If we want to sell a former single family house in Pacific Hts, now 6 units?

Asked by Clipper Skipper, San Francisco, CA Fri May 1, 2009

Currently one elegant owner occupied unit and 5 rentals. Desirable corner loctation. Which segment of San Francisco market would offer best value to seller (us..). Single family house (conversion back), owner occupier with rental properties, or pure rental property? Thanks.

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Sat Aug 15, 2009
Clipper, are all the units legal and how is it zoned?

Web Reference:  http://www.gregorygarver.com
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Tom Carlson, Agent, San Francisco, CA
Mon Jul 27, 2009
An elegant owner occupited unit with 5 rentals in Pac Hts is a very desirable property. Much of the value will depend on size, location, floor plan, PERIOD DETAILS, parking and views.
As to the conversion form units back to a SFD...
Is that a CASH REGISTER I hear ringing in the back ground? Renovations and conversions are complicated, time consuming, and VERY expensive. Sellers need to consider fees and permit costs, architectural plans, and dealing with the planning and building department.
This can be OK if you are very experienced with construction and have lots of extra TIME and MONEY. But if time and money are an issue, this renovation will be both a headache and a nose bleed that doesn't quit for about 1-2 years. OUCH!!
As to the value of rental units...rents seldom justify sale price in SF. GRM and Cap Rates do NOT usually work on small buildings. Most buyers will consider the value of the owners unit and upside potential on RENTS and/or VALUE ADDED on the possible conversion to TIC units. If any units are VACANT, this greatly increases the value of the property. My suggestion is:
1. Consult an experienced SF architect as to potential costs and fees involved on conversion or renovations. (I have a local SF architect who will give you a FREE consultation for 30 minutes).
2. Consult several experienced REALTORS to give you value estimates and ideas for marketing the units AS IS with suggestions on enhancing the value without costly renovations.
Web Reference:  http://SFlisting.com
0 votes
Laura Lambert, , San Francisco, CA
Fri May 1, 2009
Here’s some data that may be of help (understanding there’s very little activity in Pacific Heights so far this year - 8 SFR, 2 @ 5-10 units): price/sq. ft. for SFR in Pacific Heights ranges from $700-$1100 versus $300-$400 for 5-10 units - cap rates averaging 4-5%. Keeping one unit vacant gives your buyer the option of occupying the property without having to evict a tenant and buyer may be able to get a lower interest rate if property will be owner-occupied. Up until recently, my clients with 2-4 unit buildings found the better value was to offer as separate TIC units (current TIC values are $500-$700/sq. ft), however not sure about the likelihood of condo conversions for 6-units and TIC loans are more expensive.

Laura Lambert
The Azari Group
#1 Property Management Company in San Francisco
Web Reference:  http://www.azaripm.com
0 votes
Shaban Shako…, Agent, San Francisco, CA
Fri May 1, 2009
The City does frown on taking rental units off the market even though the property was previously used as a single family residence. In this case, I believe you may be able to revert the use back to single-family but it would take a lot of time and effort.

In any case, it would be best to analyze values for each property type (single family, units and TICs) and then decide which makes the most sense for you and for the particular characteristics of the property.

I have been through this analysis many times with similar properties and have seen the results vary a lot.

Shaban Shakoori
TRI Coldwell Banker, SF's #1 Office
Web Reference:  http://www.residentialsf.com
0 votes
David Tapper, Agent, Burlingame, CA
Fri May 1, 2009
You got two very good answers C/S. The only thing to add is that if it's zoned for multi units and the buyer wants to purchase it as a single family home, they cannot get the same financing as a single family home and will have to pay a higher interest rate.

Have a nice weekend and stay dry.


Web Reference:  http://www.TeamTapper.com
0 votes
Cheryl Bower, Agent, San Francisco, CA
Fri May 1, 2009
It really depends on how the property is currently being used and what is on the 3R report (permit history). If the property is viewed by the city as a 6 unit property then that is how it would likely need to be marketed. In general, the city does not like to remove units once they are in existence. As Jed mentioned, there are a lot of variables which influence how the property is marketed.

It seems like in its’ current use, you could market to the owner-user as well as the investor buyer. Two out of three is not bad!

Best wishes,

Cheryl Bower, Realtor , GRI, ABR
Cell 415.999.3450
Zephyr Real Estate
Web Reference:  http://www.sfbungalow.com/
0 votes
Jed Lane, Agent, Petaluma, CA
Fri May 1, 2009
Many questions come to mind to be able to give you the correct answer. Most important would be are the units legal? If the city has signed off on the creation of the rental units it can be more difficult to convert back to a SFH. Is the building vacant? What is the zoning? What's the condition of the units and what are the rents? If it isn't vacant, are there tenants with protected status?
After we determine the status of all that then I'd do market analysis on which product type would generate the most activity.
If it's vacant and zoned as a multifamily you might consider selling it as a TIC. Also in some cases we could offer it in multiple ways and let the eventual buyer decide what they want to do.
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