2505 Divisadero

Last listed for sale at $9,500,000 before being withdrawn, Kirk Hammett’s recently remodeled mansion atop Pacific Heights (2505 Divisadero) is now being offered for rent at $14,000 a month. Yes, that’s only $1,550 per bedroom (there are nine).

And while that application from you and eight of your buddies probably won’t make it past the screen, we’re calling it a rental bargain. Not only relative to 313 Duncan or either of those high-rise condos, but honestly based on the math.

UPDATE: As noted, within an hour of our publicizing the craigslist post for 2505 Divisadero, it was “deleted by its author.”

42 thoughts on “Rent Kirk Hammett’s Mansion For $1,555 A Month (Split Nine Ways)”
  1. This proves at least one thing: all those lame brains who thought the Noe place from yesterday would really rent for $1000 more than a huge mansion at the peak of Pacific Heights will agree with just about any price for any property.
    As long as someone else pays it.

  2. Many thanks to SS for the recent rental features!
    If we’re going to make sense of the market, we need better info on rental values (for properties that are fair comps for the “finished” products marketed to owner occupiers), and that is something that no one seems to be collecting data on.
    Here are a few questions and observations, offered in the hopes of making the rental discussions more valuable.
    1. To all the market watchers who’ve stowed away their down payment money in the expectation of market declines–if you’ve recently rented something nice (as opposed to something cheap), let us know what you’re paying and roughly what the comps are selling for.
    2. If, like fluj, you have private info on recent rental transactions involving properties that had been listed for sale, and for confidentiality reasons you can’t betray the specifics, please write in with the rough numbers (rounded rental price vs. last listing price, property type, and neighborhood).
    3. Assuming that 15:1 is a fair approximation of price/annual-rent ratios over the long run (see http://www.cepr.net/index.php/publications/reports/the-changing-prospects-for-building-home-equity/), I think it reasonable to expect a somewhat higher ratio under present economic conditions. Just as the P/E ratio of stocks tends to rise during a recession, so should the P/E ratio of real estate. This is because “E” (rent) can be expected to decline well below its average/normalized value during a recession, whereas the asset price should include the capitalized value of post-recession rents.

  3. “This proves at least one thing: all those lame brains who thought the Noe place from yesterday would really rent for $1000 more than a huge mansion at the peak of Pacific Heights will agree with just about any price for any property.”
    Looking at those comments about the Duncan place, did anyone actually say that it would rent for that amount? No. No one said that. Funny how we see over and over again how you want it both ways, Tipster. You want to be able to generalize and summarize to get your point across. Yet you always ask others for precision.

  4. I think what this really shows is that the market is in flux and people don’t really know what a place should be going for.

  5. At $14k/month this Pacific Heights mansion’s gross annual rent would be 1/56 of the purchase price, leaving a ratio of 56:1. At this ratio the Noe place would rent for $4200/month.

  6. The craigslist posting has been pulled down. Maybe it rented already. Again, even if you paid the full asking rent, it’s still no more than 1/4 the total cost of purchase (at $9.5M).

  7. Now this is odd. I haven’t listened to it yet, but have heard that the newest Metallica album is actually pretty good for a change. So why rent this place out? Does Kirk need the money?
    Musical tastes notwithstanding, I do find it odd that so many high end properties that have failed to get their wishing price are now hitting the rental market. Is this normal for mansions? I’m seriously asking since I don’t follow this segment of the market.
    Nobody buys a place like this thinking, “I can always rent it out if I move.” People do that with 2/2 condos. So has the high end market seized, or what?

  8. Maybe the craigslist posting was a fraud?
    On the other hand, $14,000 per month isn’t bad when you compare it to selling the place for $9.5 million, paying capital gains, and sticking the proceeds in a money market yielding 0.7% annually, if that.

  9. cse – we rent a 2k sq foot recently remodeled home with a pool in Orinda for $3800 a month. It was on sale for $1.15 MM, reduced to $1.095 MM, then the owners decided to pull it off and “wait til the market turns around”. They bought the place for 920k in 2005, and have probably put just under 100k into it.
    I think our rent could be less, but we are paying a bit of a premium for the kitchen/bathroom updates and the pool.
    There is just so little sales activity here that it is hard to really get a feeling for comps, but with what little that is moving, the market has not shown too much downside yet, but I am certain it will starting pretty soon as more and more foreclosures and short sales are coming on line.

  10. “I do find it odd that so many high end properties that have failed to get their wishing price are now hitting the rental market. ”
    I don’t understand why this would be odd. It makes perfect sense. Sellers aren’t getting the top dollar they want. So instead of lowering prices, they test the rental market waters.
    Has the market seized? yeah. It has been a standoff for months. Buyers are wondering where all the fantastic deals are. Sellers see renters paying big bucks and think, “OK. The money hasn’t really left the city. Might as well wait it out.” Rent the ole place out.

  11. I understand that, fluj. I understand it as it applies to Soma condos or SFRs in Sunset, etc. But a 9-bedroom Pac Heights mansion?
    These are trophy homes. I thought these people were so rich they couldn’t be troubled with bitter renters mucking up one of the jewels in their stamp collection of palaces. That’s what’s odd to me. But at least the rent vs. buy here seems to make more sense than the Duncan or Soma places.

  12. “I do find it odd that so many high end properties that have failed to get their wishing price are now hitting the rental market.”
    I think it depends on your outlook. If you think the real estate market will rebound back to 2006 prices in the next couple of years, renting makes sense, because make-me-move prices are only a few years away. This is also known as the “ostrich strategy”–bury head in sand and ignore reality.
    Alternatively, if you think real estate prices will fall 60-70% over the next ten years and not rebound, it’s better to sell now, because prices have a lot further to fall. And while a 60-70% might sound like fiction, this is exactly what happened during Japan’s lost decade. This is known as a “chase prices down” strategy. Or a “last one out is a rotten egg” strategy. Or “abandon sinking ship” strategy.
    Personally, I don’t think SF will sink 60-70%, but 30-40% is possible, with rebound a decade or more away.

  13. If this is true, then it’s a pretty good deal! If I didn’t have a comfortable place to live, I’d consider renting this… maybe. If you’re just catching up, this house didn’t sell in 05, 06, 07, or 08; so you can’t totally blame the tanking high-end market on this one. Also, it’s in craptastic shape. Yes, it was painted to look less scary, but you’d be hard pressed to really mess this one up any more than it already is. In fact, it actually kinda sorta makes sense as a rental or a B&B. Come to think of it, what kind of restrictions are there on converting one of these things to a Bed and Breakfast?

  14. Those Craigs listings are a hoot. Semi-educated Realtors, and aspiring Landlords, should really learn the rules of Capitalization before creating Marketing Documents, however informal their venue of Publication. I, for one, would be uncomfortable entering a $15K/month contract with an Illiterate…

  15. Here’s a business model– sign a 20-year lease at $15k/mo fixed. Remodel and convert to a B&B. Must clear $1700/mo per room to pay for the rent alone — double that for services, heat etc. you’re looking at a minimum $100/day to break even. So charge $200/day assuming 85% occupancy, it could possibly work as a B&B.
    Or it could be a high-end whorehouse at $500/visit.
    Then after 20 years, the owners can market it for $19M!! Its a win-win.

  16. There are two components to encouraging an owner to rent their propeties in a declining market:
    (1) the market may turn more favorable in the future.
    (2) Long term capital gains for an owner that has held properties for decades are favorable for an owner to turn the property into an investment property (rental) and file their tax returns reflecting the property as an income property.
    This allows the owner, upon a future sale of the property, to complete a 1031 Tax Deferred Exchange (www.ies1031.com)
    This tax treatment allows the seller to defer the capital gains tax by purchasing a similiar investment property and keeping 100% of their equity.
    Present Fed long term capital gains tax is 15% with the State of Calif at 9.3%. for a total of 24.3%.
    The new President has suggeted that the Fed rate may be increased.
    Either way, turning the property into a rental may be a considerable attraction to an owner for tax purposes.
    Merry Christmas,

  17. So why rent this place out? Does Kirk need the money?
    I am starting to get worried; this downturn is really beginning to affect people.
    As a set piece for the upcoming tour, maybe they can build a giant replica of the house and it can hover ominously behind them, threatening to fall over and crush all those on stage and in the front row.

  18. And to think I was worried for this guy… Bought in 1993 for ~$2.5million. The property taxes were around $38k in 2006.
    Can someone help me out here. I know there is a law or axiom that states that long term owners are the ones who determine rental prices in a specific market. I bet LMRiM (or maybe spencer) could get Kirk to come down to $10k.

  19. I find it really strange that these high-end rentals are being advertised on Craigslist. I’d think they would be handled by rental brokers to the stars.
    As for the rent/purchase ratio, it’s pretty hard to value my apartment because it has a ton of deferred maintenance. I’m paying less than $3000/mo for a good-sized 2+ bedroom, 2 bath with parking in the real Noe Valley. The 15:1 ratio values it at about $500,000. Six months ago, that price would have seemed laughable for a comparable condo or TIC, and I still think it’s quite low.

  20. I think Frederick has it exactly right. Once a property has been turned into income property there are a lot more options available to an owner, including being able to take a capital loss if it does indeed get sold for less than the purchase price.

  21. This house is only one data point in a large market, so conclusions are hard to draw. But it is indeed a house of considerable importance, known to every neighbor for blocks around, and beyond.
    The previous owner was Ann Miller, a top social lady of her time. (She is now a nun, but that is another story that you can look up in the Chronicle.)
    Why didn’t it sell? It may be the lack of a good view, except from the top floor. Or the remodel with the music practice dungeon in the basement. Certainly it is a big and grand and prominent house, surrounded by the homes of some of the most interesting people in SF.
    A so-called social mountaineer could do much worse, and someone already involved would find the building and location ideal.

  22. Frederick does make good points. But there are also significant risks to going this route:
    Tenants can be hard to get rid of in SF, even for units that are outside of rent control. When it comes time to exit the landlord business, you may find your tenant makes that difficult;
    Holding costs can be substantial, and for anyone who bought in the last few years without an enormous down payment, chances are the rent would not even come close to covering costs;
    There are also significant opportunity costs. This strategy presumes that the market is going to rebound in the not-so-distant future, which is unlikely IMHO. You may be far better off selling now at a reduced price and having the cash on hand to invest rather than waiting for a rebound that may be many, many years away.
    But I agree that this approach may make sense for someone who bought long ago and who does not need the cash and can weather a long wait.

  23. I disagree with Trip that the rebound will be years away. The mere demographics of California, with no diminution of in-flow, from Latin America, Asia, and even Europe, will cause a rebound. The only thing that could stop it would be a permanent difficulty in getting mortgages.
    Pac Hts is very much like Manhattan or Knightsbridge: appealing to a wide range of local and long distance buyers. Then there are the traditional (old or nouveau) rich people, San Franciscans or not, who would not think of living in an anonymous high rise south of Market. The same sorts who would buy on the upper East Side but not in Tribeca, or in Kensington but not in so-called Fitzrovia or the Docklands, no matter what.

  24. It seems like the law prevents this from becoming a bed and breakfast or going to any other multiunit use. Commercial or rural zoning would allow that, but here an exception would be needed and almost certainly shot down by the local NIMBYs. Informally renting out to people might work, but only with rooms in the house and not with any kind of split unit thing. In some other location one might be able to simply get away with it because no one would complain, but not there, at least not in our lifetimes.

  25. I agree that no non-single-family use would be allowed. Indeed I am sure the neighbors would be happy enough if the Board & Care home on the south side of Jackson between Fillmore and Steiner reverted to single family use. It is a big beautiful Victorian, on an oversize lot with driveway that would probably sell for $5 to 6m, as is. The current residents, as far as I know, do not cause any problem, but nevertheless…

  26. Do rock stars pay cash? You gotta love the internets. At the time he bought the property in 1993, it looks like Mr. Hammett established a relationship with Home Savings of America. A deed of reconveyance was recorded in 1997, so he may well have paid off the house at that point. I must admit I like the Alameda County Recorder’s site a bit more than Ess Eff’s, as you can at least get parcel numbers to loosely correlate transactions.

  27. So why rent this place out? Does Kirk need the money?
    I am starting to get worried; this downturn is really beginning to affect people.
    As a set piece for the upcoming tour, maybe they can build a giant replica of the house and it can hover ominously behind them, threatening to fall over and crush all those on stage and in the front row.

    From what I understand, they have been living a lot in hawaii, especially after their recent baby.

  28. I’m in a similar position as RenterAgain regarding the rent/purchase ratio.
    We’re paying less than $3000/month for a large 3br/2ba + garage right in Glen Park village, (top floor of a house, 1br inlaw downstairs), rent includes all utilities and use of washer and dryer.
    Deferred maintenance is significant and includes old carpets, appliances, fixtures and windows, making it hard to value the place. Roof had a leak last year that the landlord had repaired. It was on the market before we rented it about 3 years ago, first for $899k with no offers and then reduced to $849k with no buyers.
    The 15:1 ratio also values it at about $500,000 but that seems way too low for the area.

  29. The 15:1 ratio also values it at about $500,000 but that seems way too low for the area.
    The HSBC report A Froth Finding Mission: Detecting US housing bubbles shows the historic price-to-rent ratio to be ~20 for the SF MSA. That would put the price around $720k. But frankly, HSBC’s methodology indicates that the “rent” portion is not necessarily for an equivalent unit in “price” portion. Therefore, it’s more a a measure of how far out of whack the price-to-rent ratio (32.7, Q3 2005) was from historic norms.

  30. If the historic price/rent for SF MSA is 20 or so what do you think the city should be. I would think slightly higher.

  31. RenterAgain & geekgrrl,
    I should think that on a building with a lot of deferred maintenance, the price/rent ratio would be lower than on a building that’s been well maintained (or a new condo).
    Deferred maintenance may not detract much from the “services” provided by the building today–but will do so tomorrow, unless fixed with a large capital outlay (think of a roof that leaks just a little a bit today, but might give way in 5-10 years if not replaced before then). A buyer should take the needed capital outlay into account when deciding what to bid, but renters don’t have to worry much about this (assuming that the problems caused by deferred maintenance will mostly be manifested in the future, after the renter is no longer a tenant).

  32. I’m sure Kirk doesn’t need this $14K per month and he probably would make a deal. I think I’d rather negotiate with him than with the Napster-killing, Basquiat-collecting Ulrich or the fence-building, some kind of monster Hetfield. Death Magnetic has gone platinum and Hammett has co writing credit on all of the songs and their tour is going to sell out every night so I’m sure Kirk is feeling pretty flush.

  33. I am puzzled. “The Bunk” excepted, is there no one reading this thread who rents a recently remodeled, pulled-from-the-market house or flat in SF and environs? Or who knows someone who does and can report the rent and former/current asking price? (Fluj?)
    Or maybe you all have better things to do than reporting on such things the night before the night before Christmas.
    Happy holidays, all.

  34. OK, cse: I just moved into a condo (in SOMA) that the landlord bought to rent out. It’s a recent construction and in great shape. I’m the first tenant. The sale looks like it was 500k, and rent is 2.5k/mo, so we have about 17:1.

  35. In 1990 I rented a “Gold Coast” Broadway mansion with Bridge to Berkeley views for $20K per month for 2 years.
    Two years ago we received an offer to lease the same property for two years at $40K per month.
    Unique properties can obtain unique rents or selling prices, even in ecomomic downturns.

  36. Also in 1990, I rented a 2 BR, 2 Bath apartment on Telegraph Hill at the foot of Coit Tower. Amazing Bridge to Bridge views from every room (including from both bathrooms) like you only see in the movies. Landmark building (Herb Caen used to live there), hardwood floors, tons of closet space, parking in a garage, big dining room, big living room. Did I mention that it had two bathrooms?
    People thought I was insane to pay $3000 per month and I suppose they were right – I could have easily lived in a $500 a month studio in the Tenderloin at that time and socked away a small fortune. But I could afford the place, just barely, and I still can’t believe I was ever lucky enough to live there.
    That said, I can’t imagine anyone paying $20,000 per month in rent that same year, even for an entire house.

  37. I’ll play. I just rented a nice, brand new unit in “the real” san francisco that was recently pulled from the market. The rent/buy multiple is 22:1.

Leave a Reply

Your email address will not be published. Required fields are marked *