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SF Real Estate Digest

How to read the market

By Jamie Comer | Agent in San Francisco, CA
  • Is Real Estate a Bad Investment?

    Posted Under: Market Conditions in San Francisco, Home Buying in San Francisco, Rent vs Buy in San Francisco  |  November 5, 2010 1:32 PM  |  870 views  |  No comments

    Why you need to fire your landlord

    “"Be greedy when others are fearful and fearful when others are greedy".

    -Warren Buffett

    Real Estate is an asset.  Like all assets; stocks for example, values can go up or down.  Unlike other assets; real estate is an investment that you actually need to use and can’t live without; you must live somewhere, so Real Estate has the additional benefit of building wealth by capturing and retaining dollars you would have spent elsewhere anyway.  In addition it provides you a tax benefit in two ways.

    First; the interest is deductible on your income taxes and second Uncle Sam protects the gain of your appreciation up to 250K for single people and 500K for heterosexual  married people (which is why marriage should be recognized for all couples).  Stocks pay dividends which are taxable at the capital gains rate. With Real Estate  you are retaining more of your money because you do not have to pay capital gains on every dollar earned and you are paying off an asset that you own instead of giving the money away to a land lord.  You are creating a tax shelter for your yearly income as you write off interest payments and you are protecting capital gains from being taxed. 

    Let’s say you are a first time home buyer looking to buy a 1 bedroom condo near work and you  find that you can own one for more than it would cost to rent a 1 bedroom condo.  You might rent it for 2500 and to own it costs 3400.  Why would you pay 900 dollars a month more?  Especially when to rent one costs about 5K up front (for security deposit and so forth) and to own one might cost 50 K up front for the down payment.  The reason is simple.  The cost differential on a monthly will be absorbed by the tax write off and in 5 years time, assuming no appreciation at all, you will have retained the 150,000 dollars in building your own wealth rather than giving that money to your landlord.  Now, if you qualify for this one bedroom apartment here in San Francisco chances are that you make about 150K a year.   Would you be willing to work for free for one year?  How about a year and a half? 

    The answer is probably no, however this is exactly what you are doing when you give a landlord your after tax payroll dollars.  At 150K a year, you are handing your landlord 19 months of your work over a 5 year period.  If your boss called you into her office and let you know that you did not need to work more, in fact you could actually work a little less and she was going to give you a 33% raise so instead of making 7875 a month, she was going to make sure you got 10,375 would you back out the door and say, no, I don’t think so, it doesn’t seem like a good idea? 

    Yet this is what you are choosing when you choose to remain a renter.  You are letting other people control your ability to retain the wealth you are working so hard to develop.  You may have heard that real estate is a bad investment on the news.  Real Estate did not decline, the way that it was monetized declined.  Did the houses and condos disappear because they had no value?  Did they blow up?  No.   The banks blew up and disappeared.  The problem has never been real estate; you need it and have to have it.  The problem was with the banks.  Real Estate as an asset class is and always will be imperative in a portfolio whose aim is to build and retain wealth.  For a detailed explanation on the steps to buying, feel free to visit my website http://www.sfhomeforsale.com/Step-By-Step-Home-Buying

  • "Giant" land development deals in SoMa.

    Posted Under: Market Conditions in San Francisco, Home Buying in San Francisco, Rent vs Buy in San Francisco  |  November 3, 2010 1:55 PM  |  988 views  |  No comments

    The  tale of a city that loved its ball park

    If you thought success stories for underdogs were limited to The World Series Champions; The San Francisco Giants you have no further to look than the area immediately surrounding the ballpark: SoMa, South Beach and Mission Bay.  A team of misfit commercial real estate lease ups and land sales will champion the other Giant underdog in San Francisco; Residential Real Estate.

    In the past month, TMG partners, a development company focused on office and retail space ranked #1 Real Estate Developer by the San Francisco Business Times, has taken control of nearly 1 million square feet of SoMa Real Estate.  Here are their home runs:

    1.    TMG has signed a 270,000 square-foot- lease at 650 Townsend (@ 8th street)for social gaming company Zynga (think Farmville on Facebook). 

    2.    TMG has taken ownership stakes in  in 680 Folsom at third street (405000 sq ft) .

    3.    155 5th st.  between Howard and Mission (400,000 sq ft). 

    4.    260 5th street X Folsom ; Residential

    5.    900 Folsom x 5th; Residential

    6.    208 Utah (cross street 15th) purchased for 7.5M

    Tenants looking for new headquarter in TMG’a dug out include both rookies and veterans Twitter, Dolby, and Dugoni School of Dentristy.  Michael Covarrubia, TMG CEO reveals “The activity is tremendous.  There are a bunch of large users out there which is causing a tidal wave of activity.”  

    The largest land deal since 2005, Salesforce.com  paid 278 Million dollars for 14 acres of undeveloped land  by the ballpark in Mission Bay.  This purchase is more than double the space it currently occupies in the financial district. CEO Marc Benioff  said the company looked at buying in Silicon Valley and in Oakland  but decided to remain in San Francisco because of the city’s growing status as a technology hub. 

    “San Francisco really has become the home of the next generation Internet Companies” and made reference to the tremendous labor pool available here.  Salesforce.com has already broken ground and is slated to move in by 2013. Right behind them , their  neighbor  UCSF Medical Center  will be complete in 2014 at a cost of 1.5 Billion dollars.  This is precisely when the existing pipeline for new residential units will be utterly dry.  There is Giant diversity of business digging into San Francisco which promises a stable employment future. 

    If you have any doubt that this city has a splendid future, please remember that San Francisco is where   Tim Lincecum showed up as a rookie and rented a 1 bedroom apartment.  That was only three years ago.  If you have any uncertainty that this glorious city will make it out of this torturous recession  remember our Giants who took us on the most amazing ride these last weeks.  They have taken our leftover hearts, united us in celebration and reminded us:  Don’t Stop Believing.  To subscribe to this blog ; http://www.sfhomeforsale.com/Blog

    Update Feb 20 2011: According to CB Richard Ellis SF to be first in nation in office-rent growth this year by a 9% increase; NYC was second expected to increase by 7%. 

 
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