Alvarado St project: Modern Art

[Juan Diaz]

Today’s spotlight project is located in San Leandro, near the BART station and near to the downtown. For those of you who are unfamiliar with the geography of the San Francisco Bay, there are three parts to the Bay, the North Bay, East Bay, and Peninsula (I’m ignoring South Bay b/c it’s too far away for this house). The Peninsula includes San Francisco and Silicon Valley, and is home to the most ridiculously-overpriced real estate this side of Manhattan. North Bay is pricey, but car-dominant. The East Bay is where most of the gentrification in the Bay is happening, with the rapid-transit system, BART, being the main engine of growth for people who want a quick commute into their jobs in San Francisco.

Because of BART, Oakland has been rapidly gentrifying, and it’s slowly spreading southwards. In addition, the absolute hottest trend in housing is modern houses. There is next to no supply of modern housing in the East Bay, and anything that looks like a modern house has been snatched up super quickly. HOWEVER, these houses have only really been built in gentrified or rapidly gentrifying areas of Oakland or Berkeley (north of Oakland).

My entire project here is a leading indicator, to take both of those trends that I talked about above, and begin to introduce gentrification to San Leandro, the town immediately south of Oakland. I’m planning on building 4 townhouses (see the renderings below), and building them right next to BART. It’s a wager on the gentrification momentum continuing its inexorable progress, as people who are getting priced out of the safe parts of Oakland want: a) safety, b) BART station and c) a modern house.

We found a lender who will finance the costs of construction (100%!) so the numbers are looking like this: $240K to purchase the land, $1.2 mil to build, resale of $2.3 mil, and finance costs of $200K on our financing. Total profit: $565K, based on an out-of-pocket of $274K

I’m well aware of the dangers of doing a leading project like this, before something else similar has confirmed the viability. Still, there’s enough meat left in these projections that we could walk out of here without a loss, even if we’re well below what we think the market will support. But I’m excited about this—it’s all about getting creative and making some MONEY$$$!