On the heels of One Rincon Hill (425 1st Street) #2202 closing escrow with a recorded contract price of $1,150,000 this past March (purchased for a recorded $1,300,000 in June of 2008), #2102 has returned to the market asking $1,180,000 ($901 per square foot).
Originally offered by the sales office for $1,010,000 not including any upgrades on the first day of sales back in 2006, prices were subsequently raised on day two. And as a plugged-in reader beat us to it, tax records suggest a purchase price with upgrades of $1,128,346.
∙ Listing: 425 1st Street #2102 (2/2) – $1,180,000 [MLS]
∙ A Return To Reality For A One Rincon Hill “02” Stack Resale (#2202) [SocketSite]
∙ The First “Official” Resale At One Rincon Hill Closes Escrow: #2202 [SocketSite]
∙ First Impressions: One Rincon Hill Sales Center [SocketSite]
Tax bill (supplemental bill #800986) for 2102 suggests that the sellers paid $1,128,346.
So if they paid $1,128,346 they are looking to get out of this with just barely covering 6% transaction costs. Amazing how many listing prices indicate owners attempting to do just that.
This flipper did well, all things considering.
If he sells it before the end of the summer, he’ll lose about $15K-35K, which ain’t chump change, plus the cost of carry, maybe $40K if it was vacant, maybe $15K if it was rented, but not as bad as many others.
Roughly break even to walking away from the deposit.
Why should something typical and common be called amazing?
Why should someone who did nothing to a property be called a flipper?
> Why should something typical and common be called amazing?
Because many areas have already sunk below 2006 price plus 6 percent. Agreed, though, you can’t blame the seller for at least trying!
> Why should someone who did nothing to a property be called a flipper?
Because, if you do nothing to a property other than buy and sell it, you are by definition a flipper?
For the record, I don’t know if this person actually lived in the property. If he or she did then the “flipper” pejorative is unwarranted.
What’s amazing in July 2009 is when the tactic works. To read almost everyone on this site, that is, it should be impossible. But angling for it is easily understood, human nature, and common.
OK. “Flipping” is merely doing nothing besides buying and selling. Those who actually make wholescale changes to properties for profit are not “flippers” then.
“OK. “Flipping” is merely doing nothing besides buying and selling. Those who actually make wholescale changes to properties for profit are not “flippers” then.”
Whether changes are made to a property is not really important in deterring whether someone or a group is defined as a flipper. I would propose that a flipper is determined by the intent of the buyer. Do they intend to live in the property or rent it out long term, or are they merely entering the transaction to sell it subsequently for a profit. The resale process may begin shortly after purchase or could take quite a long period if the buyer does in fact make wholesale changes. In either case the buyer (soon to be seller) would be construed a flipper.
not sure if the first purchase was June of 08 probably was due to construction of building, but could have been a flip then, second this past March, and now a third one 4 months later, possibly 4th sale if June 08 was a flip, in a little more than a year. Wow, lots of turnover, flipper or not.
The fact people are buying these shocks me but it is a good sign. At those prices in that building.. after all the drama this year regarding stall or cancellation of tower 2, knowing the location will be desolate for some time with all the projects surrounding cancelled and of course the economy. Amazing, congrats to someone.
Signs are hopeful for the David Baker/Emerald Fund project at 333 Harrison thanks to $11 million in stimulus dollars … not to mention the 430 Main Street development is intended to start breaking ground in 2010 … we may see some new construction in a year near Harrison Street in Rincon Hill. Wish I could be hopeful about Fremont Street between Harrison and Folsom, but looks like it’ll be a blight-ish block for some time to come. I don’t remember if I’ve mentioned it on here before or not, but I just learned at the SOMA Leadership Council meeting hosted by District 6 Supervisor candidate Jim Meko that the US Postal Service letter carriers will be moving to a new building at 550 Townsend next summer and that entire block (between Main and Beale, and Harrison and Folsom) will be put up for sale …
The market will not improve until every last flipper is gone. Properties are not stocks to be bought and sold. This speculative mentality is what created the debacle.
I thought Tishman allready bought that lot (postal service block) to erect another Infinity like property?
there will be flippers as long as there is money to be made. that is how capitalism works. Speculative investments, for better or worse, are an integral part of our economic system.
LMRiM,
Quick OT question. Is Peter Schiff a good source? Just finished the “Little Book” and waiting for “Crash Proof” at the library. He sounds a lot like your posts.
SJ
Sunny Jim,
I like Peter Schiff, but I do think his investment thesis will be wrong in the near- to medium-term.
I think his fundamental error is not giving enough weight to the likely effects of the deflation of credit that is just getting started imo. These are generally dollar positive and asset price negative, all other things being equal.
I fear that he might wind up being right in the long run, that our overall finances are such that the US is going to crash and burn in a hyperinflationary blowout. (Actually, that’s almost certainly right – but “long term” might be a very long time!)
That being said, it’s worth reading Crash Proof imo. Not tremendously well written or anything, but I read it in 2007 and certainly it gave me some ideas on possible future scenarios.
LMRiM — do you like Hugh Hendry? He’s in that camp too (the initial deflation part at least), but I have no idea if he knows anything more than anyone else.
You sound a heck of a lot more like Hendry than Schiff to me!
Schiff strikes me as a little tone-deaf, but you know 5 times more than me.
Dub,
Thanks for the lead!
LMRiM,
Can you clarify the, ” I do think his investment thesis will be wrong in the near- to medium-term.”
line. His Bull Moves book is really a Euro Pac Cap brochure so, I was really trying to edit what a real investment strategy would be for the novice.
Thanks!
SJ
dub dub,
The only Hugh Hendry stuff I really recall reading was his recent Eclectica letter/article on treasuries that made the rounds on zero hedge and probably a few other sites.
I liked his approach and thought it was sensible. You always know when you’re reading someone who’s actually managed money in an “absolute return” sort of environment, because they instinctively look at the future probabilistically and therefore look at current asset selection as an exercise in maximizing the risk/reward parings for alternative possible future states. On that score, he sounds honest to me.
Sunny Jim — you are in for a treat, because Hendry gives very entertaining video interviews.
Sunny Jim,
I’ve got to run but I’ll try to post something (short, hopefully) tomorrow on Schiff’s investment thesis and some ideas on investment strategy. The short answer on his investment thesis being wrong is that he imagines that Asia will suddenly become a domestic-oriented economic bloc and that dollars will “suddenly” come flooding back into the US, raising the cost of everything in dollar terms.
In the case of Asia, that is going to be a long term process involving political change, and in the case of dollars coming back, it’s all just government IOUs that he is talking about (treasuries, mostly) and liquidation of treasuries will tank all the Asian economies pretty quickly – both from demand destruction of its export target (the US) as well as total currency chaos as most of the Asian currencies are either explicitly or implicitly managed against the USD.
Europe is hopeless imo. Forget about them (for the most part – maybe Turkey and some of the “fringe” Europe economies might turn out to be good bets).
Some recent Hendry interviews
http://www.ft.com/cms/893ac9c8-757e-11dc-b7cb-0000779fd2ac.html
LMRiM,
Looking forward to it.
Dub,
Will give it the going over. Looks good!
SJ
Sunny Jim,
I pulled out my old copy of Crash Proof, and here’s where I think he’s wrong (and has been proven wrong):
1. Too bearish on the US dollar near term. In credit deflation, money gets destroyed – the remaining money becomes worth more. As the biggest debtor nation, the US will suffer the largest destruction of money. Counterintuitively, this will support the dollar until such time as mass inflation makes sense (basically, when the USG has all the debt and the private debtholders have been made whole – or nearly whole). We are in this process now, but it has a ways to go.
2. Too bullish on European companies and expects a quick reworking of the structure of Asian economies from export focused, command and control eocnomies to more freewheeling domestic economies. I think Asia is in this process, and that’s why I like Asian stocks long term, but it’s going to take time. Some economies (like Japan) are already very domestically oriented, but suffer from vestiges of command and control structures, while others are even earlier in the process (like China). India might be the most interesting if I had to pick one economy over all the others, but I do think diversification is very important when investing on the other side of the world, and would thus want general Asian exposure, with perhaps modest overweights in India and Japan (on valuation grounds).
3. Too bullish commodities near term. This is the flip side of his dollar bearish call, and also follows from his failure to recognize that credit destruction on the scale that is taking place (and will continue for a long time) will negatively impact commodity prices. That being said, I like commodities very long term, as the secular cycle of commodity weakness that has gone on since the early 1980s is basically over imo.
4. I can’t recall exactly, but I think he was very concerned about US sovereign debt levels and a hyperinflationary spiral ensuing because of that. Maybe that will happen, maybe not – I’m not so sure. He does overlook the possibility that US sovereign debt will simply be forgiven on a mass scale by Japan and China (and perhaps some petro states) in exchange for political considerations (“Oh, you want Formosa? Here’s what it is going to cost…”). That’s not something I’d bet on as a central thesis, but it’s always a possibility that should be at least considered as a forecast risk. BTW, I am not worried about US SS and Medicare entitlement spending – the USG is just going to selectively default on those obligations through inflation, rationing, changing the rules of eligibility, etc.
5. Too bullish gold. I think gold has a definite place in an investment strategy, but to my mind it’s largely a hedge against long term monetary inflation (like, over a 30-50 year period) and more short term against outlier possibilities like a bank holiday or managed devaluation of the USD. As such, it is more an insurance position. The dynamics of monetary deflation, conversely, would presure gold, all other things being equal. Put it all together, and I guess I’d look at gold as more an insurance position – perhaps appropriate for 5-15% of one’s portfolio/net worth, depending on risk tolerance, need for that sort of insurance and overall net worth – rather than as a money making spec bet as Schiff seems to view it.
Anyway, I hope that helps, and after you read Crash Proof see if any of these ideas make sense to you.
LMRiM,
Thanks for the post! I like the fact that Schiff is one of the few talking heads that will say Government is the problem and don’t believe the hype so, that’s in his favor. He gets a bit over the top in Bull Moves when he says the dollar will drop so much in the short term that you need to get him to broker the gold that’s going to double. He also goes into a hoarding vent that’s pretty funny.
My bet is on India as well. We have our money in Vanguard accounts. Any areas I might want to investigate? Let me know when you start your “Save Your Assets From The Government” business.
SJ
Investing in India ? Hmmmm…
Pro : forward looking government and high growth
Con : massive population becoming more and more dependent on imported energy
Pro : if energy costs skyrocket, much of agriculture can revert to old school (pre 1970) ways and be powered by cattle and cattle poop
Con : population may have already reached the point beyond what can be powered by water buffalo poop, causing civil unrest.
Pro : population remarkably resilient to catastrophic change (see 1945-1950), even in a decentralized democratic government with little censorship.
Con : locked in cold war with next door neighbor who can deliver nuclear treats within a few minutes. Defense on both sides on hair trigger.
Pro : Stable and wise leadership that would never initiate WW III
Con : Rival neighbor’s leadership crumbling with potential to place atomic toys into hands of religious fanatics who have a particular hatred for the infidels they perceive populating India.
Analysis : moderate to high risk, potential high return. Potential no return.
Milk,
Go visit!
SJ