"Condo premium per square foot chart is...$37 per square foot, as of September 2009, down from an all-time high of around $225 in 2005."
Well, that seems to dovetail nicely (the downward trend) with the introduction of fractional loans in 2005.

Ebay guy: Condo premium per square foot chart is now live on my blog, here:

http://www.pegasusventures.net/wordpressblog/2009/11/06/tics…

$37 per square foot, as of September 2009, down from an all-time high of around $225 in 2005. However, as I explain in my post, I'd be careful taking this number too seriously because a lot of TIC sales don't include a price per square foot, just a sales price for the unit itself.

Misha, Looking forward to the post. There is a theory (I'm cribbing this from, I believe, cse on Socketsite), that says that TICs are more stable vehicles than condos (which cuts against what I'd call the conventional wisdom below). And believe me, I give a lot of credence to the conventional wisdom as there are many downsides to TIC ownership. Here's some possible reasons why TICs could be better: 1. TICs, in some ways, are more like coops than condos. It can be argued (definitely depends on the TIC agreement), that there is a more thorough vetting of potential TIC owners. 2. Even with fractional TIC loans, the potential TIC buyer (usually) needs more money for a downpayment and has to have the financial stability to afford the higher interest rates. At any rate, it will be interesting to watch how TICs weather the storm as the bubble unwinds. I am a fan of DIY TICs as they are one of the last forms of somewhat affordable housing; the current downturn should shake out some of the developers (and leave more space for the amateurs). I noticed recently that Bank of Marin had a record setting quarter.

I would add that, somewhat surprisingly, there is not much of a discount these days if you buy a TIC vs. a condo. I have posted a chart that tracks what I call the "condo premium" -- ie. how much more you'd pay for a condo because they avoid so many of the issues associated with TICs here (back to 2003):

http://www.pegasusventures.net/wordpressblog/2009/11/05/tics…

Based on my data, the current condo premium on a per square foot basis is around $37. I'll be posting a chart and an explanation on my blog (below) later this evening or tomorrow.

Investment condo (or TIC) in SF? You obviously like playing the lottery so I two suggestions:
1. For a TIC investment unit, look for one that has enough owner occupied units to condo convert (eligible for lottery),but may have a unit or two with a renter. This renter may even have protected status, but don't let that dissuade you; check the actuarial tables and see if their life expectancy is longer than yours. Remember positive cash flow didn't matter for the last decade, so why should it now. Once the building converts, that unit is your golden ticket.
2. For buying a regular condo, check out 'discounted' buildings that offer foreclosures for a good deal. Like the Beacon, for example; it has a class action lawsuit filed against the developers, and this is driving down the values.
Remember real interest rates are the highest they've been since the early eighties; it's always a great time to buy (or sell a condo)!

Many of the answers here respond to your question. I have just posted an article on TICs and some of their pit-falls on my website below. Beginning tomorrow, I'll also have comparative data showing sales and prices of TICs vs condos.

A TIC is actually a way of taking title to property (Tenant-in-Common). It means that you are purchasing your unit at the same time as the other prospective unit owners in that particular property and your assigned ownership is given to you as a percentage. When there are repairs to the structure, yard, common areas, you will also be charged by the co--ordinating percentage of your ownership for those repairs. You will create your own governing body within your building and create reserves for necessary and agreed upon repairs and other issues. A condominium on the other hand, has a governing body seperate from the ownership for which homeowners dues are paid. In a condo - you own 100% of the interior of your unit and the HOA (Home Owners Association) dues you pay goes to runnign that association and making repairs to the exterior of the property and environs. There are several other ownership issues to adress when purchasing a TIC in San Francisco that have to do with how the building became vacant and what it means in terms of the TIC owners abiity to convert to condominiums. HOA's have rules & regulations that may allow or not , the renting of your condo unit which must be adxressed before purchasing, if this is your intention. A TIC group may approve or veto your ability to use your unit as a rental according to the mutually drawn and agreed upon Tenants in Common Agreement. When purchasing a condo or a TIC - it is a good idea to have a thorough consultation & representation with a knowledgeable professional real estate person int hat area to help you assess which is for you and make sure your needs are met. I've attached a link to a San Francisco Real Estate Attorney who is well known for his work with TIC's and condo conversions and many consider him the expert in San Francisco Real Estate.

Buying a TIC as an investment is a highly risky proposition. Not only are you partnering with strangers, but rent control can severely limit your options on how you can rent the property, and then possibly severely restrict your ability to resell it when the time comes.

I can understand why buyers are drawn to TICs. Their price points are tempting. I only recommend them to certain purchasers, however. Investors are generally not one of them.

Hi Condo Buyer,

That's correct, if you were purchasing the whole building yourself you could go the route of a conventional loan. Interest rates tend to be higher if the property is a rental vs. owner occupied.

Depending on the eviction history of the property, there are still owner occupancy rules that need to be met to condo convert a 2-unit building.

Per Sirkin: In general, a building with no more than two residential units can be converted to condominiums after each of the units has been occupied by a separate owner for one year.

More details can be found at his website: http://www.andysirkin.com/HTMLArticle.cfm?Article=158

Or a 2 unit building can enter the lottery if 1 unit has been owner occupied for 3 years.

There are tenant rights to be aware of as well.

There are also expenses associated with converting a building: http://www.andysirkin.com/HTMLArticle.cfm?Article=2


Best wishes,


Cheryl Bower, Realtor , GRI, ABR
Cell 415.999.3450
Zephyr Real Estate
Cheryl@cbower.com http://www.cbower.com
DRE#: 01505551

Thank you so much for all the very informative answers! After my research it seems like a TIC with multiple units is fairly complicated as you have to do the lottery to convert the unit into a Condo etc.

Now say you purchase both units in a 2 unit TIC would you financing be considered a "regular" loan as you own the entire building? Also as you can bypass the lottery would you consider this as fairly easy to convert both units to condos or is this more complicated than my research has proven so far? Thanks again!


Condo buyer in SF

When you buy a condo you buy the space within the walls of the unit and a share of all the common grounds and improvements. When you buy a TIC, you and the other co-owners in the group, all hold title to the entire piece of property, land and improvments. There is a sepearate contract between the co-owners that spells out the percentages owned and spaces assigned including units and parking. That document is called a TIC agreement and like the conditions, covenants and restrictions (CC&R) of a condo association they govern behaviour and limit usage. Either could have rental limitations.
In San Francisco we have a unique governmentalsituation where the Board of Supervisors work to maintain low rents through rent control, try to restrict the conversion of rental units to ownership units, restrict the conversion to condo and just generally act like renters are the most important group in the City. Which they are to politicians since they make up over 60% of the voting public.
There are valid reasons to buy a TIC but you need to be a Totally Informed Client as you make the decision to buy that over a condo.
Our rental rates are still pretty good but if you are expecting cash flow there are only a few neighborhoods to buy in. Much of San Francisco rental property is a buy and hold play and in fact some of it is just pride of ownership, in other words they don't make money. Buying a condo as an investment you will want to weigh a number of factor starting with what is the exit stratagy and what is your cash/equity position in the property .Many other things will will come out of a discsuuin starting on those two subjects.

To your question about price, a TIC will generally have a discount from the price of a comparable condo because of the issues my colleagues have mentioned below. The discount ranges from 5-20% depending on specifics of the particular property.

Shaban Shakoori
TRI Coldwell Banker, SF's #1 Office

Hi Condo Buyer,

There is a lot of detailed information on TIC’s, condo conversion and condos on Andy Sirkin’s website:

http://www.andysirkin.com/Index.cfm?Page=13

TIC’s are one of the more complicated and risky types of real estate to purchase. They will also have greater rental restrictions than a condo. In general, a condo is exempt from some rent control laws including rent increases.

TIC financing can also be more expensive if one is going the route of fractional financing rather than a group loan (where all co-owners are under the same loan). Fractional loans have higher interest rates than conventional loans (which would be the route for a condo purchase) and they are also short term loans (generally fixed for 5 years).

TIC’s will have monthly assessments as will a condo. These dues in part pay for common area maintenance as well as a portion goes into a reserve fund.

In general, buyers who purchase TIC’s have the goal of doing condo conversion which can take several years depending on the building.

A condo will be the less complicated type of purchase if the intent is to hold it as a long-term rental. I’ve been a S.F. rental property owner for 10+ years and am happy to talk more offline about best practices in finding a solid rental property as well as qualified tenants.

Best wishes,


Cheryl Bower, Realtor , GRI, ABR
Cell 415.999.3450
Zephyr Real Estate
Cheryl@cbower.com http://www.cbower.com
DRE#: 01505551

Condo Buyer,

The answer to this question is complicated because all TICs are not created equal...

First, TIC is an acronym for Tenancy in Common, which is a legal form of ownership that allows people to buy into a multi-unit building that has not or can't be condo converted. With a TIC you share ownership in a building with unit occupancy designated by a TIC Agreement. There is one tax bill for the building which owners (known as Co-tenants) share according to owenrship value. With a condo you own your unit and have your own tax bill.

Second, there are potential rental restrictions if the building has been Ellis Acted or an OMI (Owner Move in) was done.

Third, there are implications upon resale because the number of lenders is limited, the rates are higher, and you can't get 30 yr fixed loans.

Fourth, because the building has not been condo converted there may be a lot of repairs/upgrades necessary that would already have been done in a conversion.

There are other issues beyond the ones listed here, and there are some TICs make sense to buy and some that don't. Vacant 2 unit buildings with clean eviction histories are far superior to 3 - 6 unit ones, and more than 6 you cannot condo convert. My advice to you is speak with someone who knows this subject well before you even considering buying one.

We are happy to provide a no-strings consult as we have sold a lot of these properties and are intimately aware of the issues involved.

A great resource for TIC info is http://www.andysirkin.com

Best Regards,

Lance King/Managing Broker
415.722.5549
lance@fixedrateproperties.com

Consider the HOA fees.

The acronym “TIC”, which stands for tenancy in common and tenants in common, refers to arrangements under which two or more people co-own a parcel of real estate without a “right of survivorship”. This type of co-ownership allows each co-owner to choose who will inherit his/her ownership interest upon death. By contrast, the type of co-ownership called “joint tenancy” requires that each co-owner’s interest pass to the other co-owners upon death. The broader terms “fractional ownership”, “shared ownership, and “co-ownership” encompass all arrangements involving two or more owners, including tenancy in common and joint tenancy.

Gregory Garver - Commercial Real Estate Broker
Broker License# 01716531
(415)225-9894
gregory.garver@gmail.com