The list price and lack of interior photos for 1532 Church Street make a little more sense considering possession is subject to tenant rights and it’s currently rented for $1,154 per month. But at $699,000, the single-family Noe home is sure to generate a fair amount of interest and most likely an eviction notice soon after its sale.
UPDATE: A few interior photos have since been added to the listing.
∙ Listing: 1532 Church Street (2/1) 1,114 sqft – $699,000 [MLS]
∙ Landlord or Owner Move In Evictions [sftu.org]
Check your rent control laws — there are times you can’t evict. I don’t know anything about this property, but my 6th sense is telling me “protected tenant” and/or “lifetime lease” of some kind.
[Editor’s Note: Keep in mind that owener move in (OMI) evictions of “protected tenants” aren’t prohibited when it comes to single-family homes.]
This seems like a good deal. You could put about $80K into upgrading the existing interior and end up with a nice modest house in a decent location. Or what is more likely is that someone will expand in both directions to develop a 2000+ sq.ft. house. I doubt that there will be any credible opposition to expansion.
Said “protected tenant” is a 60-something public servant on disability who appears to have some sort of cognitive deficits as well. And also her mother.
Wow, good luck with that in this city.
The lifetime tenant concept is so far beyond crazy, it’s frightening.
Most of the San Francisco rent control laws in place are crazy, frightening …and ridiculous.
Those who don’t own rental property really have no idea what owners go through for simple things like a master group tenancy when one tenant wants to leave and bring in another sub tenant. You had better do it correctly or you lose big time. It’a all a pain in the A$$.
as the Editor noted in the first comment: OMI evictions of protected tenants aren’t prohibited for single family homes. But: in this extreme case, how do you go about it? Also, isn’t there some sort of relocation costs you pay the tenant, which is greater when elderly?
But wait, aren’t there certain classes of tenants that can’t be evicted at all, even in the single family home? I seem to remember something about terminally ill patients being part of this “protected” class. (and by PN’s description it seems this tenants is the holy trifecta of “protected”)
Anyway, can someone clarify the laws here? Also, would the laws even apply here? This is SF, you know…
http://www.sftu.org/omi.html
“Long-term Senior, Disabled and Terminally Ill Tenants Protected—Senior (60+) and Disabled (SSI eligible) tenants with 10 or more years tenancy can not be evicted for OMI. Terminally Ill (SSI eligibility + terminal illness diagnosis) tenants with 5 or more years tenancy can not be evicted. Please note that these prohibitions do not cover tenants in single family homes (or rented condominiums).”
Editor: With all due respect, you are wrong. Please check your facts.
Even in cases where you can LEGALLY do an OMI, the reality is you should plan 12 months and $50-$75,000 in costs if the tenant chooses not to cooperate. This info is direct from one of SF’s top landlord attorneys. The reason I know is that I was looking to purchase a very similar property, with similar tenant situation, about two years ago to move into. That is the exact advice I received.
In this case, it sounds like there is no OMI possibility. If that is the case, what is the actual value of this property? If the gross annual rent is about $13,800, then an approximate value would be $166,176 based on a gross rent multiplier of 12.
Readers? What do you think?
[Editor’s Note: If you can point to any contradicting evidence, we’re honestly all ears. That being said, we’re well aware the process can be protracted and cost prohibitive, but that’s not the same as being prohibited.]
It appears it is quite clear that an OMI is possible. It would likely be costly and that cost should be factored into any offer made. Since as you point out the gross annual rent is low, it makes no sense for anyone other then someone planning on moving into the unit for at least 3 years to purchase this property.
Just looked at the photos and now really hope someone buys this and evicts them so they can move down to LA, where Dodgers fans belong.
Another location for info is the San Francisco Rent Board (www.sfrb.org).
Check out Topic 19 — there are a few ‘gotchas’ regarding single-family houses and rent/eviction control. One interesting portion:
“Pursuant to the Costa-Hawkins Rental Housing Act, as of January 1, 1999 single-family homes and condominiums are generally exempt from the rent increase limitations (but not the just cause eviction provisions) of the Rent Ordinance, but ONLY IF the tenancy commenced on or after January 1, 1996.”
There are other gotchas mentioned there as well.
But provided these didn’t apply, you could also just raise the rent up to market rate (or what you needed for the mortgate), but you’d need a higher downpayment on your mortgage since you’d be buying rental property.
Some homework here, but *nothing* compared to what you’ll face buying a true fixer….
The criteria for evicting tenants, and some of the procedure, is also outlined at the Rent Board web site; in particular, items 201,202, 203, and 204.
Interestingly, a more vivid and complete description of the eviction process and some of the little traps is in the editor’s link to the tenant’s union website.
Why buy? Getting old seems to make you an “owner-by-proxy” except for the bills.
Then again, I wouldn’t like to be in the renter’s shoes. So many wolves howling around your house…
One thing that I’m not sure tenants have caught on to in SF is that they should be demanding a discount to rent SFRs or condos since they do not get rent protections. I suspect people just don’t think that far down the line. If I ever get into the landlord biz in SF (unlikely — too many headaches, not enough profit) you can bet it will be with SFRs or condos and not protected units.
Zoning RH-2 and height limit 40-X means it would be possible to build at least one more unit here? It might even be possible to build up and out the back so the tenant can be left in peace, or driven out by construction depending on point of view.
So landlords of a SFH can essentially evict their tennant by increasing the rent well above market rate?
If so, why were SFH included in the OMI relocation reimbursement protections of Prop H?
A.T.
I am sure current tenants today have other issues than asking a discount to the landlord that picked them among 10 other very valid candidates.
It’s a very tough market out there.
Mole Man,
I think one of the most likely outcomes is the building of a much bigger house. 2700+ sf, with a resale value north of 2M. They do not even need to create a bogus “granny unit” to comply with the RH2 zoning because the place has only one unit currently built.
Another outcome is a 2-unit building with 2 floors over a large garage/storage area. Each unit marketed around 1.3M. It’s very possible..
If they manage to resolve the tenant situation in a friendly manner, that is. No way I’d give up a $1154/m rent for a full house without a good fight and a tidy compensation.
@AT, the cost of SFRs and condos pretty much keeps you from making a profit on these as a landlord. The rent just isn’t enough in almost every case to make it worthwhile. (Yes, I’m sure there are exceptions. I rented a condo I owned for a long time, and it worked out OK. But, if I had purchased that condo at market rate it wouldn’t have made any sense at all financially.)
And, you are always at risk that the laws in this city will change on you. For example, Prop I in about 1994 took away the rent control exemption for owner occupied buildings, 4 units or less. That hurt a lot of small landlords.
You can bet that the SFTU is CONSTANTLY chipping away at these things. They almost always have something on the ballot, and they will continue to work hard to get every unit in SF rent controlled if they can. Doesn’t mean it will happen, but don’t ever expect them to stop trying – they won’t.
My point was just that rents don’t seem to be different for a rent-regulated apartment in, say, a 4-unit building vs. that for a hypothetically identical condo in a 4-unit building. All else being equal, the tenant in the condo is getting the far worse deal with no eviction protections or rent control and would reasonably thus pay less, but it doesn’t work out that way. Just an observation, really.
sf resident – SF can’t really chip away at this particular rule (exemptions for SFRs and condos) as it is based on state law, which preempts any contrary local law.
Mole Man wrote:
I”m not a lawyer but I think you’d have a pretty nasty lawsuit on your hands if you did this.
The reason I say that is because last time I was in court as a tenant suing a landlord, the case being heard before mine was along these lines and the tenant’s complaint centered on the deliberately-nuisance maximizing construction going on being a “constructive eviction” (scare quotes to signify a term of art, not because I doubt the claim). The interesting part is proving it.
On the other hand, under the expensive civil litigation scenario that ‘sf resient’ describes, the new owner might luck out. If no energetic, crusading lawyer or NGO takes on this case pro bono, the incumbent tenants might just move out with an offer of a pittance for relocation costs since the probably don’t have any money to fight with (not everybody in a rent-controlled unit is a chiseler that can afford market rate). Lawyers convince clients to settle valid cases all the time just because they don’t want to burn the energy on them.
Correct me if I am wrong, but why do an OMI?
This property nor any SFH without an “in-law” is not covered under “rent control” only “eviction control”
So the new owner could just drive the tenant out with a hefty rental increase.
I had a similar situation a few years ago. My attorney said an OMI is always possible but takes a year for this kind of tenant (elderly, disabled). The moving cost compensation is also greater for these tenants. I think I was looking at something like 12K, but there is extra money required for additional tenants (I had only one).
I ended up buying out the tenant to hasten the process and reduce the likelihood of lawsuits.
To address some of the other issues people have raised:
The tenant wouldn’t be likely to have trouble finding a lawyer who would work for a percentage of the buyout offer.
As for raising the rent to force out the tenants, or doing noisy construction, that is one among a number of actions that could invite a harassment lawsuit that could make the process drag on even longer.
In the end, I felt like I got a great deal. The house I bought would have sold to someone else long before I showed up had the tenant not been there. I also paid considerably less than the house would have been worth if vacant. I had to put up with some uncertainty, and had to wait for a bit after closing to have the house to myself, but at the end of the process I have a great house at a great price,even after paying lawyer and tenant .
Tenants are protected from third party discussion of potential eviction or rent raises. Please refrain from any mention of this issue – the very act of contemplating eviction is a violation of human rights, at least by SF standards.
SFgov? I doubt it.
have you heard of the first amendment to the constitution of the united states?
Two Words: Ellis Act
No, I’m afraid they are indeed well within their thought control rights there.
Most of this discussion about rent control and eviction control and sf resident’s conception of the all powerful SFTU is a little overheated. Every unit in S.F. isn’t going to be rent controlled; in case you haven’t been keeping up with current events, any post-1979 building isn’t subject to rent control and that can’t be changed. That fact doesn’t seem to stop the bellyaching landed gentry from complaining about it on socketsite, though.
As far as SFTU “almost always having something on the ballot”, landlords can just say, “well, SFTU, I’ll see your municipal ballot initiative and raise you with a state law” that overrides said ballot measure. Ask yourself which group has more money and you’ll answer with which group has more political power.
Not that I’m ever going to be an S.F. landlord, but just for the sake of discussion, isn’t EsEfGerard likely correct that the new buyer of this place will write a requirement into the contract that the building must be vacant prior to closing, “generating” an Ellis Act eviction notice before, not after, its sale?
The current landlord has the right under state law to “go out of business” and sell the house, and that’s assuming this property somehow requires it, which as Kazee points out is not certain. No “driving the tenant out with a hefty rental increase” is necessary on the new buyers part.
This approach also puts the seller, whose going to have the funds available upon sale to compensate the tenant and thus the proper economic incentive, in the position of dealing with ending the lease in whatever way is necessary. The figure I’ve heard thrown around (I’m not a real estate agent) is that an unoccupied unit is worth about 20% more. That difference on anything close to 700k is more than enough to cover the relocation allowance for even an elderly protected tenant on this place.
No, I’m afraid they are indeed well within their thought control rights there.
Yeah. The SFTU sounds pretty much like STFU.
Brahma (incensed renter),
Why would a tenant ever need to be compensated? Apart from the law, what would seriously justify any form of compensation? Of course, you’re kicking someone out of your property who was grossly subsidized. Yet you have to be punished for wanting to dispose of your property the way you want to be. You give the tenant money for the privilege of wanting to stop subsidizing him.
This is kind of sickening. The impact of this self-serving law is far-reaching and very destructive socially.
Let’s not complain we are lacking housing for young families when we are helping the elderly stay in homes they shouldn’t afford. Scaling down is a natural process. You retire, earn less. If you didn’t plan for this you go in a more adapted place, not a SFH where a couple with 2 kids could make a life for themselves.
Lol, I’m not defending the practice of compensating tenants on some philosophical level, I’m just acknowledging that it happens often, and in lots of cases is required in S.F. for certain “protected” classes of tenants. As someone renting a market-rate unit, I’m a bit sympathetic to the argument that elderly people are subsidized in The City to the detriment of other renters.
We don’t need to even get into discussions of “gross subsidization” and Nozickian/libertarian conceptions of property rights and how local regulations are an affront to all that is good and true and beautiful about Liberty.
For practical purposes, in S.F., certain kinds of tenants can be entitled to get relocation allowances and one shouldn’t get into the S.F. landlord business without being aware of what the law is.
Similarly, I was suggesting that the buyer of this place would be a little remiss in not writing their closing contingencies with the current law in mind unless they really want to open up a potentially expensive can of worms.
I am no libertarian. Wanting to be free to do reasonable things with your property (such as: wanting to {gasp} make a buck is not libertarian. It’s a basic requirement of a society that respects basic property rights.
Tenants have rights too, but there should be basic constitutional rules on equal treatment between tenants and landlords.
For instance if a tenant fires a landlord, the landlord should be compensated too! He is losing a safe source of income and will have a cost associated with finding another tenant.
isn’t EsEfGerard likely correct that the new buyer of this place will write a requirement into the contract that the building must be vacant prior to closing, “generating” an Ellis Act eviction notice before, not after, its sale
No, that’s not correct. You can write it in but it would be really dodgy. The Ellis Act is a procedure and it will take time, money, and jumping through hoops. Who wants a six month escrow period, or longer + extra work? Likely not the seller. They’d almost certainly rather sell to an OMI type who should deal with it in due process after the seller washes his/her hands of it.
Jeez, even when the law allows some enterprising capitalist to kick an elderly disabled woman and her even more elderly mother out of their long time home, some still persist in complaining about phantoms. What do you people want? One hour evictions with no redress? You want a society with no recourse for the elderly, the sick, or just simply those that by definition have to be on the bottom?
Quick. Someone run the numbers. Let’s see how much money these two elderly scumbags are costing the next John Galt from purchasing his rental unit that God ordained he should make a 13% return on.
It’s like the people that INSIST Obama is a socialist. No matter what, there will be a chorus of either teabaggers or neoliberals preemptively crying about the horrible socialism and regulation this country hypothetically has (but exists only in their propaganda adled minds). It’s knee jerk. It’s propaganda. It doesn’t matter what the facts are.
Also, the price for attorney services for something like this seems way overblown. But I guess the enterprising Masters of the Universe pay for the best.
lol indeed! Society creating rules that make it slightly harder to kick a 60 year old disabled woman and HER mother out is “sickening” and will only ruin society.* There should be no protection at all for these bitches. They sucked at the government teat long enough. And did you hear she worked for the government? She was practically on welfare!
She needs to get out of the way of the real producers of society, otherwise we are a “sick” society that protects the weak when a strong society eats it weak.
*And not that it matters anyway, BECAUSE THE RULE DOESN’T APPLY IN THIS INSTANCE. It should, though. If you want to be a landlord and a rent seeking parasite in the classic sense (no offense to the LLs out there, but it’s the classic definition of rent seeking behavior that adds no real value to society).
That should be . .. if you want to be a parasite (no offense bro–I’m just being accurate), then you should at least have to follow some rules that respect the fact that you bought another person’s home that it is in all of society’s interest for people to have security in their home.
SFHawkguy,
Cool down,
I am criticizing what brought this situation, not this precise conundrum.
1st, what would happen outside of SF? The rent would have been adjusted a long time ago if the landlord wanted it and the renters would have found a better location at a more appropriate price. It would be their home too. That’s how it works everywhere. Geez, even in social-minded Europe rents increase and people scale down when they retire.
2nd, what renter laws have created are precisely this kind of Frankenstein situation.
Because the rent is kept at an artificial low rate long term renters are enticed to stay in a place only because they can still afford it and the pressure to evict them becomes higher and higher until it has to give (a disconnect with market rents of 1 to 4 at least) and it will create a human disaster.
In short, the road to hell is paved with good intentions as they say. We help the old and weak and this is fine, we should do that. But sometimes we go counter to their personal interest. People tend to adjust to their environment. You are not helping them by adding cushions to all the edges.
I hope it works for the best for the tenants.
In addition, my parents worked for the government too, therefore the parasite comment is way out of line. But they clawed their way to homeownership and it helped them stay in their home all their lives. It was also nice as a kid for me to know I had this place to go back to all of my life.
This is why people historically buy homes. They buy the land and the building because they want to stay there. When you rent, you should not expect the same benefits. Perma-renters and the “ownership is theft” crowd can start flaming now…
If local laws twist tenancy laws to create a cast of “semi-homeowners”, it will push people to milk the system. Why buy with a 5K mortgage when your long term rent is 2K for a similar place? This is a conscious calculation. But every situation has a flip side.
The bigger the potential profit, the more ruthless the sharks will be.
The interesting thing about rent control in California is that it has a non-identical twin brother — prop 13. Substitute the words ‘rent’ and ‘property taxes’ between prop 13 and SF rent control legislation, and I think you’ll find that homeowners get the better deal.
Probably the present owner of this building pays such low property taxes that the low rent income still generates positive cash flow, even with a new roof every 30 years or so.
So there is a kind of logic to how this stuff works — once the place sells, the new owner pays huge taxes, and it makes sense that the rent can be reset too. Funny how those folks who rail against rent control never seem to bring up their own prop 13 benefits….
around1905,
There are definitely some similarities between prop 13 property tax limits and rent control. However, the fact that the rent control laws also apply to smaller multi-unit buildings does create a situation wherein owners can be forced to subsidize their tenants even if they are subject to a higher tax rate as a new owner.
The rent control laws and prop 13 are both designed to reward the older, longer term renter/owner at the expense of the younger, newer renter/owner. They are both incredibly inequitable and are just plain bad policy.
Of course they had to find a Bride to the Frankenstein rent control law. Prop 13 is what they figured out to appease the monster. Yet another curse in disguise from very well meaning intentions. Both laws should be repealed and replaced by better laws. Resource-based subsidies? Probably, if we’re worried about grannies kicked out of their homes. But a landlord should not be the one subsidizing a tenant. And schools shouldn’t be subsidizing homeowners.
And no, Prop 13 doesn’t always allow an owner to still “generate positive cash flow”. To mind The Jasper Place debacle. Or even today, this specific multi-unit property on Howard:
http://sfarmls.rapmls.com/scripts/mgrqispi.dll?APPNAME=Sanfrancisco&PRGNAME=MLSPropertyDetail&ARGUMENTS=-N388903923,-N260447,-N,-A,-N29269698
Rents add up to $518.25/month. Please let me know how you can get cash-flow positive, I’ll be interested in being your agent for a book deal titled “landlords on a shoestring – extreme edition”.
Seriously this is a recipe for deferred maintenance and tenant lawsuits.
“In short, the road to hell is paved with good intentions as they say. We help the old and weak and this is fine, we should do that.”
Exactly. There are better ways to help the old and disabled besides overbearing lifetime tenancies. People who think lifetime tenancies are the only solution are usually just not being creative enough.
“Both laws should be repealed and replaced by better laws. Resource-based subsidies? Probably, if we’re worried about grannies kicked out of their homes. But a landlord should not be the one subsidizing a tenant. And schools shouldn’t be subsidizing homeowners.”
Exactly, there are much better narrowly tailored ways to help grandma than either Prop 13 or SF-style rent control. Both Prop 13 and SF-style rent control are largely overbroad, have tons of unintended (and intended, depending on your viewpoint) consequences that cause all kinds of chaotic things in a complex marketplace.
Even on some of these SocketSite threads, some people have mentioned creative solutions that would solve these problems without adding strange overbroad regulations that have wide-reaching effects.
Well, nothing is perfect.
But. Both the rent increases allowed under rent control, and property tax increases under prop 13, are approximately indexed to consumer price inflation (not of course taking asset inflation into account). So if a property made positive cash flow at one time, it always should, since both revenue and expenses can grow at the nominal inflation rate. That doesn’t mean the return is great, especially if there is asset price inflation. But it doesn’t go into the red.
I think that alot of rentals are held by folks who bought them years and years ago, and who float them on their rental income but aren’t interested in selling as the sale would just generate a capital gains tax event and they don’t need the extra cash now anyways.
As for the specific property lol cites — I’d guess that there are some banked rent increases piled up; maybe you could get it up to 1K/month for the two units. I think that you could indeed maintain the buildling in its present condition for that price (replacing appliances as they fail with used appliances, painting with city-recycled paint, etc.), although you might not get compensated much for your time.
No opinion here about whether rent control/prop 13 are good or bad policy. But its interesting to observe how things hang together…
around1905,
I wish prop 13 would follow inflation. But the fact of the matter is that it started off from the wrong foot.
1 – Prop 13 voted in 1978 adjusted property assessments to values in 1975, erasing 3 years of property inflation.
2 – Prop 13 limits any annual increase in assessment to 2%. The 70s and 80s were brutal in terms of inflation with some years over 10% and many over 5%.
http://www.usinflationcalculator.com/inflation/historical-inflation-rates/
The accrual caused a dramatic reduction of taxes in terms % of property valuation for people who kept their homes. Once a few years went by, the standard reaction of long-term Californian owners was to hold on to their property because they feared a move-up would multiply their property taxes.
Landlords did benefit from it, but cost of goods, materials and labor really skews the equation. You cannot find any plumber to work at 1978 price.
Property taxes are capped at increasing by 2%, so if inflation is 5%, property tax increase will cap at 2%. I believe rent increases are 60% of the CPI.
So if inflation was a constant 3.33% then the rent increase would match the increase in property taxes but still lag other expenses, such as insurance, water, garbage, etc that the landlord might be paying if those expenses increase at the CPI rate.
If inflation was above 3.33% then rent increases would outpace property tax increases and if CPI increase is below 3.33% then property tax increases will outpace rent increases.
***
All that said, it is still unknown if this SFR is subject to rent control or not as while most SFR’s are NOT subject to rent control, there are several things that could have happened that subjected this property to rent control for this tenent.
lol and Rillon — you’re of course both right. The allowable rent increase is indeed 60% of the CPI (as per the rent board web site). So it appears that eventually maintenance costs will sink landlords with extremely long-term tenants, although this might take several decades to happen if inflation remains modest.
For this house, if it indeed escapes rent control (likely, although not guaranteed e.g., if it was even briefly operated as two units), it would still seem that a new owner could just raise the rent to market rate and wait the whole thing out. As ‘consumer’ points out, raising the rent above market rate could be contested as an end-run around eviction control, but with a new mortgage and new prop tax basis, market-rate rent could be justified to the rent board.
^^^ Yeah, you can always try and defend your case with the rent board. They could counter that you purchased this home at a discount precisely due to the renter situation and that you are now trying to get your cake and eat it to, you greedy capitalistic pig…
One could assume, based on the below market rent that 1) the owner was not aware of the costa-hawkins legislation exempting SFRs from rent control or 2) the tenancy began prior to 1996 and therefor subject to rent control.
Either way, Since protected tenant status is not applicable to SFRs then one could also assume that standard OMI eviction procedures could be followed.
It appears that said property needs to be completely renovated, so tenant relocation costs (10-20k per tenant) would be a drop in the proverbial bucket.
Except for the noise of the J Church, this is an excellent location and could easily be a $1M, post renovation, property.
SFgov will be happy that a reassessed property will bump the annual tax bill from 700 to 7k+
J Church stops next door. At least it’s convenient.
Sold for $730K.
UPDATE: A Quick Tenant-ectomy And Attempted Noe Valley Flip.
Ok…Just to set the record straight. The tenants moved out of the property on august 31st. The 60 year old (actually 62 yrs old) was not a government employee as stated earlier. She was employed at Moscone Convention Center. Where she was #1 on the seniortiy list and recieved most of the work. She was involved in a forklift accident where her foot was run over and crushed. She left on disability but was then able to return back to full work duties. She had a disability claim and a workmans comp case that yes she did get money from. Her parents are both elderly. Both are in their late 80’s. They have worked most of their lives. They were all harrassed so much by their landlord that they ended up moving to Palm Springs. I wish that by vacating the property it would make it available and affordable to middle income families who would love to raise their kids in noe valley, but unfortunatly it won’t! The only winners here will either be the ones with money who want to make more or the banks