July 27, 2011
Take Two (Or Three) In The Marina And Call Us In Another Five Years
Purchased for $1,575,000 in March of 2006, the Marina District duplex at 3561-3563 Pierce returned to the Market this past February listed for $1,650,000, it also includes a "permits unknown" garden (or garage) one-bedroom that’s rented for $1,274 per month.
Reduced seven (7) times since, and having been refinanced in 2007 with $1,456,000 in debt (versus $1,256,250 at the time of purchase), the property has been listed as a "short sale" at $1,485,000 for the past three weeks.
Keep in mind that three months ago, two months after being listed, a notice of default was filed on the property with $87,042 then past due on its $1,274,000 first (mortgage).
∙ Listing: 3561-3563 Pierce (2 x 2/1 + 1/1) - $1,485,000 (short sale) [MLS]
First Published: July 27, 2011 9:00 AM
Comments from "Plugged In" Readers
17.87 GRM won't work for investors. All units rented, and that won't work for owner occupants. Something has to give.
Posted by: rabbits at July 27, 2011 9:45 AM
I used to be wow-ed by 360degree shots. And then I turned 14.
These shots might sound very cool, but they're not helping much.
Posted by: lol at July 27, 2011 9:50 AM
yes, clearly at at 17+ GRM renting all 3 units is not the highest and best use of this property. especially since one unit appears to be an illegal inlaw.
this ties in nicely with the post earlier this week on VRBOs. my bet is the buyer gets the tenants out and either
1) converts this to two nice units (including all 3 floors) and condo converts or does short term rentals or
2)combines the whole house into a pseudo single-family ala the fugly 112 Mallorca.
wish i had the cash to do it. probably will be another example where rent control and tenants rights work against themselves.
Posted by: resp at July 27, 2011 10:41 AM
I'm betting that this one goes back to the bank (not many people will pay that much for a place in SF with tenants that will be hard to get rid of)...
When a property goes back to the bank and is re-sold to a new owner the tenant security deposits are typically not credited in escrow (like they are on a normal sale). Does San Francisco have any city laws that protect the tenants (or do they have to take the previous owner to small claims court to get their deposit)?
Posted by: FormerAptBroker at July 27, 2011 11:01 AM
The responsibility to return the security deposit transfers with the ownership. Whoever owns the building (or unit) at the time the tenant leaves is responsible for returning the security deposit. Usually the security deposit is transferred from one owner to the next, but if there is a foreclosure, that's unlikely. If the then current owner did not get the money from the prior owner, or otherwise account for the deposit that would have to be paid, by reducing their offer price, tough luck.
The courts will always make the owner, as of the date the tenant left, return the security deposit. The former owner is not part of the deal with the tenant after ownership transfers, though the current owner could try to sue the former owner to get them to return it. In this case, it likely wouldn't be worth anyone's time.
By the way, the tenant can sue the new owner for services not provided by the former owner and, you guessed it, the NEW owner must pay. The new owner essentially takes over all obligations of the rental business from the former owner, because the rental business is who is being sued. Again, the new owner could go after the old one, but the old one usually has no money so it's probably a waste of time. If the current owner is a deadbeat and not providing services to the tenants, it's in the tenant's best interest to wait for a deeper pocketed owner to show up to sue.
Posted by: tipster at July 27, 2011 11:20 AM
this property is the reason you should never hire an out of town agent. it is impossible to get into, and when you do it is the tenants letting you in which means you're likely to only see one of the 3 units.
meanwhile, the two main units are 1 bedroom with a sunroom. you know how you normally have 2 bedrooms in back with an extra sunroom? well this doesn't have a 2nd bedroom. so the sunroom which is small and only accessible from the main bedroom is considered the 2nd bedroom.
bad marketing, bad agents, bad layout, tiny yard - makes for a happy socketsite apple experience for the bears.
Posted by: hangemhi at July 27, 2011 11:44 AM
Another problem for investors, besides the 17+ grm is that the rents look to be within 10-20% of market. Hence no upside. Probably not that hard to buy out one of the tenants for owner occupancy though. There is parking, and 1200 sq ft could be made into decent units if the layouts permit. This thing could be interesting to the right owner occupier/investor at ~$1.3 mil.
Posted by: 47yo hipster at July 27, 2011 3:38 PM
Well maybe not. Just saw hangemhi's note of only 1 real BR. But 1200 sf is still decent space for a 2/1. Don't know, didn't see it.
Posted by: 47yo hipster at July 27, 2011 3:41 PM
you won't have to pay any tenants to owner-occupy one unit in this building. just give enough notice.
i just thought of one more possible highest-and-best use. foreign all-cash offer + $20K at home depot = living for the extended family. bet one of these 3 options will be the end result.
again i think this is a good deal up to $1.4M
Posted by: resp at July 27, 2011 4:15 PM
No, you have to buy them out.. Assuming they are not protected, or claim protected, right now it's it's only $5,101 per tenant up to maximum of $15,304 (unless of course, there are elderly, disabled or minors living there, in which case it's another $3,401 for each one of them).
Posted by: R at July 27, 2011 4:37 PM
People who claim protected, and are not protected, should automatically lose their lease. What a joke that ploy is.
Posted by: [anon.ed] at July 27, 2011 5:18 PM
I see 2 potential outcomes for this property:
1 - Creation of a 2-unit TIC with the condo conversion in sight if you manage to merge the illegal unit with the bottom unit. With a partner you'd be eligible for fast-track conversion provided the tenant situation is cleared without any pain.
2 - Merge the 2 upper units into one. Keep the bottom one and legalize it as an au-pair to appease the housing unit-obsessed at City Hall. I am pretty sure this will be what happens there.
Not much market for low ROI rentals. TICs are also a bit depressed these days. Good market for large enough places in a good location.
Posted by: lol at July 27, 2011 5:33 PM
I believe that section of the block has a some settlement issues -- a property nearby is leaning forward. You can see it in the crown of the adjacent buildings. I will also note stress fractures in the facade / sidewalk.
Posted by: Local at July 27, 2011 10:15 PM
i stand corrected. you will have to "pay out" the tenants to leave per the law and they will have no choice (in one unit). you will not have to "buy out" the tenants -i.e. make them a higher offer as incentive. you may have to "buy out" the tenants in the second unit (or make a lot of remodeling noise). i imagine you could easily evict the tenants in the in-law in order to "bring the building up to code".
re-emphasize that a 3 unit rental is not highest and best use and this is a poster child of why liberal rent rules backfire.
Posted by: resp at July 28, 2011 6:28 AM