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TIC Lender Targets Noe Valley

September 10, 2009 By 2 Comments

Word on the street is that Marin-based Circle Bank is planning to open a branch on Noe Valley’s 24th Street. The bank reportedly believes the demographics in Noe and its immediately surrounding neighborhoods are very similar to that of Marin (no shock there).

With 229 TIC interests having sold since January for an average price of $622,606, it doesn’t appear the TIC market is drying up. Circle’s fractional loan product is the go-to loan for TIC purchases in 3+ unit buildings. (Fractional loans allow TIC owners to be responsible for their own, individual loan vs. all owners sharing a loan.)

I’m betting that fellow TIC and fractional loan specialist Sterling Bank, located at Church and 24th Street, can’t be too happy about its future neighbor. What do you think, Noe neighbors?

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Condos vs. TICs: The Condo Wins

May 14, 2009 By Leave a Comment

There was a time when condos were worth substantially more than TICs. Well, the gap has narrowed as the San Francisco market has softened.

A look at two-bedroom units in the city with parking reveals that condo prices have declined to the extent that they may be the more obvious choice. For example, in the under-$1M category for two-bedroom TICs with parking, the average selling price from April 1st was $621,125, with an average of 1,052 square feet.

On the condo front, the averaged sale price was $671,360, with an average of 1169 square feet.

Though TIC interests will usually provide more space for the money, I think there’s something to be said for owning your property independently. In the current economy, being on title with other owners is more of a risk than it was when TICs first became more popular many years ago.

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

TICs Loans Available, But Affordable?

March 30, 2009 By 1 Comment

I’m being contacted regularly by buyers in the $400,000-$500,000 price range, who are exploring real estate purchase possibilities. Many such individuals have been renting for a while, and are starting to feel that owning their first home is within reach.

Though condo prices are declining, the bulk of the units in this range currently on the market are tenancy-in-common (TIC) units in 3+ unit buildings. (This is an ownership scenario wherein you own an interest in a building, not the unit itself.

TIC units in this price range will typically involve “fractional” financing—all owners obtain individual loans. (This is in contrast to the traditional TIC loan of the past, wherein all owners were on one group loan.)

The TIC interests themselves are priced within first-time home buyer range, but how many buyers can actually qualify for these fractional loans?

A quick check with Henry Jeanes over at Sterling Bank reveals that TIC buyers for fractional loans will have to meet the following requirements:
- Minimum of 20% down (rates are at 7.25% with 20% down; they get lower as your down payment increases)
- Credit score of 700 (for W2 employees)
- Proof of at least six months of reserves on hand, post closing.

Of course, sellers are working within the confines of these requirements, and it is possible for buyers to negotiate rate buydowns and other financial incentives in order to complete a sale. And some sellers are able to offer slightly lower interest rates on renovated buildings in which a lender like Sterling is already providing the underlying commercial financing. (This is the case at 450 Vallejo at Kearny, a five-unit TIC offering.)

But it’s good to for first-time home buyers to know the initial cost of ownership for these types of purchases.

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TICs vs. Condos on 3rd Ave

March 27, 2009 By Leave a Comment

617_3rdMy broker tour brought me to Third Avenue between Balboa and Cabrillo this week, to check out two TICs and one condo all listed in a similar price range. 673 3rd (above) is a 2+BR/2BA Edwardian TIC, listed at $895,000. This top-floor unit has been recently renovated, and is about 1725 square feet. Though it has one-car parking and storage, there’s no outdoor space. That’s because the other, first-floor unit—soon to be on the market after its own renovations are complete—spans two levels, and has a deeded garden. (The master suite is on the garage level, so a shared yard would obliterate any sense of privacy.) Stay tuned for this lower unit: It’s about 2,000+ square feet, has two-car parking, and is expected to be priced at about $100,000 more than the top floor.

673_3rdNext up was 673 3rd, a 3BR/2BA first-floor TIC unit priced at $819,000. This unit is also remodeled, and has a solid floorplan. The landscaped garden is shared, and the owner of the whole two-unit building will stay on in the top unit to complete a condo conversion.

692_3rd692 3rd enjoys the best curb appeal of the three. It’s a 3BR/1BA, top-floor unit with a large, deeded undeveloped attic space. This will close as a condo, and the unit’s listed at $835,000. It seems the owners of the building will stay on and live in the lower unit.

Filed Under: Richmond/Lake, TIC's & Multi-Unit Bldgs Tagged With: , , ,

New Twist on TICs in NoPa

March 6, 2009 By Leave a Comment

215cole Got a three-unit building you want to sell, but don’t want to tread the choppy waters of the multi-unit TIC ocean? Take a tip from the sellers over at 215-217 Cole in the North Panhandle: Create an “airspace” subdivision of a three-unit building. Turn the top unit into Parcel A, and designate it a planned unit development, or PUD. Turn the middle and lower flats into Parcel B, and market them as two TIC interests. Then you can end up selling a two-unit building—much more marketable than three units due to the condo conversion requirements—and a PUD, which can be sold in a very similar manner to that of a condo.

Both parcels can, according to the disclosure documentation, “share the use and enjoyment of the land and certain elements of the building.” There’s one association that is then subject to a declaration which governs the building. Everybody pays monthly association dues as specified in the disclosures.

In the case of 215-217 Cole, the top unit was sold as a PUD in December for $775,000 after being on the market for 208 days. What remain are the two units, priced at $809,000 and $805,000 and first listed in November 2008. The units were in contract recently, but the deal fell through.

A word out there to prospective buyers: Consult with an attorney before you consider an ownership arrangement such as this one. It’s worth paying for a consultation so you know what you’re getting into.

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

Buyers Just Not That Into Luxury TICs

January 27, 2009 By 2 Comments

church Got a luxury tenancy-in-common (TIC) building you’re ready to sell? Keep this in mind: Buyers are just not into luxury TICs these days.

TICs were traditionally a way for first-time home buyers to get into the housing market. So TICs priced well above $1M are facing particular challenges.

Case in point: 1278-1282 Church in Noe Valley. These three TIC interests hit the market in July 2008. Though the developer did a great job with the floor plans and finishes, the property has had poor sales luck. The two-level unit with the deeded yard sold for under the $1,395,000 asking price in September. But the other two units were withdrawn in December. (Both had accepted offers at one point, but the contracts fell out.)

The top unit is back on the market for $1,165,000, but the owners haven’t officially brought the middle unit on; they may rent that out if no buyers materialize. Its last official price was $1,179,000.

But in an age of loan defaults and job losses, do buyers want to be on title with other owners? Condo prices are dropping, and buyers have their pick of units in this price range (not to mention houses). Though many TICs did sell for above $1M over the past year, many more such listings have been withdrawn.

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TICs: Trending Toward Tumult

November 11, 2008 By Leave a Comment

Popular among first-time home buyers in San Francisco, tenancy-in-common (TIC) ownership traditionally lets two or more individuals share building ownership through a group loan. You don’t technically own your unit in a TIC arrangement–just a percentage of the building. The goal is to ultimately condo convert the building, so everyone can officially own their unit. The conversion process is complicated, lengthy and fairly expensive, so the cons sometimes outweigh the pros in TIC situations.

There’s a fair amount of risk in TIC ownership–especially when dealing with 3-6 units–mostly related to you being tied to other owners with respect to paying mortgage, property taxes & other expenses. And if someone wants to sell his or her TIC interest, the entire group loan has to be refinanced with the introduction of a new TIC partner.

Therein lies the rub in the new lending environment: Everyone has to qualify for the new loan. In the past, this hasn’t been too much of a problem, as loans were easy to obtain for the most part. Now, however, I’m hearing of TIC partners not being able to qualify for a refinanced loan due to tighter lending restrictions. This is a real problem for the TIC interest sellers, as they will have to work with their group to facilitate a new loan. In other words, those partners who can’t qualify for a new loan can’t simply be forced to sell. The seller is on the hook.

I’m shying away from recommending TIC arrangements in 3-6 unit buildings, at least until the loan market shifts toward the positive. It’s increasingly challenging to convert larger buildings to condominium status, so you’re looking at years of TIC ownership before (or if) that goal is ever reached. And though there are widely used “fractional” loans available–wherein TIC partners can obtain individual loans–I have reservations on those in terms of future availability

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Condo Conversion Isn't Getting Any Quicker

October 29, 2008 By 2 Comments

No surprises here. Three- to six-unit building owners have the right to pursue condo conversion through a lengthy and time-consuming lottery system. A total of 1,844 TIC units applied for conversion this year. Unfortunately, the cap is still set at 200 conversion approvals.

Better yet, there are 2,100+ TIC units expected to apply in 2009. At this point, it’ll take an average of 24 years to condo convert for a 2010 applicant.

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