Loss leaders: October 2009 Archives

The trashed two-houses-on-one-lot dealio at 547 Pacific Avenue is back as MLS(r) #40435505 with the following description:

Fixer---two houses on one lot. Second is stripped to rafters. First needs major repairs. Great for the investor or handyman. Live in one-rent the other.

547-pacific-street-view.jpgI wonder if you're you expected to live in the "stripped to rafters" unit while renting the unit that needs major repairs, or the other way around? Either way, it sounds like a great-quality-of-life, high-cash-flow situation, doesn't it?

The transaction history is amusing:

Date Event Price
Oct 23, 2009 Listed $485,100
Aug 19, 2009 Sold $412,000
Jun 29, 2006 Sold $655,000
Apr 03, 1987 Sold $175,000

It looks as though the repossessing back is trying to turn a slight profit on the sale this time around.

Today's new Bayport McMansion is a fine, fine example of what not to do during an asset bubble. 318 Lina Avenue has the following specs:

4 bedrooms, 3 bathrooms, 3,150 sqft, 3,840-sqft lot, MLS(r) #40435548, $825,000 (plus $119 / mo HOA dues)
Exceptional price for this stunning Malpeque model at Bayport. Highly upgraded w/ onyx and wood flooring, Thermador S/S appliances, maple cabinetry throughout, [...] surround sound and so much more. ..

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The sale history speaks for itself:

Property History for 318 LINA Ave

Date Event Price
Oct 23, 2009 Listed $825,000
Dec 20, 2006 Sold $1,136,000

That's 27% off the initial price. Not bad.
You'd think agents selling houses in Alameda would know the difference between the many architectural styles that grace our little town. Heck, in any town I'd expect a Real Estate Professional (tm), someone who makes a living helping people buy and sell houses, to have a modicum of sensitivity to building styles, or at least some knowledge of chronology. But that's not the way Marcus and Millichap rolls, evidently.

Today's property at 1012 Walnut Street has the following specs:

5 bedrooms, 4 bathrooms (4 units), 5,001 sqft, 3,132-sqft lot, built in 1896, MLS(r) #40434353, $849,000

Detailed & well-maintained Craftsman with significant renovation-new roof, siding, paint, electrical, plumbing. [...] Large renovated Owner's Unit w/ 2 car garage & storage. All units sep metered/sep hot water heaters. Coin-op W/ D owned by landlord. [...] Perfect for Owner-occupant. Large backyard. [...]

First off, as far as I can tell, the agent screwed up the details in the MLS(r) listing; the lot is ~5,000 sqft and the house is 3,132 sqft, not the other way around, at least according to Zillow and Trulia. This ain't Bayport, thank you very much. Second, if we are to believe the agent, this property is a rare example of a 1896 Craftsman, complete with bay windows and a second story like so many Craftsman houses of the era.

The one part of the listing I can't argue with, though, is the "perfect for owner-occupant" bit. That's because the only owner for whom this property makes sense is the owner who lives on the premises and doesn't mind paying twice the market rate for the privilege of enjoying one fourth of their house and sharing the yard with a handful of strangers; because this house sure doesn't make any sense as an investment property. Take a look at these numbers, provided by the owner:

Unit 1: 1+1, $1,495 / mo
Unit 2: 1+1, $1,050 / mo
Unit 3: 1+1, $1,000 / mo
Unit 4: 2+1, $1,200 / mo

Gross rent income: ~$56,000
Expenses (repairs, taxes, vacancy, etc): ~$22,000
Net income: ~$34,000
A 6% fixed mortgage on a $849,000 property with 20% down comes out to about $49,000 / year. So you're $15,000 in the red every year from the get-go.

"But what if you're living in the property?" you ask. Let's see.

Assuming the 2-bedroom unit is the "owner's unit", the numbers come out to ~$42,000 gross / $20,000 net income (remember you lost $1,200 a month by kicking one tenant out). This means you're paying $2,400 / month ($49,000 mortgage - $20,000 net income, divided by 12) to live in a 2-bedroom unit in a shared house (with shared yard) that normally rents for $1,200 / month.

What an incredible deal!

"But rents aren't always going to be this low!" you retort.

Maybe not, but they're not exactly going up either.

"But real estate doubles in value every 10 years!" you persist.

I suppose it all depends which 10 years you're looking at:

ZESTIMATE®: $873,50

  • Value Range: $515,365 - $952,115
  • 30-day change: -$2,000
  • Zestimate updated: 10/16/2009

Last sale and tax info

Sold 06/17/2005: $856,000
2009 Property Tax: $11,866
If this property is supposed to double in value by 2015, it might want to get started soon.

An aggressively-priced bungalow just appeared on the market this week. 1726 Eagle Avenue has the following specs:

3 bedrooms, 2 bathrooms, 1,491 sqft, 3,750-sqft lot, MLS(r) #40434309, $381,200

Granite kitchen with all appliances all remodeled. Laminated floors, painted, new bathrooms. There are new double pane windows. There is also a separate non conforming unit with separate entrance in the rear.
The aggressive, non-round asking price suggests a bank is likely involved in the transaction on the sell side, which is supported by the recent history:

Property History for 1726 EAGLE Ave

Date Event Price Appreciation Source
Oct 16, 2009 Listed $381,200 -- EBRD #40434309
Jul 17, 2009 Sold $592,285 45.3%/yr Public Records
May 06, 1998 Sold $9,000 -39.4%/yr Public Records
Oct 28, 1991 Sold $237,000 11.5%/yr Public Records
Apr 21, 1989 Sold $180,000 -- Public Records

But if the house was sold for $237,000 in 1991 (the $9,000 transaction in 1998 is likely a non-arms-length transfer between relatives, although I don't know that for a fact), and if the July 17, 2009 transaction is what it looks like, i.e. a bank taking the house back, how exactly does one justify adding on so much to the loan balance that one winds up losing a house that should be 2/3 paid off?
After a lull in new listings, the end of this week reverses the trend with a number of interesting new listings. First up is 1206 Buena Vista, a tiny house with a cheerful paint job and the following specs:

2 bedrooms, 1 bathroom, 886 sqft, MLS(r) #362505, $459,900

Stunning 1910 home, well maintain and beautiful landscaped. [...] update kitchen. Located close to shopping, schools, and easy freeway acess. This one will not last long. .. Hurry!

1206-buena-vista-street-view.jpgOf course this listing is only new if your memory is short. After paying $630,000 ($711 / sqft) in 2005, the "owners" tried to unload their "stunning" house almost 2 years ago for $679,000. Judging by the San Francisco MLS(r) number and the funny-looking, non-round asking price, it seems that didn't work out very well.
This is the third time I've sat down to write a post about tiny 318 Pacific Avenue: I find the neighborhood so depressing it's difficult to muster the energy to research even just a few facts. But in the interest of comprehensiveness, here goes 318 Pacific Avenue, a "wonderful Victorian Farmhouse" which is neither wonderful nor Victorian (nor a farmhouse, really) and has the following specs:

2 bedrooms, 1 bathroom, 878 sqft, 4,410-sqft lot, MLS(r) #40432050, $525,000 ($568 / sqft)

This wonderful Victorian Farmhouse features a full basement/workshop area [...] large park like back yard, a deck off the kitchen overlooking the garden [...] formal dining area with box beam ceilings and an enclosed front porch!

318-pacific-street-view.jpgThe only reason the 1/10 acre lot qualifies as "park like" (and it's hardly a park, based on the MLS(r) photos, but let's give the agent the benefit of poetic license) is because the house is so damn small, has no side yard, and is set all the way up against the sidewalk.

318-pacific-lot.jpgOf course it is massively, massively overpriced, given the large number of comparable midgets priced much lower that are not exactly flying off the shelves. But of course this property is a living, breathing example of the utter insanity that gripped the real estate market from 2000 to 2007. Take a look at those yearly appreciation rates:

Property History for 318 PACIFIC Ave

Date Event Price Appreciation
Oct 01, 2009 Listed $499,000 --
Jun 03, 2004 Sold $525,000 22.7%/yr
Feb 14, 2002 Sold $328,000 26.5%/yr
Oct 17, 2000 Sold $240,000 --

Anyone paying more than $275,000 for this property given its tiny size and pathetic location just a few blocks from the barren desolation of the old Naval Air Station is an idiot who deserves to be separated from her money.

Charming--1528 Broadway, Alameda, CA

As it turns out, it's not just modern McMansions like the Bayport development that put houses on handkerchief lots. Today's Craftsman at 1528 Broadway is 93 years old and sits on a lot barely twice the interior footprint. The specs:

2 bedrooms, 1 bathroom, 1,353 sqft, 3,204-sqft lot, MLS(r) #40432306, $525,000 ($388 / sqft)

Charming craftsman home with two spacious bedrooms, fireplace, hardwood floors. [...] Bonus room in basement, perfect for relaxation, office or storage. [...]

1528-broadway-tiny-lot.jpgThere isn't much room to exercise in the yard, but with a couple of tennis courts a couple hundred feet away, who needs a yard?

The property sold for $590,000 in 2006, and again for $370,000 in August, 2009, the latter transaction being a trustee sale. This suggests whoever owns this property has some latitude to drop the price to a more reasonable level, because $388 / sqft for a yardless house on a busy street in October 2009 isn't going to cut it.

Property History for 1528 BROADWAY

Date Event Price
Oct 03, 2009 Listed $525,000
Aug 14, 2009 Sold $370,000
Nov 01, 2006 Sold $590,000
Jun 07, 1993 Sold $160,181