All Forum Posts by: Amit M.

@Greg San Martin good summary. I’ll add:

1- regarding earthquake risk, I’ve given that a lot of thought too. My main conclusion is that I only want to hold properties that are, A- not on/super close to the fault lines (in SF I’m about 7-12 miles away). B- seismically upgrade my properties (sheer walls, anchor bolts as a minimum). C- make sure I’m not on landfill. Given that, I think I’ll only sustain damage in an 8.0ish earthquake. Of course all bets are off if it’s 9.0+, but that’s unprecedented for this area. That starts to speculate along the lines of getting hit by a massive meteorite, earth spinning out of orbit, etc. 

But yes, I hear you about diversification. A year or two ago I gave some thought to selling a building or two, and 1031 exchanging into commercial NNN out of state. But I didn't think it was worth it, and I didn't feel that NNN was attractive enough- the safest had middling returns with little rent upside on long term leases, and the more aggressive ones had either short leases and/or riskier tenants. And even back then, the security of NNN was suspect in my mind, given that formerly huge companies like toys R us, Sears, Blockbuster, etc. have gone bankrupt. Of course with corona, the security of NNN has been further shattered. Don't get me wrong, someone who is well versed in commercial can probably still find the good properties today. But that's not me. I know San Francisco residential very well, not out of state commercial. So basically I'd rather deal with the devil I know, as I have so many work arounds in my war chest, given all the experience I have in this market.

2- what exactly is the process for condo conversions in Berkeley? I only know SF’s, as I’ve converted several of my properties, and yes, it was definite worth it (though lots of nuances to delineate.)

Most people who could have kept, but ended up selling in CA, regret it 10+ years later. Think long term values!

Ok, a few more words ;)

1- I highly suggest you keep this long term, and work to maximize the added units. Ideally adding the 4th (regular) unit, and then the ADUs. All as practical as possible. These are great long term investments!

2- besides the main refi, you can always look at adding a 2nd loan, or a heloc on top. That will help you leverage your equity. Explore all options thoroughly, but don’t get overly concerned with squeezing every last dollar out. Better to leave some equity and do the above added units, then sell, be restricted by a 1031 timeline, and also deal with unknown areas in lesser out of states areas. Don’t let the tail wag the dog :)

3- My guess is that after you go 5+ units (even if ADU's) it will be considered a commercial loan, so easier to pull more cash out. BUT keep in mind that commercial loans have different terms and standards. Personally I prefer keeping to 4 units and getting a conventional 30 year fixed loan, especially now with super low rates, as I hold long term. (So personally I would add the 4th "standard" unit, max that loan, then add the ADU's and not refi. But that's me.) Commercial loans are normally 5,7, or 10 years fixed terms, or 15 years overa 15 year term.

Let us know what you decide to do by updating this post! Good luck

what

dan

said

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3words/1chart

@Chetan Patil that's a good question, as Ive been hearing about how several people who added ADUs have been getting effed on the new appraisals! Basically appraisers are totally subservient to the banks, and have not been receptive to the value of an ADU. Partly because ADUs are relatively new, and appraisers are very conservative (read: chicken sh!t) to allow much value for them- either as added sq footage, OR as added income property. 2 years ago I thought this was going to happen, but I would have hoped that by now it's gotten more standardized to add some tangible value to an SFH+ADU.

So if anyone has had direct experience where they have gotten anything more than a token $ value for adding an ADU to an SFH, please chime in!

@Michael C. 2 thoughts:

1- you could refi if the new rates are significantly lower. Or you could leave existing loans and take out a heloc, which gives you more flexibility, as you don’t pay interest until You start using the money. 

2- why not consider buying your own place with the refi as a down payment? Especially if you plan to stay in The Bay Area long term, you could look for a good deal/value add, etc. There may be deals in 2021. As you know, once this sh!t storm blows over, prices in prime Bay Area will most likely skyrocket again, as they have for the last 30+ years. 

target

market

dependent

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3words

@Steven Jackson you’re going about this the right way imo. Good luck and keep us posted. 

That article is garbage. Click-bait-hype. 

So SF inventory goes from an insanely small amount by 2x. Wow, 100% increase! Yeah, 100% increase of a tiny # is still a tiny #. 

Google Andrew Sirkin for a lot of info on tic’s.