One Rincon Hill (425 First Street): Rental Market Stumbling As Well?

Offer them $3K per month in cash if you want the views. Put any deposit in an escrow (using an out of work title guy – they’ll work for cheap) with strict disbursement conditions for the end of the leasehold (find an unemployed real estate lawyer – ditto).
Be prepared for whatever may come, but in the meantime enjoy living there at way less than half the cost of buying!

I’m with wow. $2800 would be the max I think it could rent for. I wouldn’t actually pay that, just saying that’s the max I’d think it could fetch.

I would say this place could rent for maybe $3200 in this economy/environment. If you use average historical housing multiples (which are 15x-17x annual rent) you come up with fair value of between $575,000-$650,000. That is where this proeprty and other sf condos are headed, there is absolutely nothing special about this building or any of the other condos in SOMA for the most part, they are all cookie cutter apts. As far as the views in SOMA, do you really want to pay a premium for views of the Bay Bridge???? I don’t think so. We are still in the early stages of the destruction of the SF condo market.

what happens if one rents such a condo and it ends up in foreclosure? will the bank kick you out? if not, when the unit gets sold to a new owner, can that owner then kick you out (assuming the new owner is moving in)? does it make a difference if you’re still in your 1-year lease, or if it’s after said lease and you’re month-to-month at the time?

That’s a 40% reduction eh…still quite a ways to go. the annoying thing is ORH and Infinity refused to negotiate back in August–at a time when they could have closed on these places at around or slightly above these prices. I tried to put some offers in at or above these prices –neither infinity or orh would bite. Lucky me tho–as the market has dropped a lot further than I thought. i.e. i was projecting maybe 40% declines–this looks like it’s going to 70% declines for some of these places..wow that’s gonna be rough..

It sounds selfish, but I am so happy I was able to get out of my deposit here. I would have been on my ass literally If I closed and lived there today. Wow. Smartest decision I have ever made in my LIFE!

i’m thinking from the perspective of a prospective condo buyer of a foreclosed unit, but which has a renter in it. the selling agents always say “the renter is very cooperative and will move out after you buy it, or shortly thereafter”, but i cannot take them for face value as they will be long gone after i sign. and every time these discussions come up on socketsite, i try to learn from the knowledgable posters here but there seems to be many different opinions, and hinging on every little factor like age of building, foreclosure yes/no, lease details, OMI yes/no, amount of eviction costs, etc. is there an official website that breaks down all this information?

I agree with the last post. There’s a huge difference between seeing the bridge from the side than from the top. There are views and there are VIEWS. In my opinion, they have tried to put too much of a premium on this particular view.

A foreclosure, a real genuine foreclosure, voids any lease and immediately turns it into a month to month lease.
In SF, you have eviction control. An owner can only evict for a specified reason. One permissible reason for an eviction is for the owner to move in. That means that the new owner could do an owner move in eviction, after paying EACH of the residents about $4800. The tenant gets 60 days notice.
The bank can’t do an owner move in (OMI), but the bank could do an ellis act eviction. In that case, they have to give you 4 months notice. If you hire an attorney, and you have any reasonable disability (glasses count), you can get that extended to a year. because of all of this, the bank really won’t do anything at all to evict you.
The new owner might evict if the rent vs buy is not close. This means in SF, the new owner will likely want to evict. $4800 and 60 days after the sale, you’ll be out.
There will also be showings. Private showings are allowed, open houses are not allowed, unless the tenant gives permission. There is no reason for anyone to give permission. My experience is private showings are not a problem. Keep your valuables out of sight and you’ll never know they were there. You don’t have to leave but they can do a showing between 9 and 5 weekdays without your permission, as long as they give 24 hours notice. The notice can be verbal.

The law changed again in Nov 2006:
Proposition H Increases Relocation Payments For No-Fault Evictions

you can rent a 2bd 1ba in prime pac hts for $3K per month.
Who in their right mind would pay more to rent in a skyscraper on a freeway with no walking neighborhood to speak of?

Location, Location, Location.

very funny, milkshake. But, seriously, should we be concerned that cratering condo prices – sale and rental – would discourage the building of new units, thereby contributing to SF’s long-term housing imbalance?

tipster, thanks for the info.

Louis – I agree.
Also regarding views: I closed and did a refi within the past 6 months at the Infinity. Each of the appraisals they valued/used as comps in or around the Infinity area were given a value of 50k or 100k depending on what the view actually was, direction etc. The comps were all floors 12 and below so I imagine the higher the floor, the better the view, the higher the premium.

I’m pretty sure anything built after 1979 doesn’t have rent or eviction control. OMI restrictions appear to apply and there are specific differences on how far out the notice has to be when the OMI is on a SFH or Condo that just changed hands.
http://www.sftu.org/eviction.html
(I link to a rather biased source because it’s the only one that even attempts to summarize the law in a readable fashion. Make sure your salt shaker is next to you while reading.)

Having dealt with buying a TIC in the process of conversion to fractionalized loans while simultaneously having to deal with not one, but two tenant occupied units, my advice to anyone considering buying a condo currently rented is DON’T, unless you expect to continue renting it, or you are willing to find a competent (and, thus expensive) attorney.
This being a buyer’s market, there is no reason to put up with trying to get tenants out. Eliminate the unit from your list and keep going. There are far too many legal ways for tenants to obstruct you, and too many minor mistakes you can make that result in you getting sued. (And note that your home owners insurance doesn’t cover you until after you’ve closed escrow. If something you said triggers a lawsuit, such as a non-legal implied threat of eviction, and it occurred before closing, you will have no one indemnifying you)

Ed, what do you think about the new “asking rent” on this place?

Scurvy,
I’ve rented out 3 units (one and two bedroom) at One Rincon Hill in the last 3 weeks, and they have all been rented out higher than $2800 / month. It is true that rents are lower than 9 months ago, but not to that extreme.
2008 was a tough year for real estate in SoMa / South Beach. On the positive side, it did provide an excellent opportunity for buyers to get into the luxury condominium market in San Francisco at aggressive price points. Many experts have predicted a flat to slightly downward trend for prices in 2009. Although this may be unpleasant for us as home owners to hear, we must face this potential reality.
It remains to be seen what 2009 holds, however one thing is certain; San Francisco will always be San Francisco, and there will always be people who want to live here. Look at today’s beautiful weather!

Paul wrote, “Many experts have predicted a flat to slightly downward trend for prices in 2009.”
Really? And as the expert realtor specializing in this area, what’s your prediction? Now, don’t tell me your comment above was just a teaser and I have to make an appointment to get an answer.
🙂

Since Spencer alluded to it, and Henry Shiller was just on CNBC answering the question “When will housing hit a bottom?” with “The CME futures market is predicting a bottom in 2010.” I give you THIS chart of the CME CSI Futures for the SF MSA through May of 2009, with the CSI at 121.4 for SF (you have to go back to late, October?, 1999 for the CSI to be that low).

phatty, the lower units at ORH has really beautiful of the bridge, since you don’t have to look down, when you get in the unit, the whole bridge is right there inside the window, that’s something I never expected to buy a cheaper unit.

The lower units at ORH are awesome since it is practically like you’re living ON the bridge. It’s almost like it runs right through your kitchen.
Who wouldn’t pay up for that?

I live on 01 stack, it does make me feel the bridge run through my neighbor’s unit on 02 stack, however I’m not sure how people in 02 stack feel…
Could not speak for others, however at least I know I don’t feel I live ON the bridge

“the asking rent for 425 1st Street #1802 has been reduced to $4,200 per month as well (once asking $5,250).”
It looks like someone is learning that Mr. Market doesn’t care what you need to cover your mortgage.

This is the story of a long anticipated collapse in the SOMA condo market, that may well extend citywide. Anyone who buys in this market either has money to burn or is easily bamboozled. There is no reason to do anything but rent (barring very unusual circumstances).
The “value” that agents like Paul add is to their bank accounts, and by virtue of his near constant trolling in here, I’m guessing that his ability to add value to his own finances is becoming increasingly limited.
Increased realtor trolling is just a sign of the collapse. Maybe we could come up with an index?

badlydrawnbear,
I’d be interested to see the CME CSI chart you describe, but the link appears to be for White Plains NY through 2008Q1. I am curious just how “agressive” price points will be based on the CME futures.

I’m currently renting in one of the big SoMa luxary buildings and discovered that my landlord is very behind on his HOA and mortgage payments, and it looks like the property is going to enter foreclosure.
It’s a shame as it’s a wonderful property, but I do pay way less rent then I now it would cost to pay an interest-only mortgage on.
In relation to the property discussed in this post, yeah I would be concerned about offering too low a figure and it getting accepted and then the property getting foreclosed. A good deal is only good if it’s good for the landlord too. if he’s not getting a return then he’s not going to stick arround.

Paul wrote, “I do not make predictions”.
But on public forums where you shamelessly troll for customers, you do make statements like “Many experts have predicted a flat to slightly downward trend for prices in 2009.”
If you’re willing to say this openly on a forum, I shudder to think what you tell them after you have had a chance to evaluate the level of their sophistication in the privacy of your office. I bet you give them just enough rope.
There may be a joke in there somewhere, but frankly, I don’t get it.

just curious what all the doom & gloomers here think will happen to the stock market in ’09? If the SF RE market is going down another 20%-40% where will the stock market be at year’s end?

Sorry to disappoint you Chuckie, I do not have the ability to predict the future. You’re right about my jokes though, they are kind of lame, I won’t quit my day job.
About this “trolling” stuff, are you a communist? I’m excellent at evaluating / creating below market deals for buyers and above market deals for sellers. I ask for business, that’s the way we do it in the United States.
Paul

Interestingly niether appraisal I had done (two different sources, many months span) used any ORH unit as a comp. So for comp purposes I doubt there will be an impact. Good thing.

Wow – you had two appraisals done at the Infinity, and neither looked at ORH as a comp? That doesn’t seem right at all… did you happen to question them about it? I’d be interested to know their logic – seems to me these two buildings are very much comp’s of each other.
Speaking of the Infinity, shouldn’t tower 2 be opening sales this month? Anyone predicting more of a delay? My guess is they start selling in March/April, and when they do, they completely change their marketing strategy; they come out of the box with their hat in their hands waving a white flag and admit the market sucks, but advertise that as an incentive to pick-up amazing deals. And they price 10-15% less than Tower 1 (and accept 10-15% below that).
And if/when that happens, resellers like this guy at ORH will be super-screwed. We’ll be seeing him walk away around June/July.
But that’s just me playing Nostradamus this morning. Anyone else want to get their Nostradamus boots on?

When did appraisers become a trustworthy source of asset valuation?
A house/condo/TIC is worth what someone else is willing to pay for it. When everyone comes around to agree on this point, the market will pick back up and transactions will take place at the FMV of housing.

“When did appraisers become a trustworthy source of asset valuation?”
Answer: They never did.
I was just responding to Coopers post more as an fyi. “On these #s–I wonder how this is going to impact comps at Infinity when they launch.”
Clearly a prop is only worth what one can sell it for.
I did my homework so I could have cared less if ORH was used as a comp for my place. It would not have made sense anyhow as I am in a treetop (disc in past threads).
Email was sent this week regarding invite/RSVP to the launch event for Tower 2 sales so it looks like we are moving forward here. If you walk by tower 2 it is clear they are just about wrapped up with construction and everything looks great!

Phatty if Nostradamus is correct it won’t matter; we will all be gone by 2012 or so right?

The market is deteriorating and that is going to continue. If that’s what Infinity believes, then they will not want a delay, but will want to get the sales office open ASAP. If prices will drop throughout the year, the sooner they open, the more money they make.
And that’s exactly what they are doing.
Tower 2 could stop sales of tower 1, but that then becomes a pricing issue. With the sales office open, they can play games like pricing tower 2 higher than tower 1, not because they think they will sell any tower 2 units at those prices, but because it will make people think that tower 1 is more valuable and will help sell the remaining inventory in tower 1. Once tower 1 is mostly sold, they will then move to lower the prices of tower 2 to get those units sold.
So when you see tower 2 priced higher, you need only wait.

So fluj, do you think tipster is wrong? Will Infinity tower 2, in your expert opinion, sell for more than tower 1?

“If prices will drop throughout the year, the sooner they open, the more money they make.”
Tipster, that strategy makes sense to me but it doesn’t appear to me that this is the route Infinity is going. There’s nothing that’s stopping them from opening Tower 2 sales today, or even 6 months ago. They have been waiting to avoid competition between the 2 towers. A mistake in my opinion. Now sales are so slow, I don’t see any reason for them to start Tower 2 until the seasonal sales trend picks up when winter ends. When they do start selling, their only chance of survival is to open up with a bang. Starting sells now at the low point of the season would lead to more days on market when the height comes – and thus less demand then and even lower prices.
Of course, this is just a pure guess on my part. I could be proven very wrong very soon. 🙂

FYI in past people were discussing construction prices for the Infin complex; you can find the numbers in the Business Times book of lists for both phases. Does anyone what numbers are on the books for Tishmans loans? If they have made enough to cover the loans do you think they would sell tower 2 for less or hold tight?
I may be proven wrong but I think they will hold pricing fairly firm for the top notch units, perhaps drop pricing on the ones they knew they would make less profit on from the get go.

Paul wrote, “About this “trolling” stuff, are you a communist?”
Let me see if I can bring it back on-topic. While commenting on ORH/Soma/South Beach, you wrote, “Many experts have predicted a flat to slightly downward trend for prices in 2009.”
I already know you don’t make predictions. How about providing your sources? Do you agree or disagree with these experts? Or do you just quote these experts when “asking for business”?

ORH will not be a comp for Infinity as long as one building sits one tree-lined block from the loveliest part of the Embarcadero and one sits astride a freeway surrounded by vacant lots, barbed wired fences and a gas station.
Yes, they are both new towers. As long as you can’t walk outside without holding your ears (and nose if one of the locals is urinating on the sidewalk), ORH will remain a third-rate location at best. Argue all you want about the two buildings… one thing we can all agree on: if the market were not on fire in 2006/2007, 1st and Harrison would be a homeless tent city in a hole in the ground.
Anybody on this site ever take a walk under the off ramp on Harrison Street on one of these beautiful evenings?
How about you, Paul? Or do you roll up your windows and hope for a green light like the rest of us?

And I said SF prices would drop and they did
So did I: “I think a price shift should happen, it’s illogical that it hasn’t yet, but it really hasn’t” ring a bell? So did everybody. You also pointed to countless examples as evidence of dropping prices even though those properties, or others in the same area, closed for more than previously. You also made countless incorrect sales price predictions. You also posited concerted data manipulation schemes more times than I can remember.

Here are some interesting facts on Infinity from a recent meeting I attended with the developers of Infinity (today at noon):
1) 287 units closed
2) 330 units in contract or closed.
3) Nancy Oaks has applied for her liquor license.
4) Tower 2 will be sold in phases to begin with.
I hope that this is useful information for you.
Paul

Let’s see if Paul is willing to give us a straight answer the way fluj did (BTW, thanks, fluj).
Paul: Will Infinity tower 2, in your expert opinion, sell for more than tower 1?

Phatty units in contract must be new contracts?

Oh, and to squash another rumor per my noon meeting (so we do not have to talk about it anymore):
1) Tower 2 will NOT be rentals.

Relax..
I had no idea you were joking, re-read it, still missing the joke in it all. You stated the #’s as if you knew them vs. your lates post noting “they’ve been touting” although I am not sure who they are? You should have just stated it that way to begin with. Regardless I was just providing a quote directly from the developer re: the numbers for your reference. Just trying to help.
I can’t say we are not all being lied to, for all I know Tishman is running a big scheme but I really doubt it.
Units are closing on my floor, actually think the floor is sold out now; final closings all happening the past month or so unless they staged people to buy and changed the door stickers to trick me.
Selling to a subsidiary and renting, that one I believe could happen – happened in another building I was in. That would be interesting from an HOA %owned voting standpoint should the developer keep over 50% of the units; hope this is not the case. Would the developer not have to report this to current residents? Back to the appraisal (not that I believe it) but my refi appraisal done in the past month or so, it notes ” Does any single entity (the same individual, investor group, corp, etc.) own more than 10% of the total units in the property and it states no. Per tax records except for the unsold units still owned by the developer, most units are owned by different owners”. So in theory what you say could be true I suppose.
I agree not many investors would buy as an investment right now but we have no idea what they are selling the last phase 1 units for so it is possible.
Your last point – ok you win.

selling in phases is not new and Infinity probably learned by their mistake not to do so for tower 1. Typically lower floors are sold first, once the majority are gone, the upper floors are released with increases in price since the availability becomes less. Less supply usually equals higher price. The real question is the demand.

I hate to clutter this forum with additional facts, but Infinity Phase I was sold in phases as well.

in phases meaning that the lower floors were sold first and then the upper floor were released at a later time? I really thought the whole thing was for sale even before tower 1 was complete. Also, how come there are so many units available if they were sold in phases? And I have not been nor do I know, but just from the postings here I get the impression that there are alot of lower floors available which goes against the idea of selling in phases. I realize that they were closings in phases but contracts?

The reduced listing for 425 1st Street #1802 has been withdrawn from the MLS without a sale.