Thursday, August 23, 2007

On Vacation

Sorry for the sparse postings of late... I am back east, hitting the beach with friends and family until the end of August. My only real estate comment is that tiny seaside shacks on this little island off the coast of New Jersey are listing for close to $1 million, making the prices in San Francisco seem not so very bad.

Sunday, August 05, 2007

Calculating the Obvious

When you look at those open house handouts that detail the monthly cost of TIC ownership, think again. They usually only show the cost of your mortgage payment. To get a true idea of what your monthly carrying costs will be, get numbers for everything on this list:

- mortgage payment
- property taxes
- building insurance
- common area dues
- parking fees

While the mortgage interest deduction is a significant benefit, I don't usually count that when evaluating my monthly morgage costs. My calculations are simply what is my monthly cash intake versus the monthly bills I will be required to pay. The costs beyond your mortgage payment can easily add up to a third more outlay.

Other costs to consider:

- "walls in" insurance for the personal property in your unit
- a rainy day fund for special assessments

Regarding the latter, if unexpected capital improvements are needed on your building then all owners can be charged over and above their monthly dues. For example, my building has a decorative plaster facade that has its own roof. Four years into owning the building the plaster started falling off and an inspection revealed that this little roof had completely degraded. (None of our pre-purchase inspections had made note of this.) This roof cost our group about $25,000 to replace, because of the difficulty of access and the fragility of the plaster. I had to write a check for about $4,000 that month - my 15% share of the total bill.

Jail Roger

I am not one to bash realtors. Reputable realtors can add value to a transaction. They help steer first time buyers and sellers through a complex process, and spare affluent clients a lot of leg work. However, when I see that a realtor has a history of mistreating people in his former business, I think buyers and sellers should be made aware of that individual's record.

Roger Mwamba, who, with his wife Maureen Kenney, constitutes Kenney Real Estate, was the former owner of Body Tonic Gym. Several news articles and the Yahoo Group Jail Roger chronicle Mwamba's dubious practices at the gym, including a aggressive push to sign up new members and rake in an alleged $45,000, even while planning to declare bankruptcy and shut down the business. In short, former employees and members say he hired sales people (whom he did not pay) to sell memberships to clients (which he did not honor), then simply put a padlock on the door and drove away in his Porsche staight into bankruptcy protection.

Would you work with a realtor who, in his former business, left employees unpaid, billed clients for services they were never going to receive and ended up under investigation by the San Francisco District Attorney's office? I wouldn't.

Kenney Real Estate specializes in TICs. My opinion? Avoid them.

Bargain TICs

Even though there are now TICs selling for close to or above the $1 million mark, my contention is that the original purpose of this form of group ownership was to provide San Franciscans with an affordable path to buying a home. Of course a reasonable price in the San Francisco real estate market is miles above what would constitute a deal in other locales. However, I will set a completely unscientific metric, based on what I paid for a one bedroom TIC (without parking) back in 2000 - $250,000. According to the U.S. Bureau of Labor Statistics, due to inflation that equals $302,485.48 in 2007 buying power. Here are a few interesting properties in that range.

If you are a fan of 60s style, 198 Dolores (pictured above) has clean, modern lines. The unit is filled with light and the floorplan appears emimently workable. Plus, nirvana,, the price of $339,000 includes one car parking in an independent garage. This looks like a very groovy San Francisco starter home for a professional single.

This Cow Hollow studio near the Presidio would make a lovely little pied-à-terre. It includes a private deck. And you can't beat the location, in terms of retaining your value. There are several units listed on the MLS at this location, priced in the $260s. That means plenty of room to bargain. Alas, these "jewel boxes" do not include parking.

2162 Pine is another very cute studio, which would require some very creative thinking about how to best configure a sleeping/living/eating space. Perhaps re-purpose the walk-in closet? Listed at $299,000.