SF: Best Deals in the City?
Many of us wanting in to the SF market still believe a TIC is our only shot, especially if we can later convert to condo and thus realize a healthy profit. In the meantime, because TICs allot us a portion of a building and, hopefully, a portion of its common areas (a yard? Garage? Storage?) we get more for our initial payout: TICs are almost always less expensive than their single owner counter-parts.
Conversion can be tricky though: buildings with over 2 units have to enter a lottery, and that is expensive and more often than not, unfruitful. (For more on TIC conversion, see here.) That’s why I like the idea of a 2-unit TIC. Andy Sirkin, TIC attorney/expert writes: “Two unit buildings with a clean eviction history bypass the conversion lottery if both units are occupied for one year by separate (unmarrried) individuals who each own at least a 25% interest in the property during the entire occupancy period.” Thus, you can convert a 2 unit TIC to condos with a lot less hassle, and hopefully then, you also increase the value of the units as they are now individually owned.Plus, think about it: how much easier is it to maintain peace and harmony in a 2 owner situation as opposed to a 4 or 6 owner deal?
Interestingly, 2-unit buildings are not faring well in this slower market, which may be a signal to TIC partners that their time has finally come to get a good deal on a property. These data come from Garrett Goldman, from the San Francisco Schtuff blog:
As you can see, all but 2 listings which sold last week sold for less than asking, and almost all lingered on the market.
In a nutshell then, I am not sure whether TICs are good investments right now or not, but I do see that 2 unit building TICs may offer your best chance if you can’t afford an individually owned property and you want to appreciate some value in the long run. Of course, you need to do your homework: get the eviction record, understand the tenant situation and your obligations to any tenants living in the units, know the neighborhood, etc. And be willing to stay awhile, as all signs point to a need to sit tight until the market turns around– and that won’t be immediate.
2 units on the market right now:
1559-1561 9th Ave: Inner-Sunset 2-unit (each 2/1)
514 Diamond (2/1 vacant Victorian in Noe Valley) and 514A, a 1/1 for $525. Entire building for $1,124,000.
42-44 Sumner: SOMA building with one 2/1 one and 1/1. Reduced to $699,000.
