CFAH

10 South Park #1
Speaking of foreclosures in non-subprime territory, 10 South Park #1 was purchased for $760,100 in November of 2004. Bought back by the bank in July of 2009, it’s now on the market and asking $595,000.
In South Park vernacular, phase one…
∙ Listing: 10 South Park #1 (1/2) 1,196 sqft – $595,000 [MLS]
New Subprime Foreclosures Ease But Prime Foreclosures Exacerbate [SocketSite]
South Park – Gnomes 3 phases [YouTube]

Comments from Plugged-In Readers

  1. Posted by Buy High, Sell Low

    What the %^$^ is up with that kitchen? And $550 HOA for this?!?!?

  2. Posted by Jason

    I like this unit a lot more from the street than inside. That little balcony/fart deck thing is cute and interfaces well with the neighborhood, which I like quite a bit. But inside it’s kind of bland–weird floorplan, awful kitchen, etc. Also seeing all of the pieces together–that door and window really don’t fit the more “industrial” feel of the loft, etc.
    Really this is two steps away from the McLofts that are all over SOMA for cheap, it just happens to be on the best block.

  3. Posted by badlydrawnbear

    Ok, I am generally a fan of loft and loft like spaces and even I think this thing is fugly. Who ever buys this thing is going to have to do a 6 figure remodel to make it livable IMHO.

  4. Posted by Tweety

    The little fart deck doesn’t belong to this unit. $595K for this? How demoralizing. With no miracle-money IPOs and stock-option-play-parties anymore, sh*t’s real. And this sh*t should be $195K tops.

  5. Posted by tipster

    I like all the paint colors at the bottom of the outside to cover up graffiti, blood, poop, etc.
    The yellow band on the garage door can only be explained as the owner finally giving in to the neighborhood dogs.

  6. Posted by tipster

    Psst. Tweety! 2004 purchase? No IPOs and stock options then.
    Think Pay Option Arm. Anyone could play. Lots did. 4 years later, you can’t pay $600 per month any more, and you sure as hell cant sell it for 120% of the purchase price.
    It’s just now starting to hit.

  7. Posted by nottimhawko

    this is a great location. close to downtown, the ball park. i know all the SOMA haters out there will talk about poop, homeless, etc, but this is fantastic. $595 is high, but I can see some tech folk snatching this up at that price to be close to work.

  8. Posted by Chad

    Ok, another thing that confused me about our beautiful City.
    Everywhere else in the country, foreclosure auctions already have a 20 to 30% discount in the starting bid, at the very least.
    But here in San Francisco, I see even the starting bids at 90% or so of purchase price. Why so ? Aren’t we once again feeding the buyer frenzy ?? Where are the discounts given these are Bank Owned and not resale units or flips ???

  9. Posted by chuckie

    The foreclosed “owner” appears to be qualified to be one of lmrim’s heroes. Zero down.

  10. Posted by stucco-sux

    Anyone wonder why I use the term “stucco-sux”? I mean Jesus, what would you call that architectural style? Mediterano-moderno-borscht?

  11. Posted by joh

    @Tweety
    The fart deck appears to be part of the unit, according to the interior photo of the living room.

  12. Posted by LMRiM

    Zero down.
    That’s impossible, chuckie. I’ve been told many time right here on SS that everyone put down large cash downpayments to buy a “home” so that they could “put roots down”.
    On the slight chance that you are right, let me offer my congratulations to the “owner”, who likely more than broke even versus rental equivalent, especially as he surely wasn’t paying any property taxes and also must have lived for a good while “rent free” at the end. About the people who put down large downpayments on other places on the basis of the 2004 “comp” sale of this place, well, every gambler has to understand the game or he’ll play the sucker….

  13. Posted by Michael

    The Juliet balcony with double doors is definitely part of the unit but it doesn’t look like the deck to the right of it is.

  14. Posted by tipster

    I’m the listing agent, and I can assure you that the deck on the right *is* part of the unit.
    Access to that deck is one of the many charming features of the unit. It’s accessible by going out the double doors you see in the front, standing on the railing, and then its just a short hop to the other rail to get to “your” balcony.
    We charmingly refer to it as “peek-a-boo balcony access”. It’s sort of like a peek-a-boo view that doesn’t really exist.
    Should anyone object to accessing the balcony in this way, I can immediately point out that a second floor balcony is a burglary hazard anyway, to which the shady character in my listing photo (who I did NOT want to wait an extra 10 seconds to pass by before I took the shot) can attest.
    We’ll be open this weekend, and I’ll be serving free hot dogs. I need lots of traffic to make it seem like I’m about to get a zillion bids, so please everyone, come to my open house. I’m running out of friends and relatives to pack my opens, so I’m hoping all of you will come.

  15. Posted by Legacy Dude

    Will there be cupcakes?

  16. Posted by chuckie

    lmrim, the sucker is being played by unit #3…has about 25% lesser sq ft and paid $925K in 7/2007.

  17. Posted by PPC

    That’s a funny comment Tipster.

  18. Posted by Willow

    The idea of South Park is great and it does have lots of upside potential. I’m just not sure what it’s going to take to move the “element” out. The design of the front fascade is very “confused” and I’m not sure there’s much that can be done other than repainting and perhaps replacing the doors to the juliet balcony.
    760K to 595K. That’s just over 20% down in 5 years. Given that there is also parking I say it sells between 550K – 600K although I’d be interested in the thoughts of Paul Hwang…

  19. Posted by rr

    Tipster –
    That was a great slow transition from believable to unbelievable over the course of that comment. You had me going for a while. Funny post.

  20. Posted by mac

    What would this rent for? Any ideas?

  21. Posted by location

    This is a stone’s throw for that condo conversion across from Jeremy’s. Any 1brs there left to compete with this?

  22. Posted by avwh

    One South Park had 3 units left for sale, last time I checked. I don’t recall if any were 1 BRs (we looked at a 2 BR unit about 3 months ago).

  23. Posted by Legacy Dude

    “What would this rent for? Any ideas?”
    Well, it’s pretty big for a 1 bedroom and comes with a parking space. I’ll guess around $2,500 – $2,700/month. With 20% down you’re getting close to being at parity with renting on a tax-adjusted basis here. It wouldn’t be CF positive as an investment, but as a residence you’re off a few hundred a month on buy vs. rent (rough math).

  24. Posted by San FronziScheme

    Yup. If you can rent it at that price. I agree these figures are not too far fetched.
    A couple of 100s loss vs rent? Maybe closer to 800 or 1000 longer term if you take everything into account (else you’re ready to let the place deteriorate renter after renter). That’s money you are paying to subsidize the renter with no warranty to get your “investment” back in appreciation. Appreciation is the only rationale behind losing money on renting out. That’s why they call it “specuvestment”.
    In terms of cash flow, you’ll be out of pocket $1300/1500 per month rain or shine when adding the principal payment because that’s the probable neg cash flow for this puppy.
    Not a good rental. It’s at least 30% overpriced for that. A specuvestment sure, if you understand the risks.

  25. Posted by chuckie

    Let’s say $2500 per month or $30,000 p.a. in rental income. You pay $6,600 in HOA and $6,600 p.a. in property tax. That works out to a cap rate of 2.8% before you have paid insurance and any maintenance expense. I would say there is a healthy pride-of-ownership premium in that new low price.

  26. Posted by Legacy Dude

    ^^^Totaly agreed, I meant it’s getting closer to penciling as a residence. But the buy vs. rent still doesn’t make sense despite the 22% drop in price.
    Figure $476K financed at 5.3% is P&I of $2,640/month. Sloppy math, but let’s say tax deductibility reduces that to $2,000/month. Property tax and HOA are an additional $1,200 per month, putting you at $3,200/month all-in to own. So about $500 more than renting if my $2,700/month estimate is close to market rent.

  27. Posted by San FronziScheme

    LD,
    That’s very optimistic. Every condo/house has regular maintenance, tear and wear, change in carpet, paint, appliances, tiles, heating, plumbing, water heater. They happen after 5-10-15-20 years and these costs could be left for the future owner to pay but in that case this falls into deferred maintenance which will show at resale. HOAs have special assessments like roof repairs, stucco redos, paint, etc…. You have to pay taxes on the rents (maybe not if you lose that much money!). And so on… Over the long term, assume 1/3 of the rent will be gone with these pesky little things. I have called a plumber twice in one of my places this year. I am replacing 3 windows that are 30+ years old: $3200. A 100 lbs sliding door got stuck and I had someone fix it for me: $120. The water heater had a problem with the electronics, another $400. A few 100s here and there. The HOAs have a special assessments in the range of $2000+ every year. You’re talking real money in the end. And I am making 60% of the rents in cash flow as I paid off all mortgages already. This means 40% of the rent goes almost into thin air.

  28. Posted by wanker

    Of course your market rent estimate might be $700 on the optimistic side, considering you can rent 2BRs in nice neighborhoods for $2000-2500.
    It would probably be more accurate to say $500-$1200 per month difference from owning. To put it pessimistically, you might end up paying over 50% of an equivalent rental as an “owner premium”.

  29. Posted by LMRiM

    The potential sale of this unit shows how hard it is to talk about declines from “peak”. Obviously, things continued to appreciate well past the 2004 sale of unit #2, but after a quick perusal of property shark, only unit #3 gives us a hint as to how absurd things got.
    Tax records show Unit 3 to be 929 sq ft. and prop shark shows the following recent sale history:
    Sold 9/13/2005 $850K $915psf
    Sold 7/19/2007 $925K $996psf
    And now Unit 2 is for sale at less than $500psf. Wow. You gotta love that optimistic 2007 buyer cohort.

  30. Posted by spencer

    there is no way you could rent this unit for over $2k per month. otehrwise agree with chuckie

  31. Posted by Fishchum

    Based on what, Spencer? Your view that anything outside of Pac Heights is a homeless-drug-needle infested hellhole?
    This place would rent out for over $2K, easily.

  32. Posted by El-D

    I considered renting a unit in that building a couple of years ago. I don’t remember if it was this particular unit, but I do recall the asking rent was just north of $3k/mo. Of course, that was 2007…

  33. Posted by lark

    The mean bad language in this thread makes me sad.

  34. Posted by Delancey

    Is it written into the realitter code that REO listings shall have miserly photos, and the photos on REO listings shall suck the big one?
    I mean, WTF? Nearly 1200 square feet (claimed), and I can’t see it in the photos. The kitchen shot seems designed to torpedo the listing. (can’t help the galley layout, but at least fill it with light?)
    Is it that hard to take 40 photos with a 300 dollar camera, and spend 10 minutes reviewing them to discard 20-30 of them? Jay-sus.
    (no, I’ve no relationship with the property or street, just wondering at the disfunction. From the absence of effort you’d think the realitters *want* REO sale prices to tank. Maybe they do–can’t get price discovery from individual sellers in denial.)

  35. Posted by bgelldawg

    Two bathrooms and the agent couldn’t bother to post photos of either one? Blatant laziness.

  36. Posted by Legacy Dude

    Wow. Check you guys out with all your phantom costs of ownership. I’ve been admonished before here on SocketSite for over-estimating the costs of owning real estate. Reportedly you can maintain a century-old Victorian in Noe Valley for the cost of your daily Starbucks. Or so I’ve been told.
    Additionally, real estate investing is a business, so you need to lose money to make money. So sure, the cap rate may only be 2.8% now. But with the magic of leverage, it instantly becomes 14%. Voila. No time to run a fully-loaded IRR calculation when you’re too busy clipping coupons from all that rent money coming in. 70 years from now it’ll be worth a lot more. Who’s gonna be laughing then?
    Lastly, and perhaps most importantly, this place has 2 bathrooms and only 1 bedroom, giving it an LBI score of 2.0. I believe that’s a very bullish indicator, but will defer to Jimmy there.

  37. Posted by San FronziScheme

    LD,
    I saw your previous posts on maintenance costs. I agree they’re always underestimated. A few comments quoted 1 or 2% of purchase and this sounds about right. And 1 or 2% over a 2.8% ROI makes a big difference.
    I agree on the leverage calculation, but the risk-reward ratio has to be a bit more compelling for me to jump in. But that’s just me. I have been a spoiled brat in my previous purchases.
    If markets still have a 50% chance of decreasing another 20%, then this 14% ROI is not as interesting.
    I understand your long term prospects. 70 years is a very long time and I’ll bet none of us will be there to do the final math at that time though.
    Look shorter term: 10-20 years. In our ADHD quick money society few investors are even going to look that far ahead.
    20 is a good number. First, this irons out some of the cycle issues. Also people who are 45 in their purchasing/career top start seriously to think about their retirement options and RE is a big part of the plan.
    Ask the Japanese what they think about home prices after 20 years. Their top happened exactly 20 years ago and prices are still down the drain. They lived through the biggest housing bubble in their history and so did we in 2002-2007. The comeback is not a given.

  38. Posted by Legacy Dude

    Perhaps my previous comment was a bit too subtle, fronzi, but I was being sarcastic. Poking fun at the usual comments we sometimes see here from aspiring REIT CEOs about their great investments (need to lose money for a few years, ignore most of the holding costs, sloppy back-of-the-envelope math instead of real return calcs, etc.). Why let facts get in the way of a good story?
    I personally don’t think investing in real estate will lead to outsized returns with the exception of bubble periods, for reasons I’ve already gone into previously. I tend to look at these things solely as buy vs. rent for a primary residence, nothing more.

  39. Posted by NoeValleyJim

    Rent vs. Buy calculations that include principal payments are bogus. Either back them out or calculate with an IO loan.

  40. Posted by LMRiM

    Of course that’s right, NVJ. However, how do you account for the frictional costs in your rent to buy model? 5-6% realtor commission, approx 1% nonrecurring cost on the buy (appraisal, inspection, recording fees, lender fees, attorney fees, “points” that wind up not being fully amortized over the holding period, etc. – obviously, this is all going to vary greatly) all add up to a pretty big hurdle.
    Pick your projected holding period, and then run the calcs is the way I’d look at it. When using rent to buy as a valuation tool (which is really how it should be used), it probably makes sense to look at 5-10 years as the holding period, because 7 years is the typical holding period).

  41. Posted by EBGuy

    Using the New York Times Buy vs. Rent Calculator, I could get the break even point at 7 years using the following values (all others were left to defaults — and there is a lot you can tweak): $595k home price, 20% down, 5.3% interest, $2700 monthly rent, HOA $550, a high effective tax rate of 38% (which is between SF achiever and super achiever status), 3% annual home appreciation and 3% yearly rent increases. Reduce home appreciation to 2% and you double the breakeven to 15 years. If your tax bracket is lower — don’t even think about it…

  42. Posted by San FronziScheme

    NVJ,
    My calculations only take interest into account for the ROIs.
    Cash flow though has to take Principal into consideration. If you are 2K in the red every month per property (like the Lembi guys, LOL), you’d better be sure you will have these handy for the remaining holding period. If you consider principal repayment as a minor issue, it’s still part of the make-or-break equation.
    Something that really puzzles me is the fact that most rental investors will take a 30-Y amortized mortgage. I mean borrowing to buy a rental lies on the principle that the renter pays a big chunk of your place. If you take a 30-Y loan, the principal payment will be minuscule for at least 10 years.
    Take a low 5.3% rate over 30 years. After 10 years, you will have paid less than 20% of the principal. After 20 years it’s less than 50%.
    Now move to 20 years: the 20% will paid after 6 years, 35% paid off after 10 years, and paid in full after 20.
    Try 10 years: 20% after 2 1/2 years, 43% paid after 5 years.
    Your payments per 100K for the 3 options:
    30Y: 555/m
    20Y: 676/m
    10Y: 1075/m
    With 10Y, you’re paying almost double the 30Y per month but the ramp up in principal payments will be much much faster, and will be much more even that the almost geometric-curve of the 30Y. The 10Y principal is 63% or the mortgage payment and only 20% with the 30Y.
    My point is that 30Y increases your purchasing power but decreases the real benefit of rental investing. With 30 years, you’re speculating you’ll win over the long run with appreciation. With 10 years, you’re increasing your chances of winning but are lowering the leverage effect. It’s also a safe bet against depreciation. After 5 years you added a lot of equity and this is likely to be much more than any kind of market loss.
    You need more cash and a low enough purchase price to make it work, but if you manage to pull it off, this means you have found true value and you’ll sleep much better at night.

  43. Posted by NoeValleyJim

    This is a good question SFS, but I think what I would rather do is make a huge down payment, like 50%, so that the place cash flows right off the bat and your leverage is less. I know the way to really get rich is off leveraged bets, but it is the way to really get broke too, as far too many who speculated in the Real Estate Bubble markets of the last decade, are finding out — including both my father and father-in-law.
    I don’t know how long a loan makes sense, I think it depends on your individual financial situation and why you are investing in the first place and when and how you want your money back.
    For me, I see it as something akin to an annuity, where you make a big investment up front and get a steady inflation adjusted stream of income from it. Others may want to take riskier bets.

  44. Posted by diemos

    Hi Fronzi,
    There’s a form of inflation going on in the form of too much money chasing a limited investment.
    There’s only so many rentiers that can be supported off of residential investment. At the extreme 50% of the population could each own 1 house which would be rented by members of the other 50% of the population.
    As more and more people chase the idea of becoming residential landlord rentiers they bid up the price of those investments and lower the yield.

  45. Posted by LMRiM

    leveraged bets … is the way to really get broke too, as far too many who speculated in the Real Estate Bubble markets of the last decade, are finding out
    Ain’t that the truth, NVJ. Check out this chump. Net worth $100M to $4M in a few easy steps. Easy come, easy go.

  46. Posted by San FronziScheme

    NVJ,
    50% down is my previous model for rental investments. But that’s very limiting for many and you have to be sure you are buying real value, not buying at what everybody thinks is a good price like now…
    diemos,
    The dot com boom was also due to too much money chasing down to few deals. Gains in productivity + the outsourcing of consumer goods created tremendous wealth that fed the next craze. These past 10 years created less wealth but cheap debt and tax cuts (another type of debt… to our kids) compensated that.
    I understand why so many want to become renters. The age pyramid doesn’t lie, and unfortunately the newcomer’s babies are still in a too intermediate level to catch up with the promises made to our generation. You do not have to be an actuary to understand we will be in a pickle when SS will come.
    You can trust the stock market to fleece the small in the end. RE looked safer, but it turned out to be yet another way to do more fleecing!

  47. Posted by hiyou

    window oval eyes
    cave kitchen blond cabinet
    they killed Kenny

  48. Posted by Jimmy (No Longer Bitter)

    LMrIM: McAfee’s real problem seems to stem from the fact that he stopped building new companies and started taking financial advice from strangers and pouring money into non-productive assets (i.e. real estate).
    I guess even really smart people need to learn that lesson from time to time.
    With a name and reputation like his, he can be re-born by just starting a new company and selling it in a few years.

  49. Posted by EBGuy

    LMRiM, Thanks for posting that link. There was, I believe, some good foreshadowing of the next players to fall in the great unwinding. My guess is that overpaid sports personalities ( the New York Yankees failed to sell many of the most expensive tickets in their new stadium and had to drop the price) and entertainers are next on the chopping block of Deflation Nation — or is this counter to the “bread and circuses” theory of placating the masses during a depression? I mean, who needs a bonafide movie star when you have “32-year-old real estate developer and investor” reality TV stars?
    And speaking of Deflation Nation, did anyone see IKEA’s latest ‘price-slashing’ circular?

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