Investor · San Francisco, CA · Member since 2019 · 14 posts · 6 votes
I'm considering acquiring a duplex in SF with long-term tenants in both places. The property is priced low because of that. I intend to live in one of the units, and perhaps sell it in a few years, hopefully with a profit. Currently the yard is shared, which is not ideal for me. I have the following options: - Owner move in to one of the units. Not ideal, as the yard will still be shared. - Buyouts. With lawyer fees and two units, I think we're talking about a 100k easily? That is, if the tenants are interested. - Ellis Act. I see people refer to that online as a last resort, but I'm not sure it's that bad. The down side is that I won't be able to rent the other unit (rent is low anyway), and it would prevent condo conversion in the near future. On the up side, when I sell, I'm selling a vacant property which will increase the value of the property.
I guess my questions are: - What would you do? - Is an Ellis Act affecting the selling price by a lot, due to the inability to rent in market rates and perform a condo conversion?
I have a friend that did an OMI. Her lawyer was a good talker but did not have the experience with OMI and it took over a year. Buyouts can have a huge range and easily in the mid six figures depending on the property and location. You will need to talk to the tenants and see if they are open to it. Some will never move.
For Ellis Act, there is the law and there is what you can actually do. You should talk to Bornstein Law and see what the current environment allows. Agents are always throwing these words, OMI, Ellis, Buyouts, around but it is easier said than done in SF. Ellis Act will discount the property but hard to say how much by.
I don't operate in San Francisco, rather Oakland. I suppose people need to think Ellis act as in the equivalent to turning the unit to "miscellaneous storage" for a LONG TIME in the case where you're not going to tear the building down to rebuild or do a condo conversion.
If you can afford to keep the unit down for at least 5 years then perhaps it might be a strategy If you're going to return the unit to the rental market before 10 years there generally is a need to attempt to inform the previous tenant and allow them to move back. I am not a real estate lawyer just someone who has looked at the docs.
Getting the approval to convert a duplex to a condo is certainly an approach that would take some time and approval from the city. If you're "value-add" strategy has a window less than 5 years then perhaps that might be the best approach but getting approval from the city before going nuclear might provide the best outcome.