If you’ve ever wondered what’s behind that sweet little gate, here’s your chance to see.
We’re defintiely digging this “island” vibe and architecture. Don’t forget those invitations to the housewarming if you do as well. Or better yet, invite us over for a soak.
∙ Listing: 713 Rhode Island (3/2) – $1,495,000 [MLS]
I’m not really into that neighborhood, but this house screams one thing to me:
oasis.
mucho cool.
The singular hot tub accessed by two separate bedrooms gives off more of a swinger vibe to me. In spite of this I have to say I really like it.
If only it had parking!
No kitchen pics…
And the lack of parking is a problem.
Hey this is a kind of interesting statement on the market…
We’ve been seeing a lot of stuff sell for 2004-ish prices (and many cases 05, or 06). Trulia.com says this property last sold for $1MM in 1999. If they get their asking price ($1,200/sq ft in a ok-ish part of Potrero Hill – good luck with that!), they’re well north of what they paid, of course…
However – after 6% to the realtors, they’ll actually receive $1.405MM … which yields a compounded annual return of just 3.85% since they bought it – i.e. about what you would have earned by buying into a municipal bond portfolio in 1999.
I knew that prices had erased most of the last couple/few years of gains … but until I ran this calculation, I would have figured that anything bought 10-ish years ago would have posted massive returns. But no – at least in this case, we have SF real estate basically doing about as well as muni bonds (muni’s aren’t quite yielding as much as 3.8% now, but back in ’99 they were). Wild.
It gets crazier if you adjust for inflation. $1MM in 1999 dollars is $1,282,000 in today’s dollars, according to gov’t CPI data. This means we’re looking at a real (i.e. inflation-adjusted) return of $123,300 in today’s dollars. And if this sells for $1,000/square foot instead of the lofty $1,200 they’re asking for (assuming Trulia’s correct in saying it’s 1,242 sq. feet – the MLS is silent on this key number) – they’ll basically end up selling for the same price that they paid in 1999, inflation adjusted.
Who’d’a thunk it? SF real estate (in a neighborhood that has come a LONG way since this place last changed hands) basically treading water after inflation over the past 9 years…
I may have blown these numbers, or I could be looking at this all wrong. If I am, please correct me – I’m no expert here & would love it if an expert would weigh in & point out any massive errors in my thinking – thanks!
– Craftee –
PS – I’m in no way suggesting that a muni bond portfolio would give anything like the delight & comfort of living in a home that you love. I’m sure these people had great years in this home, and the fact that they’ll kind of end up living in it “for free” is no doubt extremely worthwhile for them. But looking at it on a purely financial level, the returns aren’t anywhere close to what I’d have expected!
Craftee,
Interesting analysis. But I come out with something quite different. First of all, they were living in the house. That’s certainly worth something and it needs to be figured into their overall gain. So let’s add their putative rent to. 3K a month average from 1999 to now seems about right. That’s 36,000 X 9 = 324,000.
Their overall gain is thus 1,405,000 + 324,000 – 1,000,000 = 729,000.
I don’t know how you were calculating your rate of return. But if you are comparing to munis, compounding isn’t really appropriate. 729,000 / 9 = 81,000 per year of gain.
We don’t know how much they put down or how much equity they paid off during the 9 years. If they paid all cash it would mean they earned 8.1% per year from it.
If they had 20% down and an 8% loan (typical in 1999) they’d pay about 64,000 a year in interest. That means they’d be earning 17,000 a year on their 200,000 deposit, which would be 8.5%.
Muni rates in 1999 ranged from 4.75% to 6% (according to a web site I found via Google). None of this is really exact but it seems to me they’ve done ok, at least relative to munis, particularly because their gain is under the amount that would trigger capital gains tax.
Hey Salarywoman –
Thanks for the input … and actually, I wasn’t thinking in terms of “renting vs. buying” but rather of the more simplistic question of “has SF RE appreciated at crazy rates over the last ten years” (more from a pure investment standpoint, in which occupant rent savings wouldn’t really figure into the picture…). So I was thinking about it from the standpoint of a hypothetical investor, who might have put $1MM into this place, vs. $1MM into a muni bond portfolio (in which the returns would be reinvested, thus the notion of compounding…); then come back in 9 years to check & see the difference in net appreciation.
The math seems to suggest (particularly if we assume these folks don’t get their $1200/sf asking price – and that still seems very aggressive) that at least in this particular case, it’s not done any better than muni bonds (generally viewed as being a boring, high-security, low-yield instrument).
All that aside – THANKS again for the input. A flaw in my thinking is that the hypothetical investor would have surely used leverage, which as you show would have upped the returns…
Also, while said hypothetical investor would not have saved on personal rent, s/he would have surely rented it out, and that should be part of the equation … although if we look at that, we should also figure in property tax, vacancy, maintenance, and management while we’re at it, which would knock the net annual cash flow down significantly from the full $36K/year … and of course even owner-occupants would have faced the property tax & maintenance bills…
nice analysis salarywoman.
sounds like these folks made lots of money and got to live in a great place. even tho they bought in a marginal neighborhood they still beat the hell out of the stock market.
notice how its getting harder to find any investments that did/continue to do as well as simply buying a home (esp. since you have to live somewhere anyway).
so going forward i suppose craftee would suggest investing in muni bond mutual funds and renting over any exposure to real estate. good luck with that.
No need to be nasty, Paco. I am/was just hear to learn. I wasn’t “suggesting” anything, actually – just running through some numbers that I found interesting, and openly seeking input – as I pointed out unbelievably clearly in my first post (see the words after “PS”. And I’m sorry if there were some difficult words in there – I’ll try to phrase it more simply for you next time).
Oh – and fyi, asking for $1,200/square foot in Potrero Hill isn’t quiiiiite the same as actually getting it, now is it? Oh I forgot – nothing in SF ever sells below asking, does it – particularly not these days. How silly of me.
“No need to be nasty, Paco. I am/was just hear to learn. I wasn’t “suggesting” anything, actually”
i’m sorry you took my comments as being nasty.
but i do think you were very actively ‘suggesting’ a lame case.
and you can hear that here…
The avg. $/sq foot in Potrero is currently $530 (asking). No way these people will get a price that keeps up w/inflation vs. ’99 assuming that the sq footage #’s & CPI numbers cited in the posts are accurate…
But of the other 11, 3 don’t give square feet. They don’t because the would be high. Of the 8 remaining 2 are total fixers, 1 is deep on the south slope, and 2 are on the highway.
Potrero hill is very micro.
Micro is the new “real SF”
For 1.5 million, I want a garage for my car. It’s a sketchy neighborhood, not one where you want to leave your car out on the street, and not one where it would be easy to live withhout a car.
The MLS listing doesn’t state the square footage or the year this was built. I guess the agent is counting on someone falling in love with the place and not looking at the numbers. MLS should not accept listings that are missing such basic data.
I’d want a garage, too, but I wouldn’t call 19th and Rhode Island “sketchy”– it is on one of the better blocks of Potrero Hill, and several hilly blocks away from the projects.
Parking is easy around there, but there are car break-ins, so I agree on the desirability of a garage.
This was chip conley’s place (of joie de vivre hotels) until maybe 5 years ago – he’s the one who designed what you see here.
I went to the Sunday open house. Nice place, nice spaces, some drawbacks and flaws. The garden is really beautiful.
I heard two people ask the realtor about the square footage. She stated that the records said it was 1200 sqft (or 1400 sqft—I honestly can’t remember) but that in her opinion it was “obviously more than that.” It was not obvious that it was more square footage than that. But it was obvious that the realtor was guilty of either not doing her homework or of trying to avoid the issue.
It’s one block from the crest of the hill, which puts it close to “sketchy” and yes, there are car break-ins here.
The biggest sadness was the fact the nice view had until recently been spectacular. But the next-door neighbor to the north is now building a new story to their house, cutting the view in half. This was tragic.
A nice modest house with a modest scale. If it was in fact Chip Conley’s, that explains the nice vibe the place has. But I don’t think this is a 1.5m house in this day and age.
car breakins = sketchy
requirements for a “nice” neighborhood include that you feel safe walking alone late at night, and feel safe leaving an expensive late model car parked on the street out of site late at night. Not just one full of expensive (or wanna-be expensive) houses.
If car break-ins = sketchy, then Pac Heights and Nob Hill are sketchy, too.
Yeah – the whole city has car break-in’s & thefts, which is why in my view a place w/o parking is a bad idea in general, and a place w/o parking at $1,200/square foot a block from the top of Potrero Hill is lunacy.
Personal safety is another matter – PacHeights, Nob Hill and many other neighborhoods feel comfortable late at night. That stretch of Potrero feels OK but marginal. Living in a place that’s OK but marginal is fine so long as you can pull into a secure garage when you come home at night (my girlfriend used to live at 24th & Capp, which is way, way worse than marginal, but always felt safe because of her secure parking situation. Although I still hated the idea of her living there). Absent that, it’s a terrible idea…!
My boss was robbed at gunpoint (in his driveway) on Marina Blvd. My colleague had his truck broken into so many times in the Marina that he moved to Tiburon. Sketchy areas? I’ve lived near the projects in Potrero Hill for 2 years now (the dreaded south slope!) and to my surprise, haven’t had any problems (I walk or bike everywhere and have to open my garage from inside my breezeway). Granted, the projects are ugly and scary, but from what the police have told me, most of the trouble comes from the Oakland, via easy hwy access. 19th & Rhode Island is hardly sketchy.
This one is back on the market. They cut the price $166K (11%) to $1.329M:
http://www.redfin.com/CA/San-Francisco/713-Rhode-Island-St-94107/home/1396337
2 days on market (lol). Looks like SF sellers are following the market straight down. Last sold for $1M in 1999.
now marked down to $1.26…$710/ft²
I just came across this one – it looks like it sold:
http://www.redfin.com/CA/San-Francisco/713-Rhode-Island-St-94107/home/1396337
Purchased for $1M in 1999 – almost ten years ago – and recently sold for $1.165M. Not too bad. They cut the price over 20% from their original dreaming price and got it sold. At least they covered their commissions!
(For those who care, it exhibited an approximately 1.6% CAGR nominal appreciation over the 9-1/2 year holding period, and about negative 1.1% CAGR in CPI-deflated real terms.)