Was It Worth It?

Was it worth buying a TIC versus a condo, from a financial perspective? Over ten years ago, when I was a single woman trying to buy my first home in San Francisco, the real estate boom was just starting to heat up. I was relatively conservative and did not believe the cheerleading of the mortgage brokers who claimed I could afford a $500,000 loan. Based on my take home pay, I felt I was in a $250,000 price range. I had about $50,000 for a down payment. In other words, I was, even ten years ago, priced out of the market.

In 2010 not many buyers would touch a 6-unit TIC. The whole concept of a TIC was viewed as incredibly risky. Most realtors advised strongly against them. I just happened to be walking down the street in my neighborhood, and strolled into this building for a looky loo. At that point I was no longer trying to buy and was more or less happily resigned to being a renter. Back in 2000, a one bedroom TIC unit, in this 1910 Edwardian building, with good bones and great historic details, was listed for $250,000. It has also been a rental building for over a decade, and had not been very well maintained - by either the owner or the tenants. So it needed a huge amount of work. You had to have a good amount of imagination to see the charm in this building when it was put up for sale with its crumbling plaster, multi-layers of linoleum, decrepit, unusable fireplaces and so on. But I fell in love with this old building, and plunged naively, blissfully forward.

Looking back, all things being equal, wouldn't it have been smarter, easier and even less expensive to buy a $300,000 condo? For the condo I could have put the $50K down, and taken out a $250K loan at 6% for $1,500 a month. Instead I borrowed $200,000 at 8% interest and paid... yes, more or less the same $1,500 serving the loan. Plus I would not have incurred the thousands it cost to renovate an old house, as well as the cash I am dishing out right now to condo convert.

I think it is all about the particular property. In this case, our neighborhood went through an amazing renaissance in the past ten years, boosting property values, and keeping them high, even through a volatile economy. And while there are plenty of condos being built, there are not any more historic Edwardians, framed in old growth redwood, with all the charm of old San Francisco. So I like to think I've done all right by this old place, and it's done pretty well for me also.