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What You Can Buy: Two-Unit Buildings

May 8, 2013 By Leave a Comment

Two-unit buildings in San Francisco that are eligible for one or two owner occupiers are one of the most desirable multi-unit property types in San Francisco. Two buyers interested in partnering up and living in both units while they pursue a fast-track condo conversion are great prospects for such a building, as is an owner occupier who wants to reside in one unit and rent out the other. (The latter doesn’t allow that owner to circumvent the condo lottery, but it can be an excellent way to afford a home that you otherwise may not have been able to purchase without factoring in rental income.)

I wanted to highlight three two-unit buildings that I think are great prospects. If you’d like further details on any of these properties, or would like to talk more about the ins and outs of purchasing two units, please contact me. I’ve owned my two units in Noe Valley for many years, living in one unit and renting out the other. So I can tell you firsthand about the ins and outs.

Here are my two-unit picks at the moment:

2583-2385 Greenwich Street / Divisadero
Cow Hollow
$1,379,000

This is an excellent opportunity to purchase a pair of flats which will be delivered vacant, as the owner resides in one unit and will be moving. There are two 2BR flats with a combined square footage of 2240. This is the first time 2583-2385 Greenwich has been on the market in 30 years, so you can expect a need for cosmetic updates—not a bad way to increase value right away. The property has its original 1930s detail intact, from a large fireplace to crown moldings. There’s a three-car garage that provides three independent spaces, one of which is rented. For buyers seeking outdoor space, this isn’t the property for you, as the building takes up the entire lot. But you can certainly look into the possibility of adding a roof deck, which would pave the way to Bay, Golden Gate Bridge and Alcatraz views. This location is central to Union and Chestnut Streets, North Bay commutes, and Muni lines.

17-19 Ford/Sanchez
Eureka Valley
$1,785,000

17-19 Ford is a prime two-unit building in a great Eureka Valley location. Each flat has 2BR/1BA, and are roughly 1500 square feet each. The property has been improved with refinished floors, double-paned windows, new electrical and plumbing and seismic upgrades. Kitchens in each unit have been remodeled with new appliances. There are southern views from the bedrooms, plenty of storage, large bonus rooms, and both units will be delivered vacant. This is an excellent fit for two TIC partners looking to condo convert—and who’d rather not be bothered doing their own renovations. Though the location is technically Eureka Valley, Ford is only a block and a half to Dolores Park, three blocks to Castro Street, and is an easy stroll to the heart of the Valencia corridor.

1027-1029 Washington/Powell
Nob Hill
$1.2M

1027-1029 Washington is a two-unit building that will be delivered vacant and could use updating, so this is another one perfect for TIC partners looking to condo convert. There are two 2BR/1BA units that are around 1,000 square feet each, and a one-car garage. The building is situated in a busy part of Nob Hill/Chinatown, about two blocks from the top of Nob Hill and three blocks from the Financial District. So that makes it a good prospect for buyers who work downtown and want to be able to walk everywhere. There’s also plenty of public transportation nearby.

Filed Under: Cow Hollow, Nob Hill, Noe/Eureka Valley, TIC's & Multi-Unit Bldgs, What You Can Buy

TIC Owners Await Condo Conversion Legislation Outcome

April 29, 2013 By Leave a Comment

I’ve been contacted recently by many TIC owners, inquiring about my thoughts on what the legislation will mean for resale value related to their individual situations—which can vary widely. Some have been in the condo lottery for many years, others have rented out their TIC interest, and others have recently purchased an interest in a three-unit building but haven’t even entered the lottery yet.

The condo conversion legislation was initially introduced last year by Supervisors Scott Wiener and Mark Farrell. In response, tenants’ rights supporters voiced their opinions, which has led to Supervisors David Chiu and Norman Yee recently proposing several amendments designed to help reach a compromise.

The most current version of the legislation is fairly radical, in the sense that it offers current TIC tenants lifetime leases, potentially suspends the condo lottery for a decade following the initial slew of conversions, and would eventually limit condo conversion to buildings with no more than four units. The expectation is that the legislation will be finalized in some shape or form in the next couple of weeks, after which it will be ready for a vote from the Board of Supervisors.

Until legislation actually passes, it’s a challenge to say what the implications will be for TIC owners and tenants. My recommendation is to read through the legislation details, and also look at both sides of the issue. And for that, I think it’s helpful to read TIC specialist/attorney Andy Sirkin’s explanation of the legislation. Also useful is KQED/Sam Harnett’s recent condo conversion story.

Filed Under: TIC's & Multi-Unit Bldgs Tagged With:

Yours Truly, Quoted on KQED About TIC Legislation

February 25, 2013 By Leave a Comment

The San Francisco Board of Supervisors Land Use and Economic Development Committee was scheduled to vote today on legislation that will potentially allow some TIC homeowners to bypass the condo lottery and pay a one-time fee to complete their unit’s conversion. As is typical with any legislation that affects homeowners and tenants, the issue is controversial.

And the vote has been delayed by a month, as Supervisor Mark Farrell reportedly wants additional time to talk with tenants’ rights groups.

I am, of course, a homeownership advocate (and former renter). And there are two sides to every issue. But I’m thinking that there’s something to this TIC legislation that should be able to work. In a city where two-thirds of all residents are renters—and property taxes help subsidize many things here—the Board of Supervisors should take a balanced view of the condo conversion issue and update its position so we don’t have a bunch of homeowners languishing in the lottery.

Check out the story (with link to the original audio broadcast) here: “San Francisco Struggles With Decision That Could Help Some Homeowners—And Hurt Renters.”

Filed Under: Home Buyer Tips, Home Owner Tips, Market News, TIC's & Multi-Unit Bldgs Tagged With: ,

Buyers Turn to TICs in Tight Market

February 4, 2013 By Leave a Comment

As condo prices climb and low inventory persists in centrally located neighborhoods, San Francisco buyers appear to be more willing to take on TICs.

A total of 66 TIC interests sold in the last quarter of 2011, at an average price of $594,127. However, buyers snapped up 94 TICs in Q4 2012, and the average price shot up by about 9% to $645,091.

In a city where the average condo price is almost $1M, TICs still represent a more affordable path to home ownership—particularly where 2BR units are concerned. Almost half of the TICs sold in the last quarter of 2012 were 2BRs, with 1BR TICs representing 32% of the total sold. The least popular TIC type was the 3BR+ unit; only 22% of buyers purchased those.

The TIC market has always been a niche one, with far less units selling than that of condos. (For example, 671 condos sold in Q4 2012 in comparison to those 94 TICs sold in the same time period.) But those TIC numbers could increase in 2013, particularly in neighborhoods such as the Mission/Mission Dolores, North Beach, Lower Pacific Heights and NoPa, which represented the most popular areas for TIC sales late last year.

I checked out a few TIC offerings on my broker tour last week, and in most cases, listing agents reported distributing multiple disclosure packages to interested buyers, as well as offer deadlines. There was a time when TICs would sit on the market for an average of 90 days, but that doesn’t seem to be the case in the current market.

TICs still carry unique risks. For example, the type of financing they require (fractional) lets you avoid a lender foreclosing on the entire building. But you’re still on title with multiple owners, which requires everyone to share responsibilities such as paying property taxes. And fractional financing is only offered through adjustable-rate loans, which can increase over time and leave you vulnerable to higher mortgage payments in the future. Additionally, your lender pool will be small. So if you’re looking to refinance, you’ll be limited to the interest rates those two or three lenders will be offering.

But a TIC is a bonafide homeownership opportunity in a city where rents have managed to hit all-time highs, and where a 2BR condo costs an average of $919,796.

Filed Under: Haight/NoPa, Market News, Mission, North Beach, Pacific Heights, TIC's & Multi-Unit Bldgs Tagged With: ,

Cash Sales Soared in 2012

January 4, 2013 By Leave a Comment


Cash buyers hit the San Francisco market with fervor throughout 2012, across all price ranges, property types and neighborhoods. Foreign buyers seemed to also be very active, wiring in large sums of cash from South America, China, and Europe.

If you’re aiming to buy or sell a property this year, I think it’s helpful to have a sense for where the cash buyers will potentially be circulating. Here’s my 2012 breakdown by the numbers for each home type:

Single-Family Homes
2012: 473 sold (2011: 61)
Average price: $1,116,511
Up to $700,000: 229
$700,000 – $1M: 109
$1M – $1.5M: 31
$1.5M+ 80
$5M+ 13
$10M+ 4
The Backstory: Always the most popular property type in San Francisco, the single-family home market was cash buyers’ primary target last year. There were almost eight times as many cash sales last year vs 2011, particularly in the sub-$700,000 segment of the market. But not far behind was the “mid-market” of $700,000-$1M. And let’s not forget the most expensive sale at 2950 Pacific (above), which changed hands for $16M.
Most popular neighborhoods: Single-family home buyers with cash purchased their properties most frequently in the city’s southeastern areas such as Bayview and Excelsior, along with the Central Sunset and Parkside; Bernal Heights; Noe/Eureka Valleys.

Condos
2012: 570 sold (2011: 408)
Average price: $798,419
Up to $700,000: 318
$700,000 – $1M: 121
$1M – $1.5M: 85
$1.5M+ 51
The Backstory: Condo cash sales didn’t increase as dramatically, but they were still popular. The busiest price range was for properties up to $700,000. Luxury condos topped out at around $3.5M.
Most popular neighborhoods: Cash condo buyers were most prolific in Lower Pacific Heights; Pacific Heights; Marina; Downtown; Van Ness corridor; South of Market; South Beach and Mission Bay.

TICs
2012: 78 sold (2011: 68)
Average price: $648,244
$1M+ 10
The Backstory: The TIC market experienced a moderate increase in cash sales. Most sales were in the $400,000-$700,000 range.
Most popular neighborhoods: TIC buyers with cash were most commonly spotted in Russian Hill and the Mission.

2-4 Units
2012: 128 sold (2011: 89)
Average price: $1,107,348
$1.5M+ 23 sold
The Backstory: There aren’t typically a lot of lower-priced multi-unit buildings in San Francisco, so the activity in this market was all about the $1M+ range.
Most popular neighborhoods: Multi-unit purchasers frequented Noe Valley, the Mission, and the Hayes Valley area.

[Data courtesy of reported sales in the San Francisco Multiple Listing Service (MLS).]

Filed Under: Condos, Market News, TIC's & Multi-Unit Bldgs

State of the TIC Market: October 2012

October 19, 2012 By Leave a Comment

A total of 144 TICs sold from June 1 – October 16th, 2012, with an average of 65 days on market and a median sales price of $602,000.

By comparison, more than 1100 condos sold in the same time period. Buyers obviously prefer condos, with the appeal being individual unit ownership and the availability of historically low, fixed-rate loans.

The most popular—and least risky types—of TIC sales are still occurring in two-unit buildings, as these properties have a much more direct path to condo conversion. After that, buyers appear to be open to TICs in three- to six-unit buildings offering fractional financing. (You can’t condo convert more than six units.)

Condo conversion wait time still remains an issue, with owners of three- to six-unit buildings hanging out for many years in anticipation of lottery wins. Owners of new TIC buildings are resigning themselves to the fact that they will probably never have the opportunity to condo convert in the course of their ownership, which affects TIC resale value along with a variety of other factors.

First and foremost is location; buyers are willing to purchase a TIC if it gives them entry into a central, desirable neighborhood that wouldn’t otherwise be affordable. Neighborhoods that saw the most TIC sales were Noe Valley, Twin Peaks, Eureka Valley, North Panhandle, and The Mission. Most of these TICs were in the one- to two-bedroom category.

But equally as important is the type of loan being offered. The traditional group loan for 3+ buildings has been largely replaced by fractional financing. Buyers are avoiding purchasing TICs in 3+-unit buildings offered through group loans, with very few exceptions.

For example, of the 55 TICs in contract in 3+-unit buildings, only a handful reportedly had group loans. And of the 144 sold, only about four changed hands with a group loan in place. A look at current listings in this category reveals that they are not receiving offers, even if the loan has a very low interest rate. And of the 40 TICs that were withdrawn or have expired since June, almost half had group loans.

Cash buyers are jumping into TIC purchases, but these sales are happening in buildings where fractional financing is being offered. And cash buyers are typically snapping up units in neighborhoods like Russian Hill or Noe Valley, where it’s a challenge to find, say, a two-bedroom view condo for the same price.

I’m not seeing investors flocking to purchase TICs; most tenant-occupied TICs have a very challenging time selling.

Financing options for TIC buyers continue to be led by fractional loans from Sterling Bank or NCB. In the rare group loan scenario for 3+-unit buildings, sellers are arranging for the existing TIC owners to qualify for fractional loans so they can refinance concurrently with the new TIC buyer into individual loans.

If existing TIC partners aren’t willing or able to go the fractional route, TIC sellers can consider providing seller financing. Or, they can hope that a buyer will come along who will be comfortable dealing with a group loan and who will have sufficient cash to cover the homeowner’s portion of the loan. (This option is only available if the group loan is assumable. If not, the group will have to refinance into a new group loan, which could be challenging.) Resale success in these non-fractional scenarios is unlikely; most such TICs ended up being withdrawn this year.

If you’re planning to buy or sell a TIC, it’s critical to do your due diligence up front so you’re aware of all the details. Please contact me at ebermingham@zephyrsf.com/415.823.4656 if you have any questions. I have an excellent team of resources in place that includes lenders, attorneys, and title companies.

Filed Under: Market News, TIC's & Multi-Unit Bldgs

House & Condo Prices Rise, TIC Market Picks Up

July 30, 2012 By Leave a Comment

Yes, it’s true. Single-family home and condo sales are up 11% in the past six months, with days on market decreasing to 11.5% and 22%, respectively. Good news for those property owners who are thinking of putting their homes on the market in the Fall.

This week’s MarketTracker Report takes a look at these stats, as well as the slow and steady rise of the TIC market. We also highlight three cool TICs and turn the spotlight on NoPa so you can get a sense for what this North Panhandle neighborhood offers.

Plus, the most recent citywide sales and more! It’s all here in the Zephyr MarketTracker.

Filed Under: Condos, Haight/NoPa, TIC's & Multi-Unit Bldgs Tagged With: ,

Offset Your Mortgage in a Multi-Unit Building

July 11, 2012 By Leave a Comment

For buyers who are looking for a home in a centrally located neighborhood, an excellent option is to owner occupy a flat in a multi-unit building and rent out the other units. That’s how I was able to afford to purchase my own property in Noe Valley in 1998; renting out the lower flat afforded us the opportunity to own our home, as well as have a long-term income stream. I’ve had several clients purchase such properties this year, and the purchase price could often be workable when you have at least 20% down and factor in projected/existing rents. And the presently hot rental market is certainly making this housing option more appealing.

Of course, being a landlord isn’t for everyone, and it’s no secret that San Francisco has very specific tenant-landlord laws that you should be aware of if you’re going down the multi-unit building path. I highly recommend at least reviewing some fundamentals; a good place to start is the Small Property Owners of San Francisco. And it’s also best to first consult with your lender or mortgage broker regarding your loan options. Multi-units are a different animal, and loan details vary from that of a single-family house or condo.

I thought I would spotlight two multi-unit buildings I’ve viewed recently, to give you an example of what’s out there:

795-797 Elizabeth at Douglass
Noe Valley
Two units
$1,199,000

795-797 Elizabeth features a large 3BR/1BA upper flat that’s well appointed and has room to add a second bathroom. The kitchen has been updated and has nice outlooks to the park across the street. The 1BR/1BA lower unit has a private entrance and an eat-in kitchen, washer/dryer and newer windows. There’s no yard, but two garages occupy the rear of the property in this corner building. You’re a block from the popular 24th Street corridor, with plenty of restaurants and services in walking distance. Both units are vacant, but as they’re somewhat unequal in proportion, I’m betting that one buyer for the whole building goes to bat for the property. It would be easy to reside in the upper unit and rent out the lower one.

827-829 Fillmore at Grove
Alamo Square
Three units
$1,799,000

I was impressed with the scale and Victorian details of 827-829 Fillmore, which is four levels high and has a solid annual income. The above photo is the large, vacant 1BR/1BA top-floor unit at 827-829 Fillmore. This unit has great space and lovely rear outlooks (though the finishes are a bit dated). The middle and lower units are 3BR/1.5BAs and 2BR/3BAs, respectively, and are getting good rents. There’s also a bonus unit that is currently rented. The basement has a workshop/storage area, and there’s a garden with hot tub. No garage, but there’s leased parking nearby at roughly $80-$150/month. Buyers looking for a perch in a historical, convenient neighborhood within a quintessential San Francisco building will definitely appreciate what this property has to offer.

Filed Under: Noe/Eureka Valley, TIC's & Multi-Unit Bldgs Tagged With:

Are the TICs at 226 27th in Noe Valley for You?

June 29, 2012 By Leave a Comment


Whenever a gaggle of new units hits the Noe Valley market offering 2BRs in the $400,000-$500,000 range, I start receiving inquiring emails from various prospective home buyers. I explain to everyone that the units are tenancy-in-common (TIC) interests, and then am usually asked to explain how TICs are different from condos. From there, I’m either scheduling a showing or being told that TICs are not an option.

So I thought I’d cut to the chase and write a public service blog post that will help any buyers out there who are curious about the TICs at 226 27th Street in Noe Valley. I viewed four of the units this week on broker tour, and have also been watching the former apartment building being renovated over the past several months.

226 27th Street is a ten-unit TIC building originally constructed in 1963. There are one-, two-, and three-bedrooms available, and all have covered independent or tandem parking spaces. Prices range from the high $300,000s for the 1BRs, to the high $400,000s for 2BRs and into the $600,000s for the 3BRs. Monthly HOAs are in the $385-$578 range. There are in-unit washer/dryers and a small yard for a common area.

Here are shots of a typical kitchen and bedroom in the building:


Nothing fancy, but decent space. The living/dining areas are fairly small, as are some of the bedrooms. The proposition here is reasonable space in a convenient location, half a block from the J Church and about a ten-minute walk to the BART 24th & Mission station. There are also many restaurants and shops nearby. (I live around the block, so I can personally attest to that fact.)

Obviously, the prices are much lower than the typical condo prices in the neighborhood. So why not run out and purchase one of these units? Here are the key things you need to consider (applicable to 3+ unit TIC buildings):

A TIC is different from a condo. Multiple individuals share ownership of a property in a TIC. Each individual has the right to reside in a particular unit, but does not own the unit itself. Rather, each person owns a percentage of the building. With a condo, you own your unit and a percentage of the common area.

The TIC holy grail has traditionally been condo conversion. San Francisco regulates how many TICs can convert to condo status. There is such a backlog in the system at this point, that it’s important to note that anyone purchasing a three- to six-unit TIC building now will probably never be able to condo convert. You can’t legally convert more than six units into condos.

You need “fractional financing”—or cash—in order to purchase a TIC. TICs traditionally had group loans, where all owners shared one mortgage. However, fractional financing has taken the place of group loans over the past several years. These types of loans are different from those you would obtain for a condo or house. Only two or three lenders offer fractional financing. So if you’ve been preapproved for a condo or house loan, you will need to get preapproved separately for fractional financing.

There are still risks to owning a TIC, despite not sharing a loan. The bank can’t foreclose on the whole building if a co-owner defaults on his or her mortgage. (This is the case for a TIC group loan, by the way.) But there are still certain risks to be aware of. For example, property taxes are a shared effort, and everyone is on the hook if one co-owner suddenly can’t pay his or her portion of the property taxes. Additionally, a contractor who didn’t get paid for one of your co-owners’ kitchen remodel can slap a mechanics lien on the property, for which all owners are then responsible. But the main legal risk, according to a prominent attorney in the field, is that if there’s a dispute where a court will be called upon to interpret and implement the TIC agreement, it will have less guidance than a court interpreting a condo’s HOA documents, as there’s more law on the subject.

What are the basics on this fractional financing? There are no fixed-rate, 30-year loans—only one-, three- and five-year adjustable rate loans, with a minimum of 20% down payment. You also need proof of six months’ of mortgage payments in reserve in a bank account and high credit scores. Interest rates may be a bit higher than that of a more traditional condo loan, though the fractional loan rates have come down a lot. (They’re currently below 5% on the 5-year adjustable rate mortgages.)

Resale value will not be as strong as that of a condo or house. The main reason behind this fact is that you will be reselling a TIC interest, which has a smaller buyer pool. Buyers will need to qualify for the fractional financing, and will also need to be comfortable with the risks involved with TIC ownership.

So why even consider a TIC? Despite the risks, they offer more space and a better location than a condo at the same price point. If you think you may be interested in pursuing such a purchase, contact me and we can talk.

Filed Under: Noe/Eureka Valley, TIC's & Multi-Unit Bldgs Tagged With:

TIC Market Slower, But Still Strong

June 6, 2012 By Leave a Comment


The tenancy-in-common (TIC) market in San Francisco may not be the busiest it’s ever been. After all, condo prices have fallen since the 2005-2008 market heights, and most buyers would prefer to own their own unit (vs an interest in a building, with fellow owners all on the same title).

But the TIC market is certainly not dead. A total of 120 TIC interests have sold year to date, at an average of $598,422. TICs are taking longer to sell than other property types, and those 120 TICs took an average of 80 days to sell. There are 90 TIC interests currently in contract, and 54 TICs on the market (including a newly renovated, seven-unit building on Dolores at 22nd Street).

The bottom line is that buyers will consider TICs if they can get a better location, space and price than that of a condo. Taking one of these attributes out of the mix results in a property that will sit longer than its competitors. For example, a 2BR/2BA TIC listed at $749,000 in the more remote neighborhood of Clarendon Heights has been sitting on the market since March. On the flip side, the 2BR/1BA TIC with leased parking at 31 Camp in the hot Mission Dolores area went into contract in 14 days—much faster than the average TIC.

Fractional financing for TICs is still widely available, though only a couple lenders are issuing such loans. Interest rates are much lower than they were in the past. (I remember when 7% was an expected interest rate.) And these loans continue to perform well, with little to no foreclosure activity involved, according to Sterling Bank & Trust, the leading TIC lender in the city. However, if you’re trying to sell a TIC in a building that has a group loan (i.e., everyone on the same loan), you’ll probably have an extremely difficult time selling unless the other owners are open and able to a fractional loan refinance situation.

What fractional financing has done is make it acceptable to own a TIC, without factoring in the goal of condo conversion. I tell my TIC clients that if they’re purchasing an interest in a 3+ unit building that’s never set foot in the condo lottery, they will most likely be selling that property as a TIC.

Filed Under: TIC's & Multi-Unit Bldgs Tagged With:

Just Sold: Russian Hill TIC

October 21, 2011 By Leave a Comment

I’ve just sold my 1BR/1BA tenancy-in-common (TIC) listing at 1145 Green #5. Listed shortly before Labor Day weekend, a very motivated buyer submitted an offer almost immediately and we were in contract within five days. List price was $439,000 and the sale closed at the asking price.

The unit is actually well on its way to becoming a condo, as the building won the condo lottery earlier this year.

Give me a shout if you’re looking for a similar property, or would like to sell the one you own. I’m well versed on the ins and outs of TICs, condos and everything in between.

Filed Under: Russian Hill, TIC's & Multi-Unit Bldgs Tagged With: , ,

Announcing The TIC Workshop

September 8, 2011 By Leave a Comment

Tenancy-in-commons (TICs) aren’t always the most straightforward of property types. I get regular inquiries from confused home seekers who’ve come across a large remodeled flat in, say, NoPa, that seems like a good deal. And it might be. But it’s not a condo, it’s a TIC. And there are big differences between condos and TICs.

TICs are very unique to San Francisco, and many home buyers new to San Francisco–as well as locals who are tired of paying rent–could always use a quick refresher on the basics. In conjunction with Sterling Bank & Trust, I’ll be hosting The TIC Workshop next month. We’ll cover the pros and cons of TIC ownership, what fractional loans are all about, and what you can expect in today’s TIC market. And yes, we’ll definitely be discussing the value difference between TICs and condos.

By the time you leave our workshop, you’ll have a good idea as to whether a TIC is truly an option for you.

Here are the deets:

DATE    Tuesday, October 18

TIME     7:00-8:30PM

PLACE   Sterling Bank & Trust, 2122 Market Street at Church

We’ll serve light refreshments, too.

Please email me at ebermingham@zephyrsf.com or call me at 415.823.4656 if you’d like to attend, and we’ll reserve a space for you. We honestly have a limited amount of chairs, so if you’re interested in being there, please call sooner rather than later.

And if you can’t attend but would like to hash out TIC details on a one-on-one basis, give me a shout and I’d be happy to schedule a meeting at my office with you.

Filed Under: Home Buyer Tips, TIC's & Multi-Unit Bldgs Tagged With:

Just Listed: Classic Russian Hill TIC

September 6, 2011 By Leave a Comment

My new listing at 1145 Green #5 has been teeming with activity ever since we officially put it on the market at the end of last week. Offered at $439,000, the top-floor 1BR/1BA unit is situated in a prime Russian Hill location. Yes, the unit is a tenancy-in-common (TIC) at the moment. But the six-unit building won the right to condo convert earlier this year (after 17 years in the condo lottery). So condo conversion will most likely take place in the next few months.

#5 has lovely views of the city and surrounding hills, and gets great natural light. There’s a formal dining room, sunroom and roomy entrance hall. The unit comes with a large deeded storage room, too. Here’s the view from the living and sun rooms:

If you know of anyone who might be interested in this home, do give me a shout at 415.823.4656 / ebermingham@zephyrsf.com.

Filed Under: Russian Hill, TIC's & Multi-Unit Bldgs Tagged With: , ,

State of the TIC Market: August 2011

August 8, 2011 By Leave a Comment

The tenancy-in-common (TIC) market in San Francisco has seen its share of ups and downs. I’m happy to say that this market is alive and well—and actually thriving—despite economic uncertainty.

That’s because the rise of fractional loans has enabled buyers to purchase a building together without having to be on the same loan. The latter has always been the inherent huge risk in a TIC situation. The goal of purchasing an interest in a 3+ unit building was always that of converting the building to condos down the line. However, given the constraints of doing so, buyers have given up on that goal. They’ve been happy purchasing a TIC that will provide more space than a condo can offer in a central neighborhood in the city. And they can live without the threat of losing their building in the event one of their TIC partners on the group loan experiences financial hardship.

A total of 198 TIC interests sold from January-July 2011, at an average of $696,622. The least expensive unit was a tenant-occupied, 1BR/1BA garden TIC in a three-unit building in Lone Mountain that changed hands for all cash at $115,000. At the other end of the spectrum was the 4BR/3.5BA two-level townhouse in a five-unit building with massive views in Pacific Heights that sold for $3,185,303. So clearly, even buyers on the high end are realizing that purchasing a TIC may get them the space and location they need.

There are currently 125 available TICs on the market, and about 59 in contract. Most involve fractional loans, and the market for TICs with group loans is not a very popular one. Again, economic uncertainties are giving buyers pause when it comes to stepping into a group loan. As a result, existing TIC groups are attempting to refinance into fractional loans if they can afford to do so.

The most popular neighborhoods for TICs year to date have been Nob, Russian and Telegraph Hills; Noe and Eureka Valleys; NoPa; Pacific Heights and the Mission. These neighborhoods have many multi-unit buildings and continue to be the most likely bets for TIC inventory. They’re also some of the most desirable areas in San Francisco, which is a plus for buyers who want proximity to public transportation, shops, cafes, and parks.

The fractional loan market is pretty much run by Sterling Bank and NCB. So you don’t have your pick of lenders. The good news, however, is that fractional loan interest rates are much lower than they were a year ago (6-7%). For example, a five-year ARM with 25% down will likely let you attain a 5.25% interest rate. Yes, fractional loans require at least 20-30% down, substantial cash reserves, good credit scores and are only available in three-, five- and seven-year ARM flavors.

TICs have generally been anywhere from 10-20% less expensive than condos, but that can vary depending on the number of units in the building. For example, a two-unit property really does stand a chance at condo converting fairly quickly in two to three years. But 3+ unit buildings require a very different, very time-consuming path to condo conversion. As a result, you’ll see more of a discount. (And note that Sterling only lends on buildings with a max of 15 units.)

TICs aren’t for everyone, and I typically sit down with my clients and discuss the ins and outs before they even bother with fractional loan preapproval. I’ll also be giving a TIC seminar in September in conjunction with Sterling Bank, so stay tuned for that info. And don’t hesitate to contact me if you’d like to attend. I can follow up with the date and time.

Filed Under: Home Buyer Tips, TIC's & Multi-Unit Bldgs Tagged With: , , , ,

You’ve Won the Condo Lottery–Now What?

May 4, 2011 By Leave a Comment

The annual condo lottery took place in San Francisco earlier this year, resulting in suddenly lucky TIC owners winning the right to start the path to condo conversion. I thought it would be a good time to take a look at the TIC and condo markets and give everyone a heads up on what to expect–whether you’ve just won, or may be on track to win next year.

Things are a bit more complicated in the current economy, and that means buying and selling TICs or condos can present their own sets of challenges. If you’ve just won the lottery, you’re probably a couple months in to the conversion process. And all your TIC partners are excited about what they’ll be doing after you’ve converted the building. Many TIC owners have held their properties for far longer than they’d ever dreamed, so moving the family out of that one bedroom now finally feels possible. Others love where they live and will just appreciate owning their own condo.

It’s important not to overlook every detail as you take a step closer each month to conversion. For example, if more than half the units in your building are rented vs owner occupied, you’re going to have to work through that detail so it doesn’t become a roadblock during a refinance or sale. And everyone’s ability to refinance will depend on how much equity exists.

Both the TIC and condo markets are doing reasonably well, particularly in high-demand neighborhoods that provide easy access to public transportation, restaurants, retail areas and freeways. A total of 496 condos and 63 TICs sold in the first quarter of this year. Compare that with 403 condos/63 TICs sold in the same quarter of 2010, and we’re looking at some pretty respectable numbers. So I believe we’re heading into an increasingly better market where these types of properties are concerned.

The best tip I can give condo converters is to do your homework up front. You’ll need your resources up front (attorneys, contractors, surveyors, etc) and now would also be a good time to chat with your favorite Realtor and loan rep so you have a heads up on what to expect at the time of conversion. Get a sense for your building’s value, as well as what your own unit would be worth as a condo. And recognize that all TIC owners have to work together regardless of what happens. I often consult with building owners about these situations, and I have a strong team in place. So feel free to give me a shout anytime, and we can find a convenient time to talk details.

Filed Under: Condos, Home Owner Tips, TIC's & Multi-Unit Bldgs Tagged With: , ,