You can move ahead in the ways mentioned below..... but your realtor can put out an email or voicemail to his/her office to see if other Agents have potential partners for you. And your Agent can call other Agents at other companies and see if they can put it out to their offices about potential partners. I have done this successfully.
You can also advertise on Craig's list but I would make sure you trade financial information before you decide to go partners on an offer. Making an offer for a building is the preferred way to go with Agents and Sellers. Lastly, make sure you have a good attorney who can assist you in coming up with a TIC agreement with your new partner. It does not hurt to get the process started once you find a partner.
Finally, 2 unit buildings are the way to go because, so far, you do not need to go through the lottery to change over to condos which should be your goal. I say so far because one does not know how far our Board of Supervisors will go to make homeownership even harder to come by.
The company I mentioned on Union Street is the TIC group. They are Realtors so your agent should contact them. I'm assuming you are working with an agent. The TIC Group says they put people together, I'm not sure if they work with other agents to put groups together.
All of your reasons for looking at 2 unit buildings are sound. But your competition is going to be strong always. Many investors start at that level and with the lottery bypass in place the demand is increased for them.
One other aspect that no one has mentioned yet is change in the laws of conversion. When the Board of Supervisors changes in the next election we could see an increase in the allowed number of condo conversions. The 250 allowed conversion number was set when Dianne Feinstein was Mayor. It was the number of conversions done the year before so that was the limit set. It is ridiculous that it hasnâ€™t been changed and I am working and hoping for success with a new group of Supervisors. Four are termed out and we need more pragmatism and less idealism.
One more suggestion is for your agent to look at people like Peter. His post works toward your goal. Also find out who else offered on the buildings that you lost out on and contact them. That gets you aligned with others that want the same type of home you do.
Thus, the contradiction in my comment... that you can screen, and therefore so can anyone you attempt to sell to in the future.... is only contradictory if the comfort level and demand doesn't grow. But over time I expect the burning need to screen will dimish.... in fact, some agreements are even removing certain screening rights already.
Now if you were going to sell in a year or two, I don't think the market education and comfort level will change enough, but in 5 years???
TIC sales have gone up every year both as a percentage of sales and total sales... I just ran a search... 154 in 2002, 269 in 2003, 395 in '04, 539 in '05, 652 in '06 and 722 in '07. So as long as the news from these new owners is positive, and lending improves, and the city continues to be unsuccessful in stopping TIC's from being a viable home ownership option.... that gap in prices btwn TIC's and Condos should dimish.... and where the biggest gap is now... 3 to 6 unit buildings, and even larger in 7+ unit buildings, is where the biggest potential opportunity is. Where there's greater risk, there is often greater reward :)
Only time will tell!
Thanks to all of you for providing answers. I appreciate the advice, as well as the time and effort you took.
To motivate my question, and give you an update, I have now bid *twice* on a single unit in a two-unit building for sale, and each time the building was sold to one buyer willing to purchase the entire property. If I had a TIC partner in either case, I could have at least had a chance...perhaps our joint bid would have been higher enough than the single bid to make the seller interested.
So...I'll try Craigslist and going though my real estate agent...if you have any other ideas for widening my search for potential TIC partners, let me know.
SFisHome, you asked me what my concern is about screening TIC partners and why I'm not considering 3+ unit TICs.
I want to screen a TIC partner for a couple of reasons. First, I need to understand what their priorities are in terms of living in, and possibly improving, a building. I also want to know their financial situation and get a sense as to whether they seem like the kind of person to compromise or to be firm and difficult in their positions. Suppose I want to condo convert quickly and they are in no rush? Suppose I'd like to make some general improvements to the property and they don't want to? It may be that my impressions lead me to believe that they are not the right partner for me. I understand that these issues aren't all unique to TIC partners, and that condos also involve the potential for divergent interests, but if I'm have the chance to see whether I'd like to live with someone in the same building, I want to take that opportunity.
SFisHome, I'm not sure I understand some of the advantages you suggest a large TIC has. I can certainly see how you can get more "bang for the buck" in terms of living space for the money. But anything that is cheaper to buy is also cheaper to sell. So if demand is less for a 3+ unit TIC (as its value indicates) then it will likewise be more difficult to sell when the time comes. On the one had you say that I can sell to whoever I want, but then you say that I can potentially screen potential new neighbors; this sounds contradictory to me. If I can screen, then so can my neighbors, perhaps negating a potential sale when I want to sell. Also, for me more people involved in a legal situation means more complication and more potential for unforeseen issues to arise; couple this with a long wait to condo convert (assuming all partners are even interested in this) and it makes 3+ unit TICs look unappealing to me. As you can tell, I am relatively risk averse in these kinds of situations, for better or worse.
What is your specific 'screening' concern?? Care to share??
If it's financial, the lending market is so tight right now that someone who is a financially risky partner won't get a loan any way.... the banks will do the screening for you whether or not the TIC agreement stipulates that you can see their finances. And if it's whether or not they are someone you're willing to live in the same building with, then you've got an even greater problem in a Condo building where no one screens anyone.
Hence my question... what are your concerns about partners in a TIC?
I know many, many, many Realtors here in town who think you have to screen your TIC partners... or else. But or else what? I've yet to hear an answer that would scare me, so I think they're being way too cautious. But that's great news for anyone willing to include TIC's in 3+ unit building because that fear keeps prices low giving you far great purchasing power and purchase options.
Meanwhile, the fear is largely gone with 2-unit buildings AND many think they are "deals" or investment opportunities. But... when "many" see anything... that's high 'demand'... so now prices on 2-unit building TIC flats practically match equivalent Condos. So... if you haven't been happy with what you found with Condos, I don't think you're going to find anything more appealing by including 2-unit buildings.
To get more bang for your buck, and more optionss, you're going to need to include TIC's in 3+ unit buildings. The catch is the difficulty to convert to Condos... or rather the extreme length of time in most cases (around 10 years instead of 2 years for a 2-unit).
But do you really need it to be a Condo if you can get your own loan, have exclusive rights to your apartment, can buy a much larger and nicer place for the money, can sell whenever you want to whoever you want.... and in many cases have the right to meet and screen your future neighbors when you can't do that in a Condo?
With fractional financing, and many years of perfecting TIC agreements by the lawyers Jed mentions below, the differences btwn TIC's and Condos have shrunk considerably... as has the supposed risk. Not everyone agrees... yet... and until they do... prices will stay lower, and those who are less risk averse will find far great "deals" and options. As the market gets more and more comfortable with TIC's.... which I believe they will.... the price gap between them and Condos will narrow.
So... my question back to you.... what is the "critical importance of screening"??? What risks are you hoping to avoid? What's the worst that can happen... and is it really that much better in a Condo? And how much of a price difference on a TIC in a 3+ unit building would you need to help you live with the "risk"?
You probably are aware that a 2 unit building is exempt from having to go through the lottery process. So if you can find a 2 unit go for it.
The way that a TIC organizes internally is through the TIC agreement. If one is in place read it carefully and understand how partners are screened. Also look to see what the buyout stipulation is. If you go into the venture knowing that you are going into business with a partner on a building you will be fine. As in any business you want to have a good agreement between you and your partner and a good way to get out of the business with the partner if things go wrong.
If one is not in place then be sure that you put language into it so that you have the right to screen and if you want the right of first refusal if you or your partner wants out.
If you buy into an existing TIC you will have meetings with the rest of the group prior to the close of escrow. At that meeting you wii have the opportunity to meet the partners and examine their financials and they will do the same with you. In this way it is like buying into a stock coop where you have to pase muster with the board.
During this whole process you should have the advice of an attorney like Andy Sirkin or Boyd McSparren at Goldstein, Gellman, Melbostad, Gibson & Harris (g3mh.com).
The best answer to your specific question I'd say is don't worry about finding a partner let the building do that. If you both like the same building that's a start.
You can work with the TIC Coalition and there is a real estate firm on Union St. that works to put partners together. I think that would be more cumberson though, too many opinions and too much work trying to build consensus. If you concentrate on finding what you want and building an understanding of the TIC agreement it should go well.
This advice does not create or imply an agency relationship.
If you don't have a ready partner for a TIC unit in a 2-unit building, you can still move forward on your own while waiting for someone else to put an offer on the second unit. Just be sure to include a contingency in your offer to meet and approve of any other prospective partners. This gives you the chance to evaluate the other buyer (ie: are they someone you can work and get things done with, do they have a good credit history, do you both have the goal of converting the building to condos, etc.). Alternately, you can have your realtor contact the listing agent, and see if there are any other parties interested in the property. If you find someone compatible, you can get together beforehand to present a single joint offer (which is more attractive to a seller since there'd be no buyer contingency to approve of other partners -- you'd have already handled that piece before writing the offer). I've done this in the past to great success on a 4-unit building (four buyers represented by four different agents joined together to make a single offer on the building). I hope this info is useful. :-) Good luck!