All Forum Posts by: Tom V.

Did you remove the wall between the kitchen and the living room?   It's not too late.   

You could buy puts on home builders.  

Rent, don't own.  

But I think you're better off doing the opposite in California.  

I would add that Shiller has in the past advocated for a housing futures market with derivatives based on the prices of different MSAs that would allow people to short different real estate markets.  

This opinion piece is sort of a re-statement of his general thesis behind these futures that no one  seems terribly interested in trading.  Somehow the so-called 'smart money' has yet to see the value I guess... 

http://www.inman.com/2012/03/23/market-housing-futures-has-yet-take/

With great respect for the work of Robert Shiller, this statement: 

""In San Francisco we found that while the median expectation for annual home price increases over the next 10 years was only 5%, a quarter of the respondents said they thought prices would increase each year by 10% or more. That would mean a net 150% increase in a decade. These people are apparently not thinking about the supply response that so big a price increase would generate. People like this could bid prices in some places so high that eventually the local market will collapse."

demonstrates a fundamental misunderstanding of the function of local real estate markets, and willful ignorance of the old maxim, "Location, Location, Location." 

In physical terms, San Francisco is virtually entirely 'built out.'  Constructing new homes means tearing down old structures and building new ones.  Simple right?  You just tear down an old industrial building and build some condos, right?  

Wrong.  The San Francisco planning code, in the aftermath of the first Internet bubble enshrined for posterity industrial uses for most existing uses in San Francisco.  You can't tear down a PDR (Production Distribution Repair, fancy name for 'Industrial'.) building or EVEN CONVERT THE USE TO OFFICE OR RESIDENTIAL in most parts of the city.  

So you just build up, on  existing residential parcels, right?  No so fast.  Getting a demolition permit will take you about 3 years, even in the best case scenario.   Also, you probably won't get one.  "But my house is only 20' tall and the lot is zoned for 40' height limit!"  Tough cookies.  Your pretty little old house contributes to the architectural environment.  You can't tear it down.  

The people at the top of the food chain (picture little old ladies who paid 15K for houses now worth $1.5mm) don't want their neighborhoods to change.  They don't want more or more dense housing.  They are against new housing.  

People at the bottom (fixed income people living in rent controlled buildings) see new development as increasing the likelihood they are displaced from their neighborhoods.  They are against new housing. 

There is no natural political advocacy group for middle and upper middle class people who would like to buy or rent new housing. 

Thus, the only projects that could make a meaningful impact on supply are the massive condo and rental towers being constructed.  At the same time we are adding office space so that there will at least be one new job for every new housing unit constructed.  Most new condos aim for at least $900 to $1000 + ppsf, so even when those are sold, they do little to lower the average selling price or make available more affordable housing.   

Does this mean that prices in San Francisco can never go down?  Of course not.  We are pretty overheated and if the tech market slows down, there will be a drop in speculative energy.  But will high prices be mitigated by a rapid increase in supply.  Nope.  It's almost impossible to see enough housing being built to materially impact the market clearing price.  We would have seen it in SF already....

I have 18 apartments in Sacramento that have been put on a water meter and another smaller property that is still flat fee.   I think they are going after the biggest ones first.  Water + sewer average about $950 per month, or $50 per month ballpark.   I have to pay for my own trash service separately as a (I think 5+) multifamily and the city no longer collects my green waste.  Your bill was for 1.5 months for 4 units and does not seem out of line.  

The other thing to worry about is to not get tagged for watering landscaping on non-watering days.  You get a warning but then the penalty fees can escalate quickly.  

Probably a closed LLC can be if the LLC owner continues to pay all of the expenses. I would want title insurance though in a transaction. If you are the buyer, the seller must sign title documents on behalf of the LLC, and if the LLC does not exist, I think questions could remain as to the legitimacy of title.

I suggest you raise the issue with whatever escrow title person you are using.  The seller will probably have to deed the property to themselves or some other entity who can sign a legitimate grant deed over to you.  

Hi @Amit M.

I have a building that is under the mandatory seismic upgrade program, so I qualify for an ADU under that rule. The planning department recently released an ADU guide.

http://www.sf-planning.org/ftp/files/plans-and-pro...

You should expect to budget for sprinklers for virtually any major work in SF.  

I am sure you know that sprinklers are now mandatory for any new housing units in California - even ranch houses on quarter acre lots with plenty of exits.   I would suggest trying to get a qualified sprinkler guy from outside the city to bid the work.  The only caveat is that they must be absolutely 100% clear on all of the inspection requirements.  Fire and Plumbing need to see everything before it is installed, then after the pipes are installed and need to observe testing, and only then should you sheet rock.  It is something like 3x the inspections that are required in more normal Eastern California markets. 

I would guess that Planning/Building would expect you to add sprinklers to your new unit, but not necessarily your old units.  I don't know how they would treat existing unpermitted units.  Probably make you add sprinklers, but that's tough to do with a tenant.  

Also, you may be running off a 5/8ths meter and that may not provide enough volume of water to supply a sprinkler system.  So you get to buy a new meter and pay water development fees (!), deal with SF water dept. scheduling and public right-of-way encroachments.  So many reasons why it is tough to add housing units in SF.

@Wilhelm Nothnagel

I would say that my experience trying to build 5 infill homes in Sacramento has been very educational.  I still expect to make money on the transaction, but it is a process that I started in late 2012 and am only now in summer of 2015 expecting to break ground on.  I won't have houses to sell until next summer.  A long road with lots of unexpected expenses.  A lot more baloney than one might guess just trying to get local utilities to serve my homes in the existing grid.   If I hadn't bought near the bottom of the market, I would not have been able to absorb these expenses. 

As @Brian Burke

 suggested, I think that you might be better served, especially as a person without a lot of buiilding/investing/flipping experience (and I say that as someone who started in 2010 without any building/investing/flipping experience) by doing a rehab of an existing single family home.  Your architecture skills will have greater leverage for bigger projects certainly, but the process for doing a kitchen rehab flip (for example) is a good incremental step in learning the buying-bidding-building-selling part of the market.   I feel like I only have just enough knowledge to build my 5 homes in Sacramento from the ground up, having done a dozen apartment rehabs and four biggish house flips.   

If you want to make money doing development I would suggest you could look at a rising community somewhere between SF and Silicon Valley (Brisbane, Daly City, South SF?) and try to find a junker house at a reasonable price.  Depending on what kind of architecture practice you want to have, it could help your expertise as well as your own finances.  I love my architect in SF because he knows the nuts and bolts of pulling permits as much as he knows building codes and design.  

Try not to let the little stuff stress you out.  If you have real problems with them you can always terminate the month to month, but other than that,  if you are going to live there you will always need to find a way to get along with your tenants.  These dont sound terrible in the grand scheme of things.

@J. Martin

 Thanks for that clarification.  I am trying to add an accessory dwelling unit in San Francisco to a pre-rent control building and the city is requiring me to opt out of my Costa Hawkins rights in order to receive permission to build that extra unit.  Local governments seem to find a lot of ways to mess with real estate people.  

In as much as it reflects demand for a given area for housing, RC is an interesting signal to the market.  I think you are right that if you (if anyone) bothers to learn and adhere to the rules, it just means different opportunities, not the absence of opportunities.  I know you think a lot about these things, so I will be interested to follow how it shakes out.