All Forum Posts by: Amit M.

@Justin Thorpe and @Joe Bertolino I agree with both of you. Of course there is a balance to everything, but there is no doubt in my mind that the news and media is disproportionate hyping up one side of the equation.

Joe- interesting anecdote about the Sacramento apartment sellers seeking SF properties. Right now it's largely detente between apartment building buyers and sellers in SF; most owners won't sell at fire sale prices, so buildings are lingering on market or being removed from listings. I'm sure a few will sell at the right compromise for both parties, but not a lot of transactions. So only if the vaccines are a big bust, and we are in the same position 1-2 years from now may prices drop significantly. But if we expect the vaccines to take hold in 2021 then we will start correcting fast enough whereby SF sellers can hold out for better selling prices. I know that SFH's are holding their prices well (sub $2mil, larger homes are selling for a discount.) This also happened in 2009-10, so if you're looking for a higher end home or condo (and I know people who are) 2021 is a time they plan to strike.

As I’ve mentioned before, SF is a very small market, and never has a lot of listings at any given moment. So it doesn’t take much inertia to change the market dynamics. Same thing with rentals. With so many units locked in at below market rents due to rent control, it doesn’t take much to swing the dynamics back to the landlords favor. 

Of course there are several key unknowns regarding overcoming covid. And yes Corp culture has changed due to forced WFH, which will continue in the future more so than prior to covid. But SF is a small city, so it doesn’t take a lot of new people coming back here to change the rental market dynamics, for the reasons I discussed before. Bumpy next 1-2 years, sure. But given all conditions discussed I don’t think that prime cities like SF will be on a long term trajectory of decline.

^ for SF, most renters have rent control and pay a fraction of market rent. People who pay market rents make way more than the median. as for Sacramento, prop 21 (oppressive statewide rent control, sponsored by a nut) just got flushed down the toilet by CA voters.  

Just saw this report on new leases being way up in Manhattan, for the reasons I discussed ^. I bet we’ll see a similar report on SF by summertime :)  https://www.millersamuel.com/f...

@Annie Shao I own a few residential properties in S.F. and also entertained 1031 into NNN or DSTs, but decided against it for several reasons. NNN isn't as secure as you'd think (look at all the major formerly solid retailers that are going banckrupt), and the secure ones have pretty low rate of returns. DSTs have significant fees, and you're not in control of the investments. When I get tired of managing my properties, I'll just pass them over to a property manager, so they'll be mostly hands off. Long term appreciation is still great in prime Bay Area IMO, so I should see better returns and cash flow than the above options too.
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my2c

Yeah, there are a lot of bogus click bait type articles claiming 30-35% drop in San Francisco rents. (Oh! The horrors!) 

That is only true for specific properties (mostly high rise condos) in specific neighborhoods (soma, downtown areas), and a couple tech heavy hipstery neighborhoods have also fallen a lot (the mission.) I can tell you for a fact that many other neighborhoods dropped almost nothing to 10%. And if you’re holding for the long run, which is most SF investors, who cares?

There is also tremendous hype with the sudden infatuation of work from home. Remember, work from home existed as an option way before covid. It’s not like companies were extolling its amazing benefits back when they had a choice. I believe there will be a strong reaction against work from home once vaccines dominate. People are quickly tiring of: families having to work and deal with kids/family members 24/7 at home; lack of work-home separation; singles feeling very alienated, especially young singles; companies loosing their corp culture due to lifeless and generic zoom interactions, etc. etc.

I think especially a vibrant city like SF, once the people who bailed realize that sitting on zoom 8 hours a day in some boring *** town, with crappy weather and nothing to do, really sucks! You’ll see, things will start to improve later this coming summer, and 1-2 years it’ll be business as usual in SF. Smart peeps are already starting to plot their returns, to secure a good apartment at relatively good rents, including those who have dreamed of living in SF but couldn’t previously afford to, those that were compelled to the East bay, etc., are paying attention. 1-2 years it’ll be like, S.F. landlord- we’re back bitches!

For all you guys hoping to BRRR-R*, one major hurdle is that (unfortunately) appraisers are giving laughable value's to ADU's. They see it as a "bonus", like a second garage, pool, or extra large yard. So that will effect your ability to carry out the last refi *R, as you're not gaining a lot of after rehab value, yet spending significant $$ on the ADU.

If you're able to buy duplexes or triplexes, you may have an easier time having the ADU count as a full extra unit, a duplex > triplex, etc. This will allow you to leverage the added value for your cash out refi. You may need to have your city update the property records to reflect the added unit. Although I haven't pursued this fully yet, I believe the way San Francisco building dept records work, once you update the records (usually for a new sale, but you can do it without selling too), the added unit is reflected in the unit count for multi family properties.

Food for thought...

@Lawrence Leung interesting comment on compass. From your perspective as a realtor/broker, what do you dislike about compass?

@Nick Robinson A focus on immediate cash flow is short term thinking vs long term returns. When looking at overall returns, an investment in San Francisco has outperformed cash flow oriented locations by a wide margin, not only due to incredible appreciation, but also in long term cash flow returns.

@Al Lee smart move. Especially now that we are shutting down again!

A bird in hand...the law of unintended consequences...choose your metaphor :)

@Lawrence Leung yes I agree we had at least some small local wins. But for me, the defeat of prop 21 was a HUGE win for SF property owners, as I’m sure vacancy control would have come to SF, and that’s a real game changer and a terrible policy for the city at large in the long run.

The other interesting long term prospect is that there is some chance that the US Supreme Court will hear a case on rent control from NY, which SF is also trying to partake in. And given the composition of the court now, there is a chance that they will strike down rent control wholesale (as a taking of private property.) that would be the holy grail! In the meantime the more SFs board of stupidvisors encumbers property owners, the more likely the Supreme Court will see it as an overreach of government...you reap what you sow...