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July 11, 2012

Offset Your Mortgage in a Multi-Unit Building

For buyers who are looking for a home in a centrally located neighborhood, an excellent option is to owner occupy a flat in a multi-unit building and rent out the other units. That’s how I was able to afford to purchase my own property in Noe Valley in 1998; renting out the lower flat afforded us the opportunity to own our home, as well as have a long-term income stream. I’ve had several clients purchase such properties this year, and the purchase price could often be workable when you have at least 20% down and factor in projected/existing rents. And the presently hot rental market is certainly making this housing option more appealing.

Of course, being a landlord isn’t for everyone, and it’s no secret that San Francisco has very specific tenant-landlord laws that you should be aware of if you’re going down the multi-unit building path. I highly recommend at least reviewing some fundamentals; a good place to start is the Small Property Owners of San Francisco. And it’s also best to first consult with your lender or mortgage broker regarding your loan options. Multi-units are a different animal, and loan details vary from that of a single-family house or condo.

I thought I would spotlight two multi-unit buildings I’ve viewed recently, to give you an example of what’s out there:

795-797 Elizabeth at Douglass
Noe Valley
Two units

795-797 Elizabeth features a large 3BR/1BA upper flat that’s well appointed and has room to add a second bathroom. The kitchen has been updated and has nice outlooks to the park across the street. The 1BR/1BA lower unit has a private entrance and an eat-in kitchen, washer/dryer and newer windows. There’s no yard, but two garages occupy the rear of the property in this corner building. You’re a block from the popular 24th Street corridor, with plenty of restaurants and services in walking distance. Both units are vacant, but as they’re somewhat unequal in proportion, I’m betting that one buyer for the whole building goes to bat for the property. It would be easy to reside in the upper unit and rent out the lower one.

827-829 Fillmore at Grove
Alamo Square
Three units

I was impressed with the scale and Victorian details of 827-829 Fillmore, which is four levels high and has a solid annual income. The above photo is the large, vacant 1BR/1BA top-floor unit at 827-829 Fillmore. This unit has great space and lovely rear outlooks (though the finishes are a bit dated). The middle and lower units are 3BR/1.5BAs and 2BR/3BAs, respectively, and are getting good rents. There’s also a bonus unit that is currently rented. The basement has a workshop/storage area, and there’s a garden with hot tub. No garage, but there’s leased parking nearby at roughly $80-$150/month. Buyers looking for a perch in a historical, convenient neighborhood within a quintessential San Francisco building will definitely appreciate what this property has to offer.

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