Every Friday afternoon this month we start an open thread with an expert (think real estate agents and architects) for you, the readers, to ask questions and get answers. We'll do it again this Friday, but in the meantime check out the best questions and answers from Friday's thread featuring realtor/attorney Kevin Ho of Vanguard Properties.
Q: Could you list the general risks/concerns of buying in a TIC vs. buying a condo?
A: The TIC vs. Condo debate can be a heated one especially here in the City because of the implications of the interplay between owner rights and tenant rights. Generally, buying a TIC means your neighbors are more akin to your business partners than just being your neighbors. Setting that all aside, here's a very quick pros vs. cons list.
A TIC is usually cheaper than its condo equivalent by anywhere from 10-20% depending.
Oftentimes these are classic SF homes redone and renovated; the only way to get traditional SF and modern conveniences in one.
Potential long-term investment return if the TIC can convert into a condo.
Solid way of entering the real estate marketplace.
Only two lenders lend on them. At least most loans are now fractional which insulates borrowers against their fellow TIC partners. These loans have higher interest rates, 20% minimum down payment, and no FHA-type of lending. No TIC loan is fixed beyond 7 years typically most people will refinance before their loan lock interest rate expires however.
Increased dealing with your neighbors. You all own the building together and have to deal with each other as such.
Risk that if another TIC owner in the building defaults on their loan or taxes you're left holding the bag. There are remedies to this of course but it could stymy anyone else's resale ability so long as the issue remains unresolved.
TIC units are likely to be subject to rent control laws.
Q: We're going to redo our kitchen. What should we be aiming for as far as materials and appliances that will most add to the resale value of our house?
A: I love remodeling. You love remodeling. HGTV loves remodeling. But will a buyer? There's a balance you have to follow here because there's a point of diminishing returns when it comes to remodeling. I often tell my buyers to do any remodeling before they move into a new house because doing it at the end will mean you never got to enjoy it and that someone else may not like it at all and end up changing it in the end anyway. Some of my developer/contractor clients tell me stories of having to rip out $100,000+ unused kitchens where sellers had remodeled for a sale only to have a buyer redo it all over to fit their own tastes. That happened in Pac Heights.
For the rest of us, you should strive for neutral, clean and modern. Play up natural light, views and the like. Most people like gas appliances, expect stainless steel and functionality along with an open lay out. You can spend hundreds of thousands of dollars of course on a kitchen but simple choices like Carrera vs. Calcutta marble will save you a great deal and have analogous looks. Here's a list:
1. Backsplashes. Clear, clean and simple. Mosiacs are okay sometime.s Stainless steel could be bold.
2. Undercabinet lighting. Make sure the light source doesn't blind anyone sitting in another room.
3. Solid countertops. Concrete/Quartz/Casearstone, Corian, Marble, ( Granite less so) wood chop block.
4. Stainless Steel appliances: Gas ranges, dishwasher, French door refrigerator, good exhaust fans, garbage disposal, wine coolers, kitchen islands, good flooring. Brands: Miele, Viking, Jenn-Air, GE, Whirlpool., Samsung.
5. Don't forget good lighting!
Q: What areas of the city do you feel are currently "in transition" and will be the next popular neighborhood to be inhabited by young professionals & families?
A: Dogpatch. Spotted as such by the NYTimes a while ago, the area has become destination for more folks than the Hells Angels and City Attorneys. New businesses alongside established neighborhood favorites are popping up. New construction developments like the Millwheel sold out in about 5 weeks last summer and the second phase is coming later this year or next. Longterm: Mayor Lee has said that there may be plans to end CalTrain near Mariposa Street which would make the 22nd Street Station the de facto commuter station down south. Not to mention UCSF is slated to open in 2014 down on 3rd Street.
Inner Mission. You're already seeing more strollers and general contractors in the neighborhood. There's a demographic change going on here. 24th Street is home to new "it" places like Wise Sons and Dynamo along side with renovated houses on Treat, York and Alabama.
Miraloma Park. Here many homes were bought post-WWII as part of the Baby Boom. Now those homeowners are transitioning out of their homes and are being replaced by younger families who can't afford to buy in the sunbelt or those who want yards and garages, good access to the South, Noe Valley and Glen Park and those just or need a single-family house.
Q: I am looking for a home in Bernal Heights or Glen Park. How would you compare these two neighborhoods? Which one has more upside? What type of developments do you see in the future?
A: I have clients facing the same choice now. This week it looks like there are a few new listings in Bernal worth checking out whereas there is nothing new on in Glen Park. This is indicative of the two areas. Bernal will have more opportunities and variety whereas Glen Park listings are less common because its relatively smaller.
Glen Park has a BART station (always a good draw), access to 280 and a cute neighborhood feel near Chenery, Wilder and Diamond where most of the shops and services are located. I think development is more renovation-based than anything else as the rest of the area is hilly, curvy and dominated by attached single family homes with a few duplexed and apartment buildings sprinkled in.
Bernal, on the other hand, doesn't have BART but is markedly bigger and therefore more diverse. There's both the North Slope which is close to the Mission, Noe Valley and Inner Mission and 101 and 280. and the South Slope. So you get curvy roads and single family homes, but you'll also get some flatter areas where there are more duplexes. Bernal gets more sun than Glen Park (depending on how the fog comes in) and Cortland is its main drag. Cortland has more shops and services than the Chenery area.
In the end, both have their charm in that they both have a "main street" feel. Both have parks (Glen Canyon and Bernal HIll) and both have generally the same type of housing. There's just more of it in Bernal and there's more selection because of it. I think Bernal edges out Glen Park for Cortland, and because you can access both 280 AND 101. For me, it comes down to sunshine and Bernal wins for that. But just only.
Q: How much can a 30 year old single guy afford to buy a one bedroom condo 900 square feet . Giving him a mortgage monthly payment of $2700 dollars beside dues and property taxes.
A: It depends of a number of things of course. Lending has become quite rigorous in that money is cheap, but not easy. Most lenders will want at least 20% down. WIth $150,000 that puts you in the $750,000 range. This should allow you a good amount of choice for a 1 bedroom. You may be able to get 2 bedrooms with 1 bath with parking. The total square footage will vary on where in the city you buy.
But wait, there's more:
More important is your debt-to-income ratio. This is your gross monthly income compared to a mortgage payment. Generally, lenders won't allow more than 40%-45% thereabouts.
Plus, if you're not putting down 20% you may have to pay monthly mortgage insurance premiums or private mortgage insurance depending on what type of loan you get. Generally, FHA loans (where you can put down as little as 3.5%) aren't considered the strongest ones by sellers. If you're thinking condo, not every condo building qualifies for such loans. In those cases, you should consider other alternatives like census tract loans or other 80:10:10 programs. In other words, you have choices. Congrats!
Q: Hi, are homes around Dolores/29th St really still part of Noe? I know that's where the official boundaries for Noe end, but to me, the heart of Noe is really Noe/24th St and I wonder if I should pay more (OK, in often cases, a LOT more!) to buy right in the heart of Noe which seems sure to appreciate VS the outer edges of Noe which are less developed?
A: In my book you're right. 29th Street feels a bit more like the twilight zone Noe Valley or, as I call it, bizarro Noe Valley. It's quieter, more mellow and residential than the bustle of 24th Street. But it's still considered Noe Valley. What gives? While the power to draw boundaries rests with the mapmakers and how many sub directs they want to create, what's more important, is the point you hit on: perception. Perception is ultimately based on what you feel is right. Yes, I said "feel."
Despite trying to apply logic and statistical models to quantify real estate prices, real estate is inherently irrational and more emotional than we'd like to admit sometimes. After all, a market price is only as good as what someone is willing to pay for it. And if having the moniker of being in the 'real' Noe Valley is important enough to pay a premium for it, then so be it. It's worth it to someone to pay more. And in this case, it so happens that this is a common perception. Therefore, it'll be likely that someone else will equally pay a premium to be closer to the corridor perceived to be Noe Valley than to the one defined by the maps. As long as this perception holds up, resale potential remains strong.
But name cachet should be only one consideration among many that I think you should weigh in your decision making.
I always ask my clients to identify what's really important to them. Determining what really matters at the end of the day will guide you in deciding what you'll pay more to possess. So it may be moniker, location, square footage, ability to remodel, if there's a yard, how far a property is from transit, what type of light a home gets, etc. After you determine the importance of each to the best extent you can, then you'll start to have your answer of whether being nearer to 29th Street is more important to you than being nearer to 24th.