened, dee-lited, soul-lifted and feeling the joy to see that State voters have squashed the Prop 88 parcel tax. (No one's getting near our Prop 13.) And thank you, thank you, thank you. It looks like enough voters sussed out the Trojan Horse BS of Prop 90 to vote against it. I am as aggrieved as anyone about Kelo but this was a real estate developer prop, not a small property owner protection measure. Not all the ballots have yet been counted. Let's hope.

Locally - I am distressed that Rob Black could not beat Chris Daly. And it is distressing that the tenant relocation compensation measure (Prop H) appears to be winning. (Would love to know what the district by district returns on this looks like.)

Another election. The roller coaster of votes counted, votes lost, winning some and losing some.This merits a glass of Domaine De L'Ameillaud Cairanne Cotes Du Rhone and a little TIC Sky Palace hip hop tango to Cassandra Wilson, 50 Cent and whatever comes next on the shuffle. You got to keep rolling forward.