CFAH

150 Carmel Street 2015

Priced for a record-shattering $7.7 million sale earlier this year, the original listing for the completely re-built Cole Valley home at 150 Carmel Street was withdrawn from the MLS and the property was relisted for $7.15 million in September.

Withdrawn from the MLS for the second time last month, and without a reported sale, the 4,800-square-foot home at 150 Carmel Street has quietly traded hands for $6.5 million, as noted by a plugged-in reader this past weekend, or $1,354 per square foot.

The identity of the buyer was hidden behind the “Yes Ampersand” LLC.

And despite selling for $1.2 million (16 percent) below original expectations, 150 Carmel now holds the title for the most expensive Cole Valley home, easily displacing 4924 17th Street which sold for $3.9 million ($1,195 per square foot) in 2007.

Comments from Plugged-In Readers

  1. Posted by Dave

    One thing about the LLC is that is makes it harder to find out the owner but not that much hard. Lawyers have access to software that can dig out this information. Unless the property is further shielded in a land trust.

    I’m learning about the ins and outs of LLC’s as I traded for multiple properties from just one in California.

    The primary purpose of an LLC is to shield assets you have outside the property held in the LLC from being fair game if there is a lawsuit say by a tenant in the rental property within the LLC.

    Big mistake investors make is put all their investment property in one LLC. All the assets in the one LLC are fair game in a lawsuit. But LLC’s are pricey. California charges a fee of 800/year for each LCC. An alternative is a PUP.

    I should have become a lawyer – not really.

    • Posted by questio

      LLC is limited liability corporation
      PUP is

      Google says: PUP = Professional United Pet sitters

      • Posted by Dave

        PUP stands for ‘personal umbrella policy’ (personal liability insurance policy).

        If one owns a rental property and is sued for an incident in that property the appellant can go after al your assets in the lawsuit – not just the value of the rental home. Your personal assets beyond that.

        If the rental property is put into an LLC then the appellant is restricted to going after the value of the home – whatever is in the LLC.

        If one does not have an LLC, but has a PUP then if the appellant goes after assets outside the rental home – personal assets – the PUP will cover that. Assuming one has PUP coverage that totally covers your remaining assets outside the rental.

        • Posted by Exbernaler

          It is not that difficult to get around an LLC in a lawsuit and reach personal assets.

          • Posted by Dave

            That depends. If one is wealthy and can afford lawyers on retainer then, as OJ did, one can wall off their assets.

            Generally for a small investor an LLC will do but, in my case, I found the PUP more appropriate.

            Most/many of these lawsuits are brought by “regular” folk and when they hear the retainer fee the lawyer charges they will back off if an LLC is in place.

            These suitors are looking for big game in some cases, not denying legitimate lawsuit situations.

            For a small real estate investor an LLC or PUP is essential. I say that as one who has, knock on wood, never had a problem in almost 20 years of investing. And who never even thought of it for the first 10 plus years.

            You do what you can as a real estate investor.

        • Posted by SFrentier

          I looked into llc’s but found them to be 1- a total pain in the ass wrt taxes, not to mention loans, insurance, etc. 2- dubious value if there is a serious case against you.

          Land trusts I think are more smoke and mirrors. Besides if you go to court you can’t lie about what you own…I mean you can but that would be stupid.

          But yes, I definilty got, and like, my PUP. Just gotta remember to update it when the SF appreciation train is in town! The only thing about a PUP is that it doesn’t cover negligence. So don’t be a douche landlord and you should be okay for liability coverage. If you maintain your properties well, the other high liability exposure you have is your car, so make sure that’s linked in to it too.

          Also, make sure your rental props have wrongful eviction insurance (or it may be on your PUP.). I think it’s best to have your rental insurance and PUP originating from the same carrier, so there are no weird gaps.

          • Posted by JR "Bob" Dobbs

            If your liability policy does not cover negligence, then you need a different carrier! That is the whole reason to buy such insurance.

            I’m sure your policy covers losses due to negligence. What they do not cover is losses due to intentional or criminal conduct, or punitive damages. They generally also have an exclusion for professional services or other business activities (hence “Personal” umbrella protection).

            For anyone with more than a single rental unit or two, I’d recommend holding the properties in an LLC or a similar limited liability structure and a commercial liability policy — otherwise one serious injury could wipe you out (even if you win, the legal fees will be steep, especially if the loss is not covered by the PUP).

          • Posted by SFrentier

            Thanks for your input. What I meant was intentional conduct per your wording. An example: let’s say there is dry rot on an outside staircase. Tenant points it out numerous times. LL fails to repair it, the stairs fall through and tenant is injured. At what point does it go from negligence (“oh yeah, I’ll get to that repair later”) than intentional neglect? I’m assuming that a court would decide based on the particulars of the situation (such as the severity of the dry rot, how info was communicated, etc?)

            Also to clarify on a PUP: my understanding is that legal fees are covered. So I’m not sure what you mean by professional services, etc. not covered by PUP.

            PUP only covers 1-4 units. I know condo HOAs and 5+ Units or mixed use bldgs are considered commercial properties, and a PUP DOES NOT cover those. So yes, you need a different liability policy for commercial properties. And if you own several of them, then you can get umbrella liability coverage (as opposed to having a separate liability inclusion on each property.)

          • Posted by JR "Bob" Dobbs

            Most personal umbrella policies exclude (ie they do not cover) losses arising out of the provision of professional or commercial activities. To illustrate — I’m a lawyer, and my PUP would cover a claim based on an accident while driving my car, but not a claim based on my screwing up a legal filing at work or based on an accident to a tenant arising out of my acting as a landlord. If yours expressly covers losses arising out of the rental business — great, that is what you want. But that would be unusual.

            And an LLC (or similar) structure will protect you from personally liability regardless of the basis of the claim. Hence, a combination of an LLC and proper insurance is best. As noted earlier, these benefits all have a cost. As you have more to lose (more properties, more wealth) these protections become more critical to avoid being wiped out from one serious accident. There are other, very easy and cheap protections — e.g. an arbitration clause in your leases.

          • Posted by soccermom

            Single member LLC’s are disregarded entities for federal tax purposes, and if you are already going to an accountant for your taxes, add very little in terms of overhead for your filings. If you are trying to fight it out on TurboTax then god bless you.

            Bank accounts are easy to open for LLC’s once you have your operating agreement and your state filings. You can look up an operating agreement on line, fix it up in Microsoft Word, sign it, and banks will accept it. Go to the Secretary of State web site an figure out the filing process. It’s not hard.

            Insurance and loans etc., in my experience seem to be as easy to acquire for a property-holding LLC as for an individual.

            Keep your LLC account books in Quickbooks or similar and separate from your personal income statement and you have an ongoing paper trail separating your business and personal assets.

            Is it perfect? No. But concerns about an $800 annual tax seem penny-wise/pound-foolish at least for me.

            Plus, the LLC layer makes it one step more difficult for jokers to suss you out. If you really care, you can find a lawyer to act as the agent for service of process on the Secretary of State web site and there you go…

            Your mileage may vary.

        • Posted by questio

          Thank you. This is very helpful and also insightful.

  2. Posted by missiondweller

    I have been helping a very old relative with his LLC’s (registered in Delaware, holding properties in other states). Besides the $800 fee to CA, you pay fees in Delaware, and in many states. Those 1031 exchanges were easy to get into, but…

    • Posted by Dave

      This is true. For now I’ve decided to go with a PUP. I recently purchased millions in personal liability coverage for lots less than I would pay California for one LLC. Lots less.

      The idea is to keep one’s investment properties somewhat anonymous in out of state locations. Folks see that a Californian owns the home and they think – big money. There are other things my manager does legally to make my ownership not obvious.

      But an LLC does not really do that in most cases so a PUP is a cheaper alternative. It works for me now.

      1031 exchanges are great. Really unrelated to LLC’s except if one sells one home in California and ends up with 4 in other states and decides to go from 1 LLC to 4 LLCs. Indirect relationship..

      In any case, even if one has one rental and its in California you still need an LLC or a PUP.

      My manager has a pooled liability coverage her clients. 2 million liability per property for a great price. Lloyds on London. Top notch stuff

      But as I own my SF home and have other assets I wanted more. The one thing about PUP is that if you purchase such a policy on top of other liability coverage, the most currently written policy must be greater than the others. So I had to go with a 3 million PUP instead of a 2 million which would have been more fitting. No biggie.

      • Posted by JR "Bob" Dobbs

        Yes, LLCs provide some limitations to liability, but they also have some costs, including admin costs to make sure you don’t inadvertently lose the limitation of liability. You can obtain alternative protections through insurance — commercial or PUP — also at a cost. There are also other more exotic options such as trusts. So you need to do a cost/benefit analysis between the LLC and insurance or other options. Each alternative also has exit costs if/when you want to sell (and also when you die, which will happen . . .). They each also have tax consequences.

        Generally, an LLC will save you money by permitting you to carry less insurance and thus at a lower premium, and taxes are simple. Same analysis is required re multiple LLCs vs. insurance — it may make sense to put each property under a separate LLC or it may not. If you own more than a few units, talk to a lawyer who is knowledgeable about the tax, insurance, trust, and estate planning issues.

        • Posted by Dave

          Great comment.

          Everyone is different. The wealthy/famous even more so. As to what protections they need financially.

          At a seminar of my real estate group a while back a lawyer said for total protection one needs an LLC, land trust and family trust.

          A property manager presented after him and said for the average real estate investor that might be too much. She noted one can buy a lot of personal liability insurance for the 800 bucks California charges each year to have one LLC.

          For small time investors going beyond the LLC or PUP may not be necessary. The lawyer noted that OJ Simpson had so protected his assets that after the civil judgment, as big as it was, he has paid out a penny (or a dollar – can’t quite recall, per year). And when he went into prison there were no payments.

          The key is talking to expert on this. I was in the dark and when I bought my first rental years ago. I never thought of any of this. I know a lot of small real estate investors who even today do not have additional asset protection should a renter sue them.

          Its a critical topic if one is an investor.

  3. Posted by NJ

    Wow. Congratulations to the buyer on the sweet new house.

    Although, in discussing Cole Valley records, I submit that Belgrave Ave. should be included (regardless of any technical definitions, which I don’t know). Earlier this year, 115 Belgrave sold for a reported 4.95 million. Of course, this sale still beats that, though 115 was a fixer whereas this was heavily renovated.

    • Posted by Mark

      The lot size on 115 Belgrave is double the standard lot (5000 sqft). This one is about 3800.

  4. Posted by Ohlone Californio

    pretty sure the seller turned down ~7M last summer

  5. Posted by eddy

    Probably too late for this comment but can’t resist. I’m honestly surprised that a home like this is selling for $6.5m in this part of town. I’m fairly bullish on SF real estate and I also don’t have a problem with developers strip mining the old inventory and creating white boxes or whatever flavor of home will command such premiums in the marketplace. But $6,500,000 is an extremely large figure for any home, anywhere.

    Buyers are free to purchase whatever they want and pay whatever they want but the issue I have with this kind of a sale price is that it is largely detached from the broader market in SF. It wasn’t long ago that $6.5m would command some of the best homes in the best locations and this home in Pac/Pre Heights should (would) command a significant premium but that isn’t really playing out.

    101 Maple is sitting on the shelf @ 2100/psf. My guess is that it sells below $10M putting it closer to $1700/psf. Still a premium over this place at $1354/psf in Cole Valley. But I wouldn’t be surprised to see Maple sell for closer to $8-9m. Bottom line is that there just aren’t that many people in the world that can afford $6.5m homes and as more and more of these homes flip and price at those ranges it will create a challenge when these homes eventually come back on the market 5 or 6 years from now as the new car small will have worn off and there are still many many homes that will be refurbished and sell at a premium.

    High end buyers will have a lot to choose from in a few years at prices below these levels in my opinion.

    • Posted by soccermom

      I understand that sentiment, but how do we reconcile an expensive home in San Francisco for $6.5mm with what seem to be the hundreds(?) of homes in Los Angeles and certainly New York/London that sell in the $10-$20mm+ range. I suppose it has a lot to do with large lots overlooking all of LA or global core pricing for London, but don’t some of these prices still “look cheap” when compared to global tier 1 locations?

      I’m not, for the record, arguing that Cole Valley is a global tier 1 location, more that the big pretty old houses in Pac Heights seem more apt to drift up into the $15-25mm range than to keep a lid on the market at $10mm. Perhaps the old blue chip neighborhoods simply haven’t caught on with the right foreign/new money buyers.

      • Posted by eddy

        Great observations and arguments. Wish I had more time to dig into the actual data and numbers of the market for high end home buyers and total number of higher end homes. One argument to be made is that super prime RE in SF has been grossly undervalued. I actually think this could be a possible argument considering the scarcity. It’s one of the reasons I think the 2250 Vallejo home will sell at or over asking.

  6. Posted by Someone

    soccermom, there aren’t that many out of state buyers at the high end in SF. You can read about Chinese investors buying palo alto and cupertino but they rarely touch SF, especially not above $5M.

    I love SF, but it doesn’t have the UHNWI attraction LON, HK, LA, NY, MIAMI attracts.

    • Posted by soccermom

      Yes – that’s the point I was making with eddy (absence of overseas buyers pushing the high end) – but it could be changing. I am unaware of any “real” studies of this dynamic but I sold a house this summer that was toured by at least 5 mainland Chinese buyers, at least two with some child-education angle.

      The recent WSJ piece was interesting too.

      • Posted by Ohlone Californio

        The concept of why a “study” examining at most 8-9 or so buyers from any given nationality in the SF marketplace at any given quarter might be a difficult thing to achieve has been discussed on this website. The concept of how even 2-3 buyers of any given nationality can roil a market for a quarter has also been discussed on this website.

        In terms of China, there exist several well regarded Chinese trade publications which only showcase American properties ~$5M. So in one sense, properties ~$5M and higher are easier to market to monied Chinese.

      • Posted by Someone

        SF Parcel is your friend, you can look at every +$3M sale in SF in the past 1-3 years and reach the same conclusion I’ve did. Newspapers write articles and busy buddies show up in open homes, but who is buying is public records and only a small fraction is hidden behind LLCs, especially harder to crack DE ones.

        In short I’m with Eddy, this tide will stop in the next 1-2 years, those paying top dollars don’t care, they can afford paper loses

        • Posted by soccermom

          What’s the link to the parcel map to which you refer?
          I don’t believe there is ownership information on the property information map….

        • Posted by Ohlone Californio

          Someone,

          Are you going to answer the question? Saying nothing after making a bogus claim is not your friend.

  7. Posted by Ohlone Californio

    You can use the SF Parcel site to see every sale for 3M+, then take the names and correlate them, assuming all Chinese-appearing names are indeed Chinese nationals, and achieve a sort of understanding of who was looking for what, where, and in what areas, and how competitive, or what effect those buyers had on any given market was during that time? I don’t think so.

    But perhaps just start with the two aspects. I don’t think it’s possible to use the tool to do what you state.

  8. Posted by Someone

    Once you have a name, LinkedIn is usually your friend, and vast majority are local. Most LLCs are managed by few local lawyers. It’s the usual mix of tech riches, entrepreneurs, execs, senior lawyers, hedge fund partners and VCs, vast majority operate and live in the bay area.

    It’s entirely possible that all these properties had multiple offers and the “Chinese buyer” was always the 2nd highest which drove up the price, but oddly they rarely win.

    Having local buyers is good for price stability but it does mean that comparing to other international markets is silly and given the local economy is crazy hot, the froth will vanish even w/o another global recession

    • Posted by Ohlone Californio

      I’m sorry but I did not follow that in the slightest way. Anyway, what does that post have to do with being able to use the city’s SF Parcel website tool to be able to create a report on how many Chinese buyers there were or were not at any given time?

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