August 25, 2008

Let’s Do The Time Warp Again (In Glen Park): 461 Chenery

461 Chenery

It’s a plugged-in tipster with a good memory that notes another price cut for the bank owned 461 Chenery in Glen Park. The property was first noted by a SocketSite reader in May soon after it was bought back by the bank on 5/12/08 for $601,343 and subsequently listed on 5/19/08 for $669,900.

After a month on the market the list price was reduced to $629,900, after another month to $599,900, and after another month (five days ago) to $539,900. As best we can tell, the pre-bank owner had purchased the property for $485,000 in January of 2003 (and had pre-spent a bit of that “appreciation”).

From our tipster (and prior to anyone wrongly screaming “schadenfreude!”):

Interesting to see what it goes for given that it is very much walking distance to BART.
Huge fan of the site and bought a house in the Glen Park area 13 months ago. Jealous of this listing price for sure but let’s see where the sale price comes in because it is still well above 2 bedroom rent for cash flow.

Oh, and the current Zillow “Zestimate”: $776,500 (with a “low” of $628,965).

∙ Listing: 461 Chenery (2/1) - $539,900 [MLS]
March S&P/Case-Shiller: San Francisco MSA Declines, Top Tier Flat [SocketSite]

First Published: August 25, 2008 7:30 AM

Comments from "Plugged In" Readers

from the MLS description

Glen Park Victorian

Really?! Victorian?!?!

Sorry, but when I think of an SF Victorian, this Glen Park POS doesn't come to mind.

Posted by: badlydrawnbear at August 25, 2008 7:45 AM

A quick check on Craiglist shows rent for something similar to be about $2300. I doubt if it cashflows until it gets down to $460,000. Sure would like to hear any opinions on this count.

Posted by: chuckie at August 25, 2008 8:40 AM

This "owner" is another one of my heros. From one trader to another, my hat's off to you if you're reading this!

Prop shark shows that the "owner" pulled out (at least) $120K on 2/20/2004, which means that the owner "flattened" his risk exposure.

Teasing through the tax records, it looks like the "owner" stopped paying property taxes on the place sometime in late 2006 (after which the bank started paying no doubt, so the taxes appear up to date now). Throw in at least 12 months or so of free rent after the "owner" stopped paying the mortgage, and you can see that this was a very smart financial transaction.

I hope no one nearby got suckered in by this "comp" back then and sunk their own hard earned cash into a downpayment.

Posted by: Satchel at August 25, 2008 8:46 AM

Built 1904, not a vic. Stripped and stuccoed at some point, but might not have been that great anyway. May have typical bullseye molding and wainscotting, if you like that sort of thing. Early 20th century lower middle class housing.

Posted by: missionkid at August 25, 2008 8:53 AM

Little surprised this one is sitting in the healthy SFRE market...BART and freeway access, nice walkable Glen Park close by, and a view.

No parking, but still...

Posted by: Foolio at August 25, 2008 9:05 AM

These types of places, at least to some degree, must be competition for all of the condos still being built

At least in my case I would have been a reluctant condo buyer. I’d rather have a small Bernal or Glen Park house. Its looking like I may be back in the game for that now

If they stay on track with the numerous developments planned I would say this is a bad sign for the 2/1 cottage owners

Posted by: Zig at August 25, 2008 10:35 AM

any guesses as to the amount the buyer will spend on remodel, updates, and repairs to this property.

I am assuming, by the out of date interior, that a lot of deferred maintenance has built up. I would think that has to be part of what is driving down the price on this place.

Posted by: badlydrawnbear at August 25, 2008 10:59 AM

i did some quick research on this house a few months ago. it appears that there was a dispute with the next door neighbor over a tree in the back yard near the property line. neighbor was claiming the tree was protected species, owner had different opinion. presumably this all came up in the context of a permit application.

considering the fact that no renovations were done, perhaps the end result is clear.

anyone know anything more about this?

Posted by: stevenjk at August 25, 2008 11:24 AM

Yeah, I saw this house for sale back in May while walking by. The issue is who is on the market for this kind of property.

Rental property: there are many recurring and unknown costs with houses. The price has to be really low.

Contractors and architects looking for a project: existing disputes are a drag for permits and expansions.

Families: parking is a big issue.

Condo crowd: how much will it cost to update it to today's tastes?

Whoever will buy this will have the same issues when reselling which means this better be long term. The buyer will be someone who has fallen in love with the place and doesn't mind the drawbacks, or someone who thinks he can steer this boat out of its current course. He won't have much competition despite of the low price, imho.

Posted by: San fronziScheme at August 25, 2008 11:59 AM

Fronzi could chime in here, but i don't think this would be particularly interesting as a rental property at any price over $300K or so. Maximum attainable rent (after making some allowances for rent discount for desirable, long term tenants, or, alternatively, allowances for vacancies) IMO would be no more than $2K per month. 150X monthly rent would be a fair price for a rental SFH in SF (that multiple is much HIGHER than in other less desirable cities or for less desirable properties like apartments).

Interestingly, this place sold in 1992 for $204K. If we use the Fed's CPI calculator, that would be $313K in today's dollars. Sounds about right (ie, fair value) to me.

Posted by: Satchel at August 25, 2008 12:13 PM

Yeah, but what does it actually go for?

Posted by: NoeValleyJim at August 25, 2008 12:54 PM

my guess is that sells for around $450K

Posted by: spencer at August 25, 2008 12:55 PM

Having purchased a 2BD/1BTH small home in Glen Park, I'm definitely anxious about what this place finally sells for. Another similar home featured on SS a year ago in GP sold for over 830K -

I'd like to think the lack of parking and deferred maintenance are the telling factors here but that can't be the only reasons contributing to the $300,000 spread in pricing between this property and the one that sold in June 07.

Posted by: Willow at August 25, 2008 12:57 PM

I know some of you wont agree with me but here goes:
You could lift the house up enough to add a garage and basement rooms: cost about $150-200k
Renovate the complete interior; kitchen, 2 baths: cost: $100-150k
Restore the facade, get rid of that crappy stucco: cost about $30-50k.
Add a new complete third floor: 2-3 bedrooms, 2 baths: cost about $150-200k.

Could be a great house with all these improvements; remember close to Bart, glen park village. The potential is there.

Posted by: noearch at August 25, 2008 1:05 PM


Did anyone check out the noise level from San Jose Avenue? Last time I was on the street, the humming was very present and it must be more obvious at night especially if the BRs are on the back with little noise deflection. I wonder if this is part of the reason why the neighbor want to keep the tree...

Depending on this and other factors, I'd say you'll find someone at 2500. 2200 if you want to keep the renter more than 3 years. This wouldn't be rent-controlled (SFHs aren't) therefore you can pick the rent you want depending on the renter. What I always do: 1/3 to friends at low price, 1/3 to their friends at 10% discount, and the rest to strangers at market price. The first 2 tiers are told to fix everything minor themselves. I'd shoot for handy acquaintances with this place.

For rental purposes: 300 would be a breaking point for this place. Less than that would make it a steal. 300-400 would make it a long-term OK deal with not much cash flow for 5 years. More than 400: sure, it's your first rental isn't it?


Psychology is everything for some properties. If a place "looks" distressed (REO, deferred maintenance, long time on MLS, decreasing price) there will always be a cloud over a property. Which is why RE salesmen like to really control the environment, stage the place, get as many people as possible (even neighbors) in open houses to get a crowd effect and a "it won't last long feel". If a place is sitting with no interest, this is a big drawback.

Posted by: San fronziScheme at August 25, 2008 1:27 PM

So, correct me if I am wrong. per noearch, you could have a 4bd/4ba with garage for $1040K.

Can somebody say "instant equity"?


While on this subject, I came across this 8-unit building over the weekend. Sold in 6/2007 for 1,350,000. That's $238/psf in Mission Dolores.

Over the weekend 5 TICs in the building came on the market for average of $605 psf.

Now, if they can sell it at these prices, that's a gross markup of $2.1M. Seller is a licensed agent. Seems to me somebody is making a killing. What am I missing?

Posted by: chuckie at August 25, 2008 1:37 PM

SFS: Completely agree about Psychology. Also, I've walked along Chenery St many times, I don't think SJ Ave noise is an issue.

Noearch - Agree with you on this being a great location, but how many out people out there in the diminishing pool of qualified buyers want to take on this project?

Posted by: Willow at August 25, 2008 1:44 PM

Seems like the term "updated kitchen" is very subjective these days.

Posted by: Lori at August 25, 2008 1:54 PM


I hope the RE salesman will succeed in his venture even though I wish there were laws against "Real estate insider trading". This is pushing the balance of opportunity to one side only.

Us underlings can only decide NOT TO BUY from RE salesmen. But we don't have a choice, do we?

Not only they have a monopoly over the information and good deals, but they have all the right in the world to profit from it personally, leaving only the crumbs to us.

I wonder when/if the NAR will come up with a few basic rules against this kind of behavior. Until that day, people will always be suspiscious of these guys.

Posted by: San FronziScheme at August 25, 2008 2:11 PM

By the way, a permit for a horizontal and vertical addition for this property was rejected by the DBI. I'm not sure if the neighbor had anything to do with it, but the point is, you never know if these project properties are going to fly (until you try). People seem to think that just because "the neighbors have them" (garages) it will be OK to add one, but that's often not the case for a variety of reasons.

Posted by: kaya at August 25, 2008 2:14 PM

I think with the right kind of sensitive design, one could, in fact, get approvals for a rear addition and possibly for a 3rd floor. Yes, it would require neighborhood reviews and planning negotiations, but it's possible.
This has great potential with a careful remodel, but the location has value, but yea you'd prob need to spend $600k+ to complete the work.

Posted by: noearch at August 25, 2008 3:02 PM

Fronzi I assume you have not read the disclosure packet and that you are way out of line. I generally don't like to make assumptions like that. But in your case, it's more than warranted.

Posted by: fluj at August 25, 2008 3:04 PM

fronzi... it doen't appear that this developer/ realtor bought at less than market rates. On the propertyshark page I linked, it shows neighborhood comps. I think it may just be a case of buying wholesale and selling retail. Plus, of course, all the value add. But, still buying at $238 psf and selling $605 psf, in a declining (ok flat :)) mareket is remarkable.

Posted by: chuckie at August 25, 2008 3:05 PM

kaya, thanks for the heads up. One of the permits from 2007 show in the description:


Brick foundation? Does anyone in the structural field know if that's an issue for earthquakes? This building dates from 1904 therefore survived the big one, then I'd bet it's not an issue.

Posted by: San fronziScheme at August 25, 2008 3:08 PM

"Does anyone in the structural field know if that's an issue for earthquakes?"

You really don't belong on here man. It's really unfair the way you act given your lack of knowledge.

Posted by: fluj at August 25, 2008 3:11 PM

yes, brick foundations are a huge issue. they will NOT hold up at all in a major quake, or even a medium one. it's an unreinforced foundation and the house can move laterally and collapse.

Any major remodeling should always include removing the brick foundation and putting in a reinforced concrete one, with shear walls, bracing, etc. the best investment you can do to a house, before you start any cosmetic work, in my opinion.

Posted by: noearch at August 25, 2008 3:13 PM

295-299 Guerrero sold for $1.325M (per MLS) on 6/15/07 after 92 days on market. Looks like it went into contract after about 3 weeks - so lots of other potential buyers had plenty of time to step up and bid on the property. There were (are) 9 units - 8 residential + 1 commercial. Listing didn't show how many were vacant - but it did show a 4% cap rate.

As of August 14, 6 units are for sale: 5 TIC's (from $239K to $475K) + 1 commercial ($300K). New listings state no Ellis evictions. Listings also note that the "White Report" is pending. Can you sell these units without the final DRE white report? (So at 11 DOM and ticking, all 6 units still show as active.)

Posted by: FSBO at August 25, 2008 3:18 PM

Out of line? Just expressing my opinion. I am not saying that RE salesmen who buy/sell property for their own profit is illegal, just that we would feel better about them if they didn't do it. For instance the NAR/CAR/SFAR would set more strict guidelines/rules to help with the recurring image issues their members have...

Posted by: San fronziScheme at August 25, 2008 3:20 PM


I haven't looked at this property or any of the details. Is there a reason why you suggest going through all the hassle of lifting up the house and all that instead of just a tear down rebuild?

I assume it's not allowed. Please tell me this monstrosity isn't "historical"

or is it really cheaper to go through all that work you outlined?

Posted by: ex SF-er at August 25, 2008 3:24 PM

hey fluj...who are you trying to run off? who belongs on this site?

Only knowledgable realtors, I guess.


Posted by: chuckie at August 25, 2008 3:25 PM

Actually, you called it insider trading is what you did. You don't even know enough to understand that realtors are by and large small fry. Your argument is really against institutional investors and the like.

No. You come on really strong on here with daily digs and slams, and meanwhile you don't have the knowledge base to be credible. This is just a big sounding board for you to try to gain knowledge.

Posted by: fluj at August 25, 2008 3:26 PM

No, it isn't my site. It's for everybody as far as I am concerned. Just know that you can and will get called out on things. It happens to me constantly.

Posted by: fluj at August 25, 2008 3:29 PM

@ex SF-er:
sorry to disappoint you but any property older than 50 years old is classified as an "historical resource" by the Planning Dept. and CEQA. It will be virtually impossible to demo this house..remodeling it is the way to go. it's not really a monstrosity. just a little Victorian with a bad stucco job.

I dont see the renovation as a hassle; its just the process one goes thru to end up with a nice property.

as for fronzi.. sure he can stay here and say what he wants, but some advice, dude: I wish you would temper your opinions with a bit of knowledge, instead of just "I'd bet it's not an issue.."

Posted by: noearch at August 25, 2008 3:33 PM

I strongly suspected the brick foundation could be an issue. The fact that this building dates from 1904 made me double guess my rule-of thumb, which is why I wanted advice. Maybe they got lucky in 1906, or maybe the foundation is post-1906 (unlikely).

Thanks for the replies, and I will not even comment on the expected friendly words coming from our dear dear friend.

Posted by: San FronziScheme at August 25, 2008 3:40 PM

Thanks to FSBO and the MLS history on 295-299 Guerrero. I couldn't find this anywhere at my level.

Definitely not an "insider" deal, then. Good luck on the sale.

Posted by: San Fronzischeme at August 25, 2008 3:48 PM

Actually, it looks like they filed to do a vertical addition on this building twice... Good luck on that remodel.
As far as the brick foundation goes, it's definitely money well spent to replace it. How much of a time bomb it is for its current structure depends on the condition of the bricks and mortar, the maximum brick wall height and your aversion to risk. Anyway, you wouldn't be able to do a vertical addition without replacing the foundation.

Posted by: kaya at August 25, 2008 3:49 PM

@ noearch and others in the "rebuild for value" camp,

I don't heave a real strong feeling about Glen Park (other than that it is overpriced in general), but a nearby property might have some relevance for this discussion.

454 Joost is in Sunnyside, a little further from the GP BART station (the other direction from 461 Chenery). Maybe 5 minutes' walk further - no more. Better views and much quieter street than Chenery. And the houses on Joost are - for the most part - detached, while Chenery are predominately attached around there.

454 Joost was bought as a tear down for $770K in 2005. The house was either knocked down or completely gutted and rebuilt. Here is the finished product:

(Scroll through the pictures)

They started trying to sell it 6 months ago @ $1.5M - WAY too expensive fo the neighborhood. I can't tell if it has sold - it doesn't look like it - and the last price was $1.389M. Now I think it is officially "off market" but still for sale. Any info woud be appreciate from plugged in readers out there.

The new 454 Joost is 2600 square feet - about what noearch I guess would think 461 Chenery would be after rebuild (assuming pwemits could be obtained). At $770K for the initial purchase, that would be $300 psf "lot cost" for the completed 454 Joost. Add another $30-50 psf for the holding cost for the 3 years since purchase. It doesn't seem to be selling at $534 psf all in.

So, my question to the architects and contractors out there: looking at the pictures at the 454 Joost website, could one realistically build THAT house for $200 psf total, because that is what the developer would have had to do for this project to be profitable?

I can't see how the developer there isn't going to lose his shirt, and evidently the developer can't see it either - delinquent prop taxes are already in excess of $14K according to the assessor's website.

I think something like 454 Joost is a cautionary tale for some amateur who might think that 461 Chenery has value at $500K.

Posted by: Satchel at August 25, 2008 3:50 PM

454 Joost shows as "Withdrawn" as of Aug 13 after 104 DOM (starting at $1.495M and ending at $1.389M).

Posted by: FSBO at August 25, 2008 4:01 PM

"delinquent prop taxes are already in excess of $14K according to the assessor's website."

My understanding is that flippers often don't pay the property tax for cashflow reasons since there's no real downside.

Posted by: diemos at August 25, 2008 4:10 PM

Glad to see Glen Park is now priced as it should be. The area around Glen Park just isn't all that desirable and the price is reflecting it.

Posted by: LIberty at August 25, 2008 4:13 PM

i'm an arch as well. your experience must have been much better than mine with the planning dep. i have projects sim. to this in age and there is no way this could get lifted. at best you are looking at replacing doors and windows in kind. as for vertical addition you are looking at 15' set back from front facade. and good luck with 311 if neighbors have already fought.

Posted by: keltron at August 25, 2008 4:13 PM

My perception may be misplaced, but I think the several blocks further west of the Joost street property makes a big difference. I find Glen Park often too foggy for my taste, but as you get towards Sunnyside (good sense of humor in that name), it gets progressively worse. The microclimate thing plays a big role in where I want to live.

Posted by: kaya at August 25, 2008 4:14 PM

The Joost street property's Achilles heel is its lack of a backyard. If it had both green space and the decking, IMO it would already be sold. Properties on the north side of the street in those areas tend to fare worse. The south side properties often can have nice yards below.

Posted by: fluj at August 25, 2008 4:17 PM


it would be possible to lift this with Planning approvals. partial lift, then excavate for parking. You can do a 3rd story and align it with the front facade (in some cases) if you restore the orig. facade and duplicate it with matching windows, trim, etc. It's been done recently in Noe on Elizabeth st and on Sanchez st. same kind of house.

Posted by: noearch at August 25, 2008 4:18 PM

By the way, 454 Chenery just went pending at 3 p.m.

Posted by: fluj at August 25, 2008 4:19 PM

I meant 461 Chenery.

Posted by: fluj at August 25, 2008 4:20 PM


"but as you get towards Sunnyside (good sense of humor in that name), it gets progressively worse."

It definitely gets worse as you "go up the hill" from the bottom of Monterey/Glen Park, but my experience living and bike riding all over out there is that Sunnyside really is pretty "sunny" and comparable to Glen Park. A bit more foggy to be sure, but generally during the foggy months, it's a question of the fog clearing at 11am in GP versus 11:30 in "lower" Sunnuside. On days when all of Sunnyside is fogged in, GP will be fogged in too in my experience.

The real "break" seems to happen around the top of Monterey/Mt. Davidson (up around Northgate/St. Elmo) or the top of Portola below Twin Peaks. West of those points, total fog that's for sure from July to early Sep (most years)!

Posted by: Satchel at August 25, 2008 4:22 PM

Re: 461 Chenery, I guess the buyer wasn't following our discussion here.

Re: 454 Joost, someone (or some bank) is taking a big hit on this. There is a $500K mortgage from United American - and there were substantial funds pored into this remodel. Assessed value was raised to $1.155M (not that they are paying their property taxes).

Posted by: FSBO at August 25, 2008 4:32 PM

wow fluj.

now that's plugged in!

Posted by: ex SF-er at August 25, 2008 5:20 PM

re: 295-299 Guerrero

Isn't that basically the corner of the Valencia Gardens projects where all the "locals" hang out?

As our agent told us... projects only go downhill, especially newer ones and to make sure to have a sufficient buffer between one's home and the PJs for investment sake.

It seems the price is about right for basically buying a condo in Valencia Gardens.

Posted by: Espumoso at August 25, 2008 5:46 PM

@satchel (or anyone)

Where did you come up with the 150 times monthly rental number? Im wondering did ratios reach that point in previous downturns in the early 80s and early 90s?

Thanx in advance

Posted by: mac at August 25, 2008 5:54 PM

I am going to guess an even $500,000. Quite a few homes right around here have been expanded lately, I am surprised that this one has been blocked by the neighbors.

Posted by: NoeValleyJim at August 25, 2008 6:07 PM

Well, if this one went for $500K, that's great. 2003 pricing is a good start IMO.

@ mac - I'm not an expert on real estate valuation specifically, but I do like to think I have some expertise in asset price estimation generally, having been involved in it for 15 years, finance degree, macro hedge fund portfolio management experience in the 1990s, etc.

100-150X monthly rent is a standard range identified by long term real estate investors in small scale residential real estate (ie, John Schaub). It's also consistent (from what I can tell) with historic averages in most markets. It's not really applicable IMO to special properties or very high end properties.

I like to use these type ratios when I think about asset values rather than "cash flow" analysis. The problem with cash flow analysis is that anomolous current conditions are typically taken as the norm. Most of the inputs in any analysis of real estate as an investment - like rent growth, financing conditions, interest rates, inflation, etc. - are mean reverting, which means that cash flow analysis based on current conditions is likely to steer you wrong.

I hope that helps a little!

Posted by: Satchel at August 25, 2008 7:18 PM

Looked at pictures. Charmless interior, exterior matches. Neighbor must be equally mediocre blocking new plans. Of course the plans may have been excruciatingly mediocre so neighbor was carrying out a good act.

Posted by: missionkid at August 25, 2008 9:00 PM

I'm glad the neighbor has a say about anything, since the neighbor's house is soooooo awesome itself and really adds to the charm of the block. yeah right.

no wonder the housing stock in SF is so dilapidated, and the streetscape so hideous. You have hovels declared "historic" and renovations blocked by people who can't even keep up their own home.

This just hardens my resolve. If we should need to move back we will rent. why pay a premium to buy when a bitter neighbor who lives in a hovel can block any planned renovation?

say what you will, this house is not historic. sure, it's falling down and old, but that doesn't make it historic. it just makes it old. And yes, this house is "that bad" (on the outside). This house lost any possible "historic" moniker when it was stucco'd. or is it the 1980's kitchen that is historic? the only historic feature worth keeping in the entire house is the fireplace.

Posted by: ex SF-er at August 25, 2008 9:45 PM

Yes, I walked by this place on my way home today: 415 Chenery and 473 Chenery have both been expanded on in the last few years and they are on this same block.

One of the neighbors does seem kind of odd though, perhaps that is the problem.

When have San Francisco SFH sold for 100-150 times rent?

There is a good chance that "The Great Moderation" is permanent, in which case your analysis is off the mark. A DCF analysis is more appropriate, especially if you can lock in low interest rates.

Posted by: NoeValleyJim at August 25, 2008 9:48 PM

mac - the 100 - 150X monthly rent in Satchel's range would equate to a gross (annual) rent muliplier of 8.5 - 12 with the resultant CAP rate probably in the range of 5 - 9%. So you can make (or almost make) positive cash flow in Year 1 on the total investment. Satchel, SanFronzischeme and others have pointed out that 60 - 80X monthly rent (CAP rates of 10%+) have been possible, if not common, in less frothy markets. These are the multiples you need to pay if you want positive cash flow and a decent rate of return on invested capital. Paying 250 - 300X monthly rent (CAP rate of 2-3% or less) requires a faith that significant annual rent increases and/or appreciation rates will continue during a sufficiently long investment horizon.

Posted by: FSBO at August 25, 2008 10:36 PM

295-299 Guerrero: my guess is that the person who brought this is a neophyte.

a) bad location for tic's- say hello to your new project neighbors right next door. busy street corner.

b) wrong building- 8+ units means perma-tic's(i.e. no condo potential.) no parking. ghetto-ass liquer store in bldg (nice!) some small studios/1br's (try searching mls for woodward st in the mish- those POS's tic's have been for sale forever.)

my guess is that these ARE NOT going to sell. maybe 1 or 2 people will be gullible, but once they see that the other units don't sell, maybe some low end renters are still in some of the units...and this will just fall apart. same thing happened on a 17-20 unit bldg on 19th(?) street near mission st. they tries selling some of the units, studios and 1br's as tic's, while leaving some of the units with low rent tenants- it did not work.

Posted by: 44yo hipster at August 25, 2008 10:50 PM

for whatever reason this house just has my hackles all in a bunch (to mix metaphors). there is no reason why this house shouldn't be allowed to go to 2 stories, most of the houses around it are all 2 stories. Especially given the fact that it sounds like it's foundation is not appropriate for SF.

I'm going to start a new business.

I will hire people and give them excellent health insurance and an H1 (Hummer). Homeowners can then pay my company to crash a Hummer into their house, completely destroying it.

It's a win win win for everybody
-increased SF employment
-homeowners will finally have the right to renovate THEIR house.
-there may be a secondary backlash against Hummers and perhaps we might even get dedicated pedestrian/bike only streets
-increased Hummer sales which saves GM.

Posted by: ex SF-er at August 26, 2008 6:35 AM

Have you ever thought that perhaps this house is perfect for a small family (2 parents- one stay at home mom, one public school teacher Dad and their 1 year old son) that wants to stay in SF, wants a safe neighborhood, wants to have a yard, walking access to BART, a park and a market and doesn't have any money to remodel other than maybe refinishing hardwood floors? They are not buying to fix and flip, they are buying to get a toe hold in the RE market in SF rather than moving to the Excelsior or Oakland. This house seems perfect!!!

Posted by: REAddict at August 26, 2008 7:29 AM

"Have you ever thought that perhaps this house is perfect for a small family (2 parents- one stay at home mom, one public school teacher Dad and their 1 year old son)"

Are people crazy here? The average public school teacher makes $60-80K in SF. How is a one teacher household going to pay for a $500K+ house? What a joke. I don't think SF has a very bright long term future unless the people wise up here.

Posted by: Satchel at August 26, 2008 7:45 AM

REAddict -- good points, but it's worth mentioning your arguments are similar to those used to justify housing in Vallejo, etc., a few years ago (except for the "stay in SF, be near BART" part).

The fact is this house is pretty shabby, and there are rentals which would probably serve your small working poor family better.

But far be it from me to suggest that someone rent instead of buy, and after all, they will have a ready-made SOB story for the cron (it almost writes itself) if things go bad.

Hope they can get their loan, though...

Posted by: dub dub at August 26, 2008 7:48 AM

Yes, it would be perfect for said family.

At about $90-200k.

But I think paying $200k while making around $60k/year with a stay at home spouse and a child would be pretty tight.

Posted by: ex SF-er at August 26, 2008 8:02 AM

Dear ex-SF'er.... couple of problems with your hummer plan -- one is that GM doesn't make the H1 anymore. Second, I don't think they're big enough to do any real damage to a house.

Maybe one of those old bluebird school buses would be a better choice? Or a dump truck. You could fill up the whole thing with scrap iron and back it into the house at about 45 mph. Of course you'd have to take precautions not to get injured yourself (perhaps wear a helmet).

Having said that, I remain surprised/astonished that "unfortunate" fires don't occur more often as a means to skirt these planning rules.

Posted by: Jimmy (Bitter Renter) at August 26, 2008 8:25 AM

Satchel, SanFronzischeme and others have pointed out that 60 - 80X monthly rent (CAP rates of 10%+) have been possible, if not common, in less frothy markets.

So you are telling me that in the City of San Francisco, it has been possible in the past to buy a single family home for 60-80X rent? When was that true?

Posted by: NoeValleyJim at August 26, 2008 8:27 AM


The credit crunch has affected me personally now! it's hard to come up with good ideas in this economy!


on a more serious note:
"Having said that, I remain surprised/astonished that "unfortunate" fires don't occur more often as a means to skirt these planning rules."

-I'm glad they don't
-hopefully it's because people realize that it is very difficult to "control" a fire, especially when the houses are attached/semi-detached.

Posted by: ex SF-er at August 26, 2008 8:29 AM

hipster; "295-299 Guerrero: my guess is that the person who brought this is a neophyte"

The agent flogging these places is Roger Mwamba from Kenney Real Estate. The mastermind might be judging from the name and the bios here:

I know a couple of other buildings they have been flogging. I will post the links in a little bit and maybe someone will dig up how they did on those projects.

Posted by: chuckie at August 26, 2008 8:41 AM

"So you are telling me that in the City of San Francisco, it has been possible in the past to buy a single family home for 60-80X rent? When was that true?"

You know NVJ, I really don't know, because I haven't lived here all my life. I can tell you with CERTAINTY that that has been the case in many parts of NYC in the mid-1970s, and also in the early 1990s.

One would think that the realtors on this site would have some sense of historical ratios here, but they never seem to.

Here are a few data points I DO know about SF. One would expect 100x-150x as a range for average SFHs under normal conditions (60-80x are really historically low and anomalous for owner-occupied residence stock). As one goes up the price scale, the ratio would typically rise for owner occupied residences. This is because there is (and should be) a premium for desirable long term properties. Conversely, for crappier "starter" SFHs, one would expect the lower end of that range. Because of prop 13, SF most likely has after 1979 shifted all these ranges a slight bit up because prop 13 acts as an insurance policy, and the value of that policy would be capitalized in the price (lowering the required return on the asset, and thereby raising the ratios).

Viewlover on this site has posted that he paid $3K per month in the late 1990s to rent a modest SFH out in the Sunset (I think). I can't imagine a place like that would have cost more than $400-500K, at most. So that would be less than 150x as recently as the late 1990s.

I rented a place in Montery Heights/St. Francis from mid-2002 through mid-2008. It was a 3000 square foot 4/4 view home, with remodeled kitchen and 1000 sq ft of room in the unfinished lower level/garage. The rent was $3.1K/mo, and it never went up. The price to buy in mid-2002 was approximately $1.2-1.3M, so about 400x achievable rent.

BUT, the house was rented for $4k/mo in 1996-2002 to tech execs from HP. In 1997, it would have cost about $750K to purchase the house - a VERY desirable property. In other words, about 180-190x monthly rent, about what you would expect as an average for a desirable, long term owner occupied residence given the bump to the ratios that prop 13 would provide. I would have bought it at those ratios.

I've been trying to find the link - I bookmarked it but I can't seem to find the text - but a few months ago on SS one of the posters wrote that a 1 bedroom apartment on Fillmore rented in 1974 for $450/mo (rented by a company he worked for then). At that time, a nice SFH of 2300 square feet would have sold for $50-75K in St. Francis (for instance, see the price history on this one: )

Something in Noe acceptable would have been about $30-40K.

I have to believe that IF that $450/mo rent FOR A ONE BEDROOM APARTMENT figure is right, then 1973/74 was a period where SFHs could be had at less than 100x rents.

Like I said, I'd love to hear from others on what the ratios were, especially pre-prop 13. For those who think the 1970s are "ancient history" and even what happened in the mid-1990s is not relevant to SF, well, the market is a great teacher. And, as the saying goes, when the student is ready to learn, the teacher appears.

Posted by: Satchel at August 26, 2008 9:08 AM

NoeValleyJim - I agree with Satchel. These low monthly multiples were (and are again) in existence in other markets - but you probably would need to go back a ways to find them in SF. A CAP rate of 10% was the old standard. The SFH market is different - but the point that some of us are trying to make is the sheer riskiness of paying 300X equivalent monthly rent for a house. If you buy something at this price level, you are getting a 2% CAP rate (maybe even less). As an investor, do you really want to bet that annual rent increases and housing price increases are going to be high enough over, say, the next 5 - 10 years to bail you out?

Posted by: FSBO at August 26, 2008 9:27 AM

Maybe people would partake in the following survey:

Anyone that sold/bought a house in early 80s or early 90s.. what price would that place have rented for?

Anyone here that rented a place in the same period, what price would that place have sold for?

It would be nice to get a range of answers to find the cap rates at the market troughs.

Posted by: mac at August 26, 2008 9:50 AM


That's an excellent suggestion and I, for one, would very much like to see any data that people have.

HOWEVER, downturns in the 1980s and 1990s may not be a very good predictor of what is coming. A lot of people confuse credit inflation (trend increase in debt/lowering of real interest rates) with price inflation (trend increase in price as measured by nominal money/trend restriction of available credit). The former is very asset price supportive; the latter is deadly for asset values.

I think we are at an inflection point, and credit deflation is our future. The past downturns you mentioned both played out against a backdrop of trend credit inflation. Take a look at the famous chart I always post:

IMO it's time for thinking people to start broadening the data set to periods before the great credit inflation. Stock investors made the same foolish mistake of only examining data post-1982 or so when they foolishly projected a rosy future for US stock investing in the late 1990s.

I'd be as interested in ratios from the 1930s, 1950 - 1980.

Posted by: Satchel at August 26, 2008 10:10 AM

A CAP rate of 10% was the old standard.

Sure, when bonds paid 12%, it would have been stupid to invest in anything that only returned 5-6% instead.

But if The Great Moderation theory is true, or heaven help us, Satchel's deflation theory, then 5% CAP rate will look good. You have to compare returns on real estate to risk-free returns in both time periods.

As I have said before, just using a P/E ratio without considering the cost of borrowing money is simple minded. Or the mostly equivalent way of thinking about it, which is to consider the CAP rate without looking at the risk-free rate of return.

What would really be interesting to me is to see historical CAP rates vs. T-Bond rates plotted over time. That would actually give us a good idea of how far out of whack the current market is and how far it needs to adjust to return to the norm.

It someone knows where I can find the raw data for this, I will put it together into a graph or something, but I don't even know where to find historical CAP rates. I will ask my wife when she comes home, she might know.

Posted by: NoeValleyJim at August 26, 2008 11:12 AM

Bought a duplex in Bernal for 130k in '81. Run down previous rental. Divided by 80 that would be 812.50 per month per unit. Sounds high for back then for a 2/1. I'd say you'd get more like $500-600. Was renting a place with a nice view on Potrero for $400, but was smaller. AFAK the first run up was in the mid to late 70's. The duplex had sold for in the 40's about 5 or 6 years before I purchased. Sorry not more precise, but would have to find paperwork. Anybody else remember? The hippie dives in the Haight in the early 70's were huge and cheap. Not so much cheap any more.

Posted by: missionkid at August 26, 2008 12:14 PM

"Sure, when bonds paid 12%, it would have been stupid to invest in anything that only returned 5-6% instead."

Umm, I think 30Y US bonds paid 12%+ for only a few years around 1980-82. It was a VERY anomalous period, and also the only time when US bonds or 10Y money really ever paid over 10%.

In any event, cap rates of 10%+ were of course possible in many periods during the 1990s (not sure about in SF specifically), and 10Y USG debt NEVER got over 8% or so:

About the "Great Moderation" - forget it. The idea that the policy fools have engineered an economic environment that has less macroeconomic volatility than in the past is crazy. Look to the easy answer, in the chart I provided on debt/GDP for your insight. The "Great Moderation" has been a false sense of organic growth generated by debt. Good for bankers, bad for the macroeconomy because of the distortions it produces. Was it really smart for the US to invest all that cash/credit in larger houses and granite countertops? We'll find out....

Posted by: Satchel at August 26, 2008 12:41 PM

@ missionkid,

Thanks for that data. It sounds like the duplex you purchased sold for about 110-130x monthly rent. You say it sold 5 years previously for $40Kish. So, it had gone up in price 150-225% over that period. (Thanks prop 13, BTW.) I find it IMPOSSIBLE to believe that rents from 1976 through 1981 inreased by 150%-225%, so this data point supports the idea that in the mid- to late-1970s, prices were LESS than 100x monthly rent, perhaps substantially less.

BTW, long bond rates in the mid-1970s were about 7-8% (certainly no more), IIRC.

Posted by: Satchel at August 26, 2008 1:01 PM

You mean five years, right, from 1980-1985?

It looks like 1-Year yields topped 10% for five years as well, which is probably about the same as T-Bills.

Show me that CAP rates on SFH were over 10% in the 90's because I don't see it. Your $450/mo rental in 1974 is pretty dubious as well, considering other posters have said that this was the rent on 2/1 in Bernal 10 years later.

You love to cherry pick data from various sources to back up your claims, I want to see some solid data about San Francisco housing, not Detroit or The South Bronx or where-ever it is your are claiming home prices dropped to 80X rentals.

Fed and the US government have learned a lot about economics in the last 40 years, that is why the last two recessions have been so mild. Dust off those old economic texts from the 40s and read something more recent. Even the Chicago school believes in the Great Moderation now.

Posted by: NoeValleyJim at August 26, 2008 1:06 PM

As to missionkid's example, do you remember the mortgage interest rate paid?

Prime ranged from a low of 16% to 20.50%. Taking the low of 16%, your .80 example results in payments of $1,409/mo.

In 2008 dollars, $131,000 x (647.3/272.4 = multiplier of 2.376)=$311,299, with a monthly payment of $3,347.

Early '80s was the 2nd period of price appreciation here, according to a local's imperfect memory. So while home prices were low by comparison, interest rates were very high and didn't moderate until the 90's.

Posted by: michiko at August 26, 2008 1:15 PM

Yeah, that was the Volker era. Assumed a variable 1st and had owner finance note with ballon. Pretty common back then, as I recall. Interest rate was around 12-13% I think. It was another crazy period, but seems a lot more affordable in retrospect.

Posted by: missionkid at August 26, 2008 1:28 PM


"Your $450/mo rental in 1974 is pretty dubious as well, considering other posters have said that this was the rent on 2/1 in Bernal 10 years later."

Take it easy! Don't blow a gasket. I never claimed personal knowledge - I just related something I saw on SS:

"In 1974 I got to stay in this building as the company I worked for in Fresno had one of the units rented for use when the owner needed to be in the city. He let the employees use it whenever they wanted. It was a fabulous building and I have often wondered what it was like currently. In 1974 the rent for a one bedroom was $450.

Posted by: dkzody at July 26, 2008 4:57 PM"

Funny, you never questioned the original poster back then..... In fact NO ONE did.

(I actually thought it sounded a little high. Throughout most of the postwar period, it doesn't seem that Sf was a particularly prosperous place. This is pretty easy to tell just by looking at the falloff in population as well as the crummy quslity of the housing stock built in the 1950s and 1960s. Certainly nothing like what was built in the suburbs or fringes of NYC or in Detroit, for instance, at that time.)

Posted by: Satchel at August 26, 2008 1:35 PM

ballon=balloon,ie balloon payment

Another data point for the cogoscente: typical Sunset Doelger house circa late 20's, 2/1 upstairs with illegal in-law down with seperate entrance: 28k in '63.

Posted by: missionkid at August 26, 2008 1:38 PM

Jim A's bond link is broken for me -- here's one that I think works

Posted by: dub dub at August 26, 2008 1:40 PM

Interesting questions, ones I've also sought answers to. Here's a link to a file that shows rents for 2 bedroom apartments in the city from 1979 to 2001.

Here's a link to a site containing similar info from 2004 through 2008.

So we're only missing the dot-com bomb era, and we all know what rents did then. The two data sources may be somewhat apples to pineapples, but it's a start.

Posted by: Dude at August 26, 2008 1:46 PM

OTOH, "seems more affordable in retrospect" is just that. If you still own that property, you're probably doing pretty well.

Posted by: michiko at August 26, 2008 1:48 PM

I came here in 1982 and rented a house in Daly City for 500. I think we got a deal and I would say that fair value was 600. I think that the house was worth about 100k as I think i saw a nayboorhood sale for about 105k at the time. Again.. a lot of 'thinks' in that. So at that stage the ratio was about 150-200.

If u look at missionkid's example its 130k/600 which is > 200. But it looks like it sold previously at 40k. That was the mid 70s when the stock market was down 50% (73-74). That sort of implies a

Different econ times now than 73-74 but that period has been thrown around for what could happen again with respect to the market so if you're a real bear then that period is worth a gander.

Posted by: mac at August 26, 2008 1:51 PM

I came here in 1982 and rented a house in Daly City for 500. I think we got a deal and I would say that fair value was 600. I think that the house was worth about 100k as I think i saw a nayboorhood sale for about 105k at the time. Again.. a lot of 'thinks' in that. So at that stage the ratio was about 150-200.

If u look at missionkid's example its 130k/600 which is > 200. But it looks like it sold previously at 40k. That was the mid 70s when the stock market was down 50% (73-74). That sort of implies a

Different econ times now than 73-74 but that period has been thrown around for what could happen again with respect to the market so if you're a real bear then that period is worth a gander.

Posted by: mac at August 26, 2008 1:55 PM

Sorry about the broken link, here is one that works:

I am not "blowing a gasket" and I hope that I don't come across that way. Tone of voice is hard in ASCII, I know that, my remark about 40s economics books was supposed to be flip.

San Francisco was actually not doing that great in the early 70's, with, as you state, a shrinking population and employment base and we still did not get down to 80X rents. So I guess, yeah, if the regional economy goes into the tank, and people start leaving The City in droves, and crime rockets through the roof and a bunch of the housing stock starts getting boarded up, like most of the Upper Haight was in the mid-70s, then home prices will become relatively cheap again.

I just don't see that happening.

Posted by: NoeValleyJim at August 26, 2008 1:55 PM


That Bernal rental was $500-600 per unit, so $1000-1200 all in. 110-130x, if my meagre math skills are right!

Posted by: Satchel at August 26, 2008 1:56 PM

Sorry.. i keep getting server problems from SS. Anyway i meant to say that missionkids ratio from the 70s (ie sale price of 40k) would certainly be less than 100.

And , as satchel just pointed out, much less if I read it to be 1/2 a duplex rather than the whole one.

Posted by: mac at August 26, 2008 2:00 PM

That was a duplex, so it was 130k/1200, estimated.
Flat was a 2/1, but 5 people rented, dining room,
living room and parlor all converted to bed.
So the renters were paying maybe 120/month for the shared flat.

Posted by: missionkid at August 26, 2008 2:04 PM

FYI - monthly yield on the 10-year back to 1953. It got above 15% for a couple months in autumn, 1981.

Posted by: Ten Year at August 26, 2008 2:33 PM

missionkid, so your PITI was what - $1600+ in 1981 dollars, around $3200+ in today's dollars, something like that, plus - you said you had a balloon. Then you lived in one side and rented out the other to 5 separate people? I wonder why.

Not really enough info to suss out what the actual ratios were, but sounds like it was a risky deal by today's standards.

Posted by: michiko at August 26, 2008 4:27 PM

michiko brings up an interesting point about PITI versus rental rates (or asset prices as a ratio to rent).

I haven't checked the math but the intuition would be the same.

In 1981 on those numbers, PITI PRE-TAX (remember, this was before Reagan's revisions of the code that, among other things, lowered top marginal rates from the 70% (!) level to the low 30s) was about 1.3 - 1.6 times monthly equivalent rent. After deduction at those old tax rates (and keeping in mind that the interest component at those 1981 interest rates was much higher than what a homeowner enjoys today) it was almost CERTAINLY cheaper to buy it than to rent it.

Interest rates are mean reverting. Only during that period (early 1980s) were mortgage rates anywhere near that high in the US. The asset prices were accordingly low, to reflect the high interest rates, and STILL the asset would have "cash flowed" on an after tax basis.

As rates mean reverted down over the 1980s and 1990s, the asset increased in price, allowing the owner of the duplex to refinance it at much lower rates, or sell it at nice (nominal AND real) gains.

Fast forward to today. Rates are near historical lows. Asset prices are at historic highs, in nominal as well as real terms, at least in the "real" SF. And yet the assets STILL do not cash flow on an after tax basis, even given these crazy low rates. Not even close, at least in the "real" SF. Mean reversion from here is going to be a wipeout. If rates go higher, which they almost certainly will even in a world of mild price deflation, asset prices will go lower. At historic highs on a real, nominal or price/rent ratio, there will be no wriggle room.

Very different from 1981, and that's just one reason why I don't like "cash flow" analysis for asset valuation too much (it does have its role, of course). Too much incentive to project into the future the anomalous conditions of today, and that was as true in 1981 as it is today.

Posted by: Satchel at August 26, 2008 5:29 PM

I scanned the comments and only saw a few regarding having walked past this property (a lot of interesting comments not about this property as well1).

I was inside with my agent and we pulled the disclosure package. If you place a tennis ball on the floor near the front door, it will nearly roll to the rear of the property. Sure, I'm exaggerating a bit but this building is falling down and needs SERIOUS work. The former tenants took it upon themselves to punch holes in the floor/walls to route cable lines. The shower is directly off the kitchen and I didn't step into the separate bathroom as I was fearful I'd fall through the floor. The bank has nailed plywood boards in the rear door (inside) to avoid the liability of someone doing down the rear stairs, which are about to blow away in the wind.

The comments about the cheap stucco on this building are the least of the concerns. When I heard the back story regarding the hostile neighbor (seems they put up a fight on a permit to build a 2nd floor and extend into the rear yard) that sealed the deal.

If you can get the property at the right price all the structure issues can be resolved. What can't be resolved is a hostile neighbor who doesn't want the house next door to be fixed up while their dilapidated continues to increase the speed of cars on Chenery to avoid the ensuing eye pain.

Hope you enjoyed reading this as much as I did typing it up. :)


Posted by: GoetheSF at August 27, 2008 10:24 AM

Thanks GoetheSF.. great report! It will help everyone understand the price if and when the place does sell.

Posted by: chuckie at August 27, 2008 10:58 AM

all this talk about investing in SFH's in SF and the high rent multipliers...but i'm not seeing alot of discussion on the appreciation upside of owning prime property.

i.e. say someone brought a few homes in noe in the late 80's. well today they would certainly have cash flows from them. and the homes would be non rent controlled, so they could keep the rents at market rate.

sure, they could 1031EX for a larger apartment bldg that would give them a higher ROR on their equity, but their incentive to keep the homes is that they are sitting on prime real estate, with very solid long term appreciation potential. furthermore, they could always pull cash out of the homes and invest in other real estate, if they wished to grow their portfolio.

the bottom line is that most investors in SF RE made the big bucks through appreciaiton, not cash flow. and i suspect it will continue to be the case in the future, due to the high housing demand/new bldg restrictions/rent control dynamics that we have.

Posted by: 44yo hipster at August 27, 2008 9:10 PM

This one seems to have been pulled from the market. Can anyone confirm?

Posted by: chuckie at September 28, 2008 9:43 PM

chuckie - 461 Chenery just sold for $525K on Sep 26. This works out to $535 per square foot based on the 980 sf shown in the listing. The previous listings from 2002 had shown square footage at 1,100 - but Property Shark showed 980 for the $601K foreclosure by Wells Fargo in May 08.

Posted by: FSBO at September 28, 2008 10:20 PM

If 461 Chenery sells for 525k, 522 chenery (the gutted contractors special) needs a price reduction... Not to mention, what bank is going to lend 659k for that place? Banks don't like to loan money for gutted properties anymore.

Posted by: Nicole at September 28, 2008 10:34 PM

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