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May 05, 2008

Guest Blogger

I think it’s safe to say we’ve all had our fill of the “F” word. I can’t listen to another “foreclosure” story or read about a short sale gone bad because of the banks issues. So today I’m going to turn the blog over to Paul Johns. He is an agent in the city and he’s writing a guest blog for us today on the challenges of selling a rent controlled building:.

By Paul Johns


One rent control building.

An example of a typical rent control situation is a building on 8th Avenue in San Francisco that is is a well maintained building owned by the same family for years. All of the current owners are over 70 years old.

Now the beneficiaries must sell and things aren't going very well. Part of the problem is bad luck, such as one owner (by being a beneficiary of the trust that owns the building) being recently evicted. He was renting from what he thought was a friend who's property was foreclosed upon. As banks cannot rent their foreclosed properties, he is being evicted even though he always paid his rent.

One of the owners wants to move from where she lives but can't afford to with just her Social Security and the small amount that comes from this building. I find it ironic that people in their 80's who own property are burdened by younger people who just want a break in the rent.

One tenant has been there since the late 1980's and pays far below the market rate. He appears to be in his 30's and the rent roll shows him in a studio apartment. However there is a bedroom that was fashioned out of some of the building's storage area. He doesn't pay anything extra for this and rent control won't allow an automatic increase in his rent.

First, the owner may carry back a note with adequate down payment. The asking price is $2,500,000. A problem with the price is that it is too high for a standard down payment on this type of building, usually around 30%, because the income won't support the loan. If the building was vacant or getting market rent, it would be worth considerably more. If a buyer wanted a place for an extended family the building would be a good candidate for the Ellis Act. That's when a landlord goes out of the rental business. One problem is that ALL tenants have to be evicted and the building has restriction on re-renting the units.

You can reach:
Paul D. Johns
Your Favorite Realtor
PropertyPaul@gmail.com
415-255-136

Thanks Paul!

Posted by Jeff Brooks on May 5, 2008 07:29 AM | Permalink

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