Real Estate Case Studies from My Very Busy 1st Half 2021

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PETER TAO SELECT CASE STUDIES (AKA “WAR STORIES”) 1ST HALF 2021

As a Realtor, the 1st half of 2021 has been incredibly busy despite many challenges for buyers, sellers and Realtors. While I am always happy when I optimize sale price on a listing or successfully win in a multiple offer situation for buyers, I have been particularly fulfilled in the last few months navigating an incredibly competitive SF Peninsula real estate market. I completed a diversity of transactions/situations that few agents ever work on let alone just in a few months which made for very interesting and rewarding transactions. The following are a few case studies highlighting a few deals.

War Story #1 – S. San Francisco Duplex

Clients: Buyers who I helped buy their 1st mid-Peninsula house many years ago on their first offer are about to start a large expansion project.

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Situation: Clients will need to move out for a year for construction on existing residence, so they asked me to look for a 2BD condo for up to $1.4m to purchase and move into; after completion of renovations,  they will move back to their house, and then rent out the condo.

Challenge: There are condos within their budget in good locations. However, due to low cap rates for condos in prime locations, and a high monthly HOA, the unit would have negative cash flow as a rental with a mortgage.

Solution: As they had advised that part of the reason for purchase was to diversify their investment portfolio away from the stock market, I described the possibility of a duplex and some of its advantages if they had financial flexibility to do so.

Result: Rather than spend $1.2-1.4 million for a a 2bd/2ba 1k square feet condo in an older building with monthly HOA of $500+, they raised their budget by a few hundred thousand and acquired a beautiful Spanish Meditteranean-style duplex with 3bd/2ba floor plan on each side that had been recently remodeled just a few years ago. We were able to get it at under list price, and they got a vacant unit rented out within a week of purchasing.

Takeaways: There is demand for multifamily properties but not the wild bidding wars of SFRs. Super low interest rates make investment real estate appealing for those with capital for down payments. Clients were successful because they are numbers-oriented, knew the type of asset they wanted, and had a good plan to become landlords

War Story #2 – San Mateo Village with Outdoor Oasis

Clients: Sellers with a growing family unit who I helped buy their 1st home several years ago wished to upgrade to a larger house.

Situation: Clients were undecided about selling 1st before buying or buying 1st before selling. I helped them assess the advantages and disadvantages of both options as well as the financial risk factors and life logistical challenges for each.

Challenge: The $2.6 to 3.3 million price range for a 4BD house in a good school district has been a highly competitive segment. Selling first would put them in a better financial position to compete in a multiple offer situation, and allow them to look for a house at a higher price point. However, both clients work demanding jobs and have a young toddler; thus, being “out of the market” and having to live in a temporary rental given their situation is just not tenable. 

Having looked at houses at a lower price point where they did not need to sell their current house first, they realized they could not get the space they needed based on their existing lender preapproval.

Solution: Clients had been told a maximum price they could afford without selling their existing house first. However, I realized the lender they were working with did not specialize in “purchase mortgages”, so they did not have the breadth of products addressing my clients’ situation. I outlined scenarios of lenders who had more options who would factor in that their current home would either be sold immediately thereafter or used as a rental home. They got pre-approval from a different lender at a higher price point.

Result: They bought a larger house they sought and needed While they considered keeping their 1st house as a rental, they decided they did not have time to become a landlord so they decided to sell. We then had time to fully prepare their current house to list on the market after it was vacant. This allowed me and sellers to do some renovations and stage the house, so it showed really nicely accentuated by an incredible backyard. After my full marketing program blasting the marketplace, we received 9 terrific offers and very happy sellers and buyers.

Takeaways: Using a mortgage lender who specializes in purchase transactions is important, as is having a real estate agent who knows the intricacies of mortgages and financials. Move up Buyers face a very tricky and scary challenge in this real estate market, but can be successfully navigated. Being able to do prep work, staging a property, coming up with an appropriate list price is key to optimizing value on a listing. 

War Story #3 – SF Dogpatch New Construction Condo

Clients: Buyers sought out a pied-a-terre in Sonoma or possibly San Francisco..

Situation: Clients who were long time friends were interested in investing in a 2nd home in Sonoma where they viewed it as a near term pied-a-terre and a medium term retirement home.

Challenge: After viewing many houses in Sonoma and coming close to making an offer, clients realized that prices in Wine Country were being driven up by multiple offers at a price point higher than what they wanted to spend. They then discovered their teenage children were not as keen to spend time up in Sonoma as they had expected..

Solution: As I knew my friends enjoyed good food, drinks and entertainment, we started discussing the condo market in San Francisco. On a last minute decision, I suggested we visit a few SF condos on the way back from a Sonoma visit one weekend

Result: They are now happy owners of a 2BD/2BA new construction condo in the red hot Dogpatch neighborhood walking distance to Chase Center, AT&T Park, restaurants, coffee/boba shops, and all that SF has to offer. They acted quickly in submitting an offer as their particular unit had access to a larger outdoor space than normal. I represented my clients and secured the unit which ended up getting multiple offers; I also negotiated upgrade credits too. Best of all, their children are very excited to make use of the condo on weekends.

Takeaways: Vacation areas like Sonoma, Carmel, Lake Tahoe are red hot with skyrocketing prices. Buyers are returning to the SF condo market after a 2020 slowdown, but value can still be had relative to single family residences. I am able to represent Buyers for new construction buildings but need to schedule and attend the 1st showing appointments.

High Level Predictions for 2nd Half 2021

  • Buyers had been severely hindered with their ability to view properties without public open houses. Finally, open houses are back.
  • Expect there to be a significant summer slowdown in activity with fewer listings and buyers in the marketplace due to what looks like a busy summer vacation travel season.
  • As employees slowly return to the offices full or part time, traffic on the freeway, roads and bridges will slowly pick up again, albeit not as bad as pre-pandemic.
  • There will continue to be an imbalance between strong demand to purchase real estate and limited supply in the <$3m price point despite news of people moving out of the Bay Area.
  • Crazy low interest rates certainly help fuel the real estate values. However, eventual movements higher with interest rates will have little impact.
  • As buyers who lose out multiple times with single family residences, demand for condos will increase as buyers become frustrated.

The insights and opinions are my own and not that of any companies I am affiliated with. The SF Peninsula real estate market is rapidly changing, and each property is unique. As always, don’t hesitate to call me for any real estate purpose or otherwise. 

Please “like” my Facebook page at https://www.facebook.com/PeterTaoProperties for update on my blog posts.

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