Buy a duplex with a friend and save $200,000–$400,000 each
First time homebuyers — I want to change the way you think about buying your first property in San Francisco.
Let’s keep it simple. You pay less money when you’re buying in bulk. What most people don’t know is that this principle is as true for houses as it is for laundry detergent, custom t-shirts, and giant packs of ramen.
The bigger the house, the lower the price per square foot.
First time homebuyers in SF typically look for condos under 1,000 square feet. That’s what you can afford. But it means you’re actually paying a premium compared to wealthier buyers.
Take the Haight-Ashbury / Cole Valley district for example. This year, condos in the Haight are selling for a whopping $1,100–$1,200 per square foot.
Multi-Unit properties in the same district are SO much cheaper.
925 Clayton St. is a perfect example. It’s 4-unit property, and each unit is approximately 750 square feet. It sold for $2,050,000. That means that each unit cost only $512,500! That’s $683/sqft — slightly more than half the price per square foot of buying your own condo.
Did you have any idea you could buy a 1 bed / 1 bath in the Haight for $500,000?
925 Clayton is no anomaly.
Last year there were more than 400 sales of 2–4 unit buildings in San Francisco. And before you ask, “Well what about tenants?”… more than 1/4 were entirely vacant.
Now, 100+ vacant buildings (200+ units) is a far cry from the approximately 2,700 vacant condos sales in SF last year. But for buyers with patience and commitment, they’re out there — an average of 2 sales per week.
Here are a few more examples — all vacant — from 2017:
Allow me to anticipate a few objections.
Q. What if my partner stops making mortgage payments? Will that affect my loan?
A. No. When you buy with a friend, you typically sign a Tenancy in Common (TIC) agreement. When you have a TIC agreement in place, you can obtain Fractional Financing. This means you each get a separate loan for your slice of the building. If one owner defaults, the other loans are unaffected.
Q. Can I sell my unit without my partners selling theirs? What if I want to move out before they do?
A. Yes. Under a standard TIC agreement, each unit can be bought and sold individually.
Once you have a TIC agreement in place, you are eligible to convert your units into condos. After condo conversion, the resale value of each unit increases an average of 15–20 percent.
Why? Because now you hold complete ownership of your unit. That means you don’t have to worry about your partner selling to someone you don’t like. Life is less complicated when you own 100% of your own unit.
If you own a duplex, you qualify for the city’s “automatic” condo conversion process, which takes about 2 years. So in 2 years, you’ve increased the value of your home by 15%. Not bad! (Caveat: 3–4 unit buildings have more restrictions and take longer to convert).
Call to Action!
Almost every single buyer who’s heard of this strategy wants to do it. But they don’t have a partner they can buy with. That’s why I founded HOMESLICE, a meetup group for TIC buyers looking for partners. We meet the first Wednesday of every month at RE/MAX Futura, 1010 Valencia St., San Francisco, 94110.
RSVP for this month’s meetup here (space is limited): https://www.meetup.com/homeslice/events/238632401/
Schedule:
6:30pm — Free cookies/snacks, drinks and mingling and meeting the panelists.
7:00pm — Formal introductions, presentations and Q&A with the panelists.
7:45pm — Networking and follow-up questions
Featuring:
Samuel Clonmell, Bank of San Francisco
Samuel is a loan officer specializing in group and fractional products essentially to financing multi-unit and TIC properties.
Jen Chan, President/Founder, White Tiger Condo Conversion
Jen will discuss the different paths to home ownership; from TIC to condo conversion and how it can increase 15%-30% to your home value.
Chris Matthews, Old Republic Title
With a TIC structure, co-investors share ownership of an entire property. Chris Matthews, an experienced TIC title officer, answers your Title and ownership questions.
Host:
Sam Cooper (CalBRE #02023359) is a First-Time Homebuyer specialist with RE/MAX Futura (CalBRE #01776125) and founder of the TIC Matchmaker and the SF First Time Homebuyers Blog.
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Website: https://samuelbermancooper.mpoapp.com/
