how to test the waters selling OB lots zoned for 8 total units

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Submitted by gzz on May 4, 2016 - 10:31am

I have two ancient but nice redwood frame houses in OB on large adjoining lots zoned for 4 units each. It would be 8 total if they were merged. You could demo them and build 8 skinny tall detached houses or keep one or both and build a 6-7 unit building.

I have really no way to value them. zillow has a crazy low estimate of their value since it does not account for lot size very well. Gross monthly rent is about 7,000.

I'd personally guess at 1.7m.

I would not want to sell for 1.7, but probably would for 1.9. Is there a good way to get a listing without signing up with an agent? Or list it on loopnet rather than MLS so I do not have to deal regular buyers just looking for a house?

Submitted by livinincali on May 4, 2016 - 11:19am.

I'd go with loopnet. Zillow/MLS folks are looking for turn key properties to live in, not development opportunities.

Submitted by HLS on May 4, 2016 - 1:53pm.

It can be listed on MLS as a package.
If prices as a teardown, it can be made clear in the listing that the houses cannot be shown and it's a 2 lot package listing.

No buyer looking for a house is going to bother you.
MLS is for lots also, not just houses.
MLS gets you worldwide exposure.
You never know who is looking for what.

As long as you can get your net price, what's your objection to listing with an agent (and getting valid info to support the listing price)
**If you have no way to value them, where does $1.7M come from ?

There is potential liability in selling by owner.
Offhand comments can be made by a seller that are taken as facts by a buyer who finds out after closing weren't correct and you can end up in protracted, expensive litigation.

The pages of Realtor purchase contracts clarify a whole bunch of points and place some responsibilities on the agent and their broker.

Commissions are always negotiable, not set in stone.
If they're worth $1.25M you wont sell them for $1.9
If they're worth $2.5M why sell for $1.9

Submitted by HLS on May 4, 2016 - 1:54pm.

livinincali wrote:
Zillow/MLS folks are looking for turn key properties to live in, not development opportunities.

According to who ???

Submitted by flyer on May 4, 2016 - 6:37pm.

gzz. Don't think you'll have any problem selling your land/properties if you choose to. Have family who have sold in the last year or so in Point Loma, Sunset Cliffs and OB (after 30-40 years) and the market is hot--lots of cash investors.

Every one of them sold to cash investors for way above asking price, and family members in the biz handled the transactions. Some were never even listed.

Submitted by Hobie on May 4, 2016 - 6:39pm.

Why not just list at 4MM and wait. Cash still rolls in while you wait for investor. May happen faster than you think with positive political future. Of course, specific location will give you the right price. But you know that already. I think OB is ripe for major overhaul. Think Balboa Island. As price goes up, hippys go away.

Submitted by flyer on May 5, 2016 - 5:21am.

That sounds like a good idea. The demand for certain coastal properties just seems to be growing from what we're seeing, so the OP should do well.

Submitted by FlyerInHi on May 5, 2016 - 3:18pm.

Gzz you did so well with your purchases. I wish I had seen the potential you foresaw.

I have a friend who bought a multiplex in OB . He passed on another one and he regrets.

Submitted by ljinvestor on May 5, 2016 - 6:21pm.

There is a guy who has been building a lot of those row type homes in PB the last few years. You might want to look him up and see what he would offer. His name is Rob and I believe his company name is "The Beach Builder"

One or two others have also built a bunch of those homes in PB over the last 15 yrs but I'm not sure of their names.

Submitted by gzz on May 6, 2016 - 12:36pm.

Appreciate the advice everyone. The houses are in good condition and well sized, about 1500 and 1800sf, so not really tear-downs.

The main problem with them is they are set back about 25 feet from the sidewalk and about 12 feet from the permitted building line, creating a lot of "wasted space."

Right now, despite the fact that everyone does it, the front of a property is not allowed to be devoted entirely to parking. The city might allow a variance to permit this if it meant two 100+ year old beach cottages could be preserved, letting the wasted space in front go to parking.

The 1.7m "low estimate" of the houses value is based on their cash flow of about ~$7000/mo as long term rentals (20x annual rent) or alternatively their conservative market value if they were sold separately.

Submitted by gzz on May 6, 2016 - 12:58pm.

I agree that hold and wait will probably work well. I have about 870k in low interest mortgage debt on them, and if the value of the property grows 4% a year with the leverage the 870k in equity grows about $70,000 a year for an 8% annual return plus the small profit from renting themselves over the mortgage/maintenance brings that up to almost 10%.

I've been giving some thought of moving to SF since about half of my work is there, that's the main reason I might sell, otherwise I could not afford to buy there. Hard to really say for sure, but the return on real estate might end up being higher there too. The problem is there already has been much more appreciation there than here. SD and SF both had rapid appreciation 2011 to 2013, but we slowed down after that and SF did not.

If I moved there I'd probably get something like these:

http://www.zillow.com/homedetails/77-Bla...

http://www.zillow.com/homedetails/4122-4...

Submitted by bearishgurl on May 6, 2016 - 3:39pm.

gzz wrote:
I agree that hold and wait will probably work well. I have about 870k in low interest mortgage debt on them, and if the value of the property grows 4% a year with the leverage the 870k in equity grows about $70,000 a year for an 8% annual return plus the small profit from renting themselves over the mortgage/maintenance brings that up to almost 10%.

I've been giving some thought of moving to SF since about half of my work is there, that's the main reason I might sell, otherwise I could not afford to buy there. Hard to really say for sure, but the return on real estate might end up being higher there too. The problem is there already has been much more appreciation there than here. SD and SF both had rapid appreciation 2011 to 2013, but we slowed down after that and SF did not.

If I moved there I'd probably get something like these:

http://www.zillow.com/homedetails/77-Bla...

http://www.zillow.com/homedetails/4122-4...

WOW, lucky you, gzz! I didn't realize there were still fairly reasonable deals out there for SF. Thanks for sharing! I like the location and fantastic lot size of the 2nd listing better than the 1st one, but the 1st one has a great location as well although not as "upscale" and has a garage (for no bigger than a Prius). That's HUGE in SF! It appears that the owners/LL of the 1st listing, just north of the Castro, lost it to FC due to ATMing it to death over the years, cuz they had to have purchased it >25 years ago. I'd take the 2/1 right above the garage and the garage for myself and rent the 3rd flr 2/1 out (after slightly rehabbing it) if I bought it. (One of the back [1/1?] unit's tenant is apparently still under a "rent control" contract.) It has a nice elevated easy-care backyard as well.

I can't tell from the map, but if the 2nd listing actually has a double-deep lot, it may abut the street behind where you may be able to get ingress/egress from that street and build a 2-car garage.

I'm with flyer. I really believe you can quickly unload your OB (2 on 1?) without even listing it. Although you have 2 detached homes in OB and the homes in SF are attached, I do agree that SF tends to appreciate more and faster and is definitely less transient (once tenants finally score a rental there, they tend to stay, esp if the unit is "rent controlled"). I would think that new tenants (not established, rent-controlled tenants) in SF make far more money, on average, then tenants in OB (SD) and tend to stay longer. That is, unless you can get away with turning your SD houses into AirBnB or VBRO, which is a constant hassle to manage with a FT job. You state City will not allow you to pave your front setback for parking. Do you think they would approve your turning them into VBRO? Of course, your neighbors would likely report you if you started to do that. You also state that you're currently getting $7K month rent. Wow, that seems like a LOT to me for OB! Are you getting 1 yr+ leases totaling $7K month in rent? OB has always seemed very crowded and transient to me but maybe I've been asleep at the switch while it has gentrified beyond recognition :=0

Good luck to you, gzz! If I were you, I'd sell and go to SF in a heartbeat. Life can be short and it is (literally and figuratively) a "breathtaking" place to live and work ... the experience of a lifetime!

Edit: I just reread the thread and it appears you bought two contiguous parcels. Your mention of your $870K encumbrance caught me off guard and I thought it was for one property.

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