Thursday, February 21, 2008

Fractional Loan Rates Drop

I received a cryptic call from Sterling Bank a couple days ago, saying that they were dropping their TIC loan rates to 6.75%. My TIC group refinanced with Sterling last spring, shifting from a group loan to individual fractionals at a rather exorbitant 7+% loan rate. At the time, as much as we beat on the loan officer they would not budge on the rate. Our TIC group almost came to blows over whether we should move to the fractionals, given the financial penalties of doing a refinance and the high rate and the short five year term - but in the end we did it.

I returned the call out of curiousity to find that a few months after closing on last spring's refi, the bank is calling to offer me the privilege of ponying up another several thousand dollars to REFINANCE AGAIN. I did not want to wear down the poor novice sales guy they put up to dialing for these dollars, but I had to ask him point blank - was he crazy? Yes, let me refinance my mortgage with you on an annual basis and pay all those ludicrous points and fees just for FUN! That makes perfect financial sense!

And no, they don't want to discuss cutting our rate. This is what I call - bad business. If you are cutting rates after you just sold me a higher priced loan within the last 12 months then don't call me to rub my face in it. As I said to Mr. Salesman - for those of us who recently opted for a TIC fractional loan (and that is most of us who have TIC fractional loans) this is not good news. Take that message to your front office.

Of course if you are buying a TIC lower fractional loan rates are something to give a bit of a cheer about.

Saturday, February 09, 2008

433 Carl

Awesome neighborhood, great light, historic charm, in-unit laundry hookups, storage, radiant heat, new electrical, plumbing and roof - what's not to like about this Cole Valley TIC at 433 Carl? Leased parking. (There are six garages in the photo - what gives?) Listed at $479,000.

Should I Buy a TIC?

My hairdresser is a darling 30-something gay man. Today while cutting my hair he asked, "Should I buy a TIC?" I thought about it. Everything (with the exception of the condo lottery) has gone right for me. My building is a historic gem. Our neighborhood has completely turned around and is now a desirable place to live. My building partners have been responsible, collaborative, hard-working people. The real estate boom let me earn $150,000 tax free and flip that into a larger unit when my neighbor decided to sell.

But it's not 2000 anymore. The real estate surge is over. Condo conversions have effectively been halted. TIC fractional loan terms are burdensome.

On the other hand rents are sky high and you don't want to invest all the money you may have saved in this stock market.

So on balance I'd say the old rules apply. If you are going to be living in the same town for at least five years, if you have a steady and predictable income and you can easily afford a 20% down payment, and if you are paying as much in rent as your mortgage would cost - go ahead. Just be careful what you buy. Location, location, location. Negotiate, negotiate, negotiate. It's a buyer's market. Try to imagine not just yourself living in the place, but yourself five years from now trying to sell it.

TIC Rally

Thanks to the Chron for covering the TIC rally at City Hall last Wednesday. "Payback is a Bitch" Supe Aaron Peskin is quoted defending the City's lottery policy which, if anything, gets more onerous every year. Only a few days earlier the Chron featured an article about Peskin's outlandish, harassing home phone calls to City executives working for the Port. He threatened to cut off their funding and get rid of their jobs if they didn't go along with his building schemes. To Mr. Peskin I say there is a group in this City that is going to be very happy when your funding is cut off and that (thank to term limits) you lose your job.

Condo Conversion Seminar February 12

So what do you win if you win the lottery? Years of hassling with the City government bureaucracy as you attempt to navigate the byzantine rules for condo conversion. After successfully managing a FSBO (for sale by owner) I am an advocate for DIY (do it yourself) whenever possible. However, I wouldn't dream of attempting a condo conversion without help.

Law firm G3MH is conducting its annual post-lottery workshop on February 12 at 6:30pm in Building A, Fort Mason Center. G3MH has created what they call a DIY program to assist TIC owners through the conversion process. The workshop provides tailored forms, expert guidance and tips for avoiding common pitfalls.

The workshop will also highlight the latest news in TIC fractional mortgage loans.

Condo Lottery Loser

We lost the condo lottery AGAIN. Looking back, I realize our fatal error occurred during the first three years of our occupancy. Because of turn over in our building during those early years we ended up having to wait until post-purchase year four to enter the lottery. Being held back that one year has, statistically, pretty much put us perpetually in the drawing class with ever worsening odds.

Anyway, the good news is that instead of paying who knows what to get the condo conversion process rolling we can put our house money this year toward repairing that rotting back staircase.

Sunday, February 03, 2008

510 Page Street

Page is a lovely tree-lined street with easy access to inter-City public trans and the 101 Silicon Valley commuter corridor. 510 Page is a six-unit TIC; although built in 1913 it appears to have had most of its historic charm remodelled out. And there is unfortunately only one garage space. (My six-unit building is the same. Is this a legacy from when the building's residents only needed to stable a few horses instead of maintain space for 6+ cars?) The other caveat is - Webster Street. In an overly liberal-on-crime City where the police can at best practice containment Webster is unfortunately the block where a lot of local petty hoods end up getting pushed. So you might see some thugs in black hoodies hanging out in front of the local groceries in the Webster corridor. In any case, a two bedroom flat for $500,000, especially one with a jacuzzi tub and some outdoor space, in this part of the City is worth a look.

Partners and Friends

Two of my downstairs neighbors came up to my place for a glass of wine on Friday night. I've known them for nearly seven years now. Together we've gone through the hassle of dealing with exploding water heaters, roof leaks, disintegrating back stairs and many of the other vicissitudes that come with being first time homeowners maintaining a 100 year old building. We've shared the trials of the dotcom boom and bust, suffered the shock of 911 and watched each other go from being single to getting partnered up. We've cheered each other on through job interviews, shared conspiratorial house gossip, watched each other's pets during our vacations. Now we are heading for 50 and sharing ideas about where we might like to spend our retirement. (It's probably not going to be San Francisco.) This is one of the priceless things that can come with being part of a TIC - knowing, and liking, and even over time coming to love - your neighbors.

TIC Spotless Loan Records

This article in the Chron highights the success of the $500 million in fractionalized loans that local banks have delivered over the past couple years:
With defaults rising like the tide and cresting in foreclosures, the blame has often focused on lenders who took chances with "creative" loan products. But there's one kind of home loan that is reporting a virtually perfect record. No defaults, no foreclosures and, according to some experts, not so much as a late payment.
Ironically, this exceptional record is not associated with some Fannie Mae-underwritten conforming loan for single-family homes, but a newfangled lending product that was thought to be so risky and so innovative that mainstream banks still won't touch it. Such is the ironic success of the Tenancy in Common fractionalized loan..."
Why are these TIC loans such a booming success? Comes down to three simple principles, the same three things that used to be the foundation of all mortgage lending: TIC owners occupy their properties, TIC owners put a minimum of 20% cash down toward a home purchase, TIC owners go through a rigorous credit check before being approved for the loans.

So the question remains - why are TIC loanholders still being penalized with punitive interest rates?