All Forum Posts by: Michael Kovac

@Nic S.

Bay Area and more specifically San Francisco has seen more stabilization following the spring 2016 market. The bullish appreciation that we have seen from the 2012-2016 recovery is now beginning to plateau and level off. I would expect a "cooling-off" period of when it wouldn't be a terrible time to start looking at owner occupied property for yourself.  This market is AAA and for it to take a dip we would need a significant change in financing regulation (ie. repealing dodd frank), local economy (ie. tech leaving) or a natural disaster (ie. earthquake) to drastically shift it as @Account Closed said.

@Nic S. 

The question of rent vs own vs invest is always a complicated question and goes beyond what you would pay for rent vs a mortgage etc.

I ultimately look at the opportunity cost of your last banked dollar and start from there, then you can look at your lifestyle goals and future plans to get a clearer picture.

@Nic S. best of luck in your search! 

And no! You are not crazy for tackling both, just remember to keep your eyes on the prize...

Very curious to see where this goes for you @Ethan Cooke

FYI I have not forgotten about what we talked about... you will hear from me soon!

The buyout depends on many factors, including length of tenancy, the rent-differential between current rent-controlled rate and market rate, the relationship of the tenants and whether the landlord can evict for cause or implement a no-fault eviction. It all depends on how hard the tenant wants to fight and how big of a case the attorney representing the tenants wants to build. We have seen a large amount of tenant buyouts resulting in both parties seeking legal representation more recently. At the end of the day it is a negotiation between the two parties.

My apologies @Lenny B. I saw your location was listed as SF and assumed that was where the fourplex was located. 

Lucky you! No rent control in Sac...

@Lenny B.  The process is not so simple as giving notice of a rent increase as the city of San Francisco has many laws that protect tenants from rent increases. There are complexities such as the age of construction, length of time your tenant has been there, age of your tenants and other factors. There are also maximum allowable annual rent increases that are regulated by the rent control board.

A great resource for this is the San Francisco Tenants Union Website.

Click Here For The Rent Control Page

I hope this is helpful!

Michael

@Charles Ma truthfully I have no experience with the the arena of dedicated space for the peerspace and storefront rental business model but that doesn't mean that it couldn't work. The area that you are in is very desirable and high-traffic so it could be viable with a pipeline. To me what comes to mind are sole proprietors that need temp space for their startup ie new yoga instructors -OR- seasonal businesses that need a short term commercial lease. Obviously it would be hard to play both sides of that coin as the startup sole proprietors won't be happy about leaving once the Halloween costume store wants to exercise their seasonal lease.

A client of mine was very successful in getting above market footage rates by converting space that was conducive to tech startups needing space. A similar, and large-scale operation that you may or may not heard of called WeWork is a great example of this. Sort of an airbnb solution to office space. That is something that in this market I believe can work. The downside is that you would have to develop the space and manage it.

All in all the beauty of commercial space and commercial tenants lies in the triple net lease. A good tenant that establishes business will develop/improve the space for you, be reluctant to leave, will pay all of your expenses and the lease will have scheduled increases which means a hands-off preforming asset.

Best of luck! Hope this helps.

Michael

Yes! @Yousif Abudra is spot on @Jonathan Pflueger, the short term, existing construction, multifamily strategies that are working now in the Bay Area (I stress short term) are more complex and surrounding the rent control ordinances of the city that you are purchasing in. Every situation is different based on current use, past use, tenant protection status, vacancy, construction date, the rent board annual rent increases and a variety of other factors. 

You can then get into other strategies that involve converting to TICs or Condos as many have done to add value other than the traditional buy-rehab-resell strategy. The idea behind that is that the price per unit as a TIC or Condo is greater than the price per unit as a multifamily home. Not as easy as it sounds due to loads of red tape, but it is possible in certain scenarios.

Ultimately in this market those who are buying units that are "turn-key" are trading a low risk, low return asset for the hopes of huge appreciation. Simply a different strategy. Some prefer AAA bonds, some prefer junk bonds. Both have their advantages, disadvantages, amount of return and risk.

I would recommend Excel Site Services.

Tell Tony Paragon Commercial sent you!

Best of luck...