At Pacific Trail Townhomes , we are very careful to explain these are not condos. However, living in this development is very similar to living in a condo.

For openers, it looks like a condo - two buildings, multi-units, nicely landscaped and cared for, unlike most apartment buildings. Every unit gets it’s own parking space and storage unit, just like a condo. There’s common areas that everyone can use, like a condo.

And probably most similar to a condo, there is a TIC agreement that creates a Homowner’s Association, just like in a condo. This one is very heavily regulated by the state, and is therefore pretty conservative - something we haven’t always seen in Marin County Homeowner’s Associations. The funding for reserves is very strong, and now that it is up and running, the reserve fund will probably build quickly.

Each unit is individually financed, and you are free to buy, remodel, and sell when you want to - just like in  a Condo.

There are more similarities than differences, so the overall experience is, we believe, like living in a condo.

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A recent change at the property makes it highly desirable from a buyer perspective now. The best and biggest unit, a three bedroom, two bath, 1400 square foot apartment with a big deck overlooking Magnolia Avenue, has just vacated. The owner had it leased through July, but the tenant suddenly left, and the owner decided it was a good idea.

Why? Larkspur continues to be one of the strongest real estate markets in Marin County. This is a community where buying a house is incredibly difficult, and almost never available for less than $800,000. In fact, right now, the cheapest house still available is $999,000, and it’s a contractor’s special with a capital S. Now, buyers have the chance to own property near town, live in it, and have income to pay for the mortgage.

How much on the mortgage? The two units downstairs generate $2700 a month in rent right now, and probably have some upside. At the great interest rates available right now, that easily covers $400,000 a month in mortgage payments, and leaves $250 or so a month to help with property taxes.

That’s money you can basically subtract from the sale price. So now we’re down to $775,000, for 1400 square feet, 3/2, recently remodeled, with a front and back porch. Still sound expensive?

Take a look at condominiums in the area, such as the ones along South Eliseo in Greenbrae. For about the same price, you get about the same square footage…factor in homeowners dues on a condo (often $300 + a month in this area), and for the same money, you actually own a piece of land, and don’t have to worry about what the homeowner’s association decides to do about the leaking roof.

Which would you rather do? Own a condo for $650-$700,000, or own a larger piece of property, and enjoy the benefits of greater leverage over time?

What do you think? If you’d like a complete presentation on the benefits of owning investment property in Marin County, feel free to contact me at bravasio@fhallen.com.

Next, Part II.

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Current law requires only thirty days notice to terminate a month-to-month tenancy. In cases where any tenant or resident has been residing in the property for less than one year, then thirty days notice is sufficient.

Compared to the city of San Francisco or Berkeley, Marin County landlords have it pretty easy. Both of those cities have rent control, one of the worst laws ever created. This new change in state law makes things a little more difficult for property owners, but won’t significantly change the way they have to operate.

Rent control is a different topic, and one I could write about extensively. In a nutshell though, it’s a classic case of the law of unintended consequences - a law that’s intended to do one thing, and then something else unintended happens.

The intent is good: protect tenants from unreasonable rent increases, and keep housing affordable for people. Unintended consequence: with income effectively capped by rent control, landlords have no incentive to and in many cases can’t afford to  properly maintain property. Maintenance gets deferred, property gets run down, and the quality of life for tenants suffer as the housing stock degenerates.

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There are plenty of illegal second units around. The IJ article estimates 400, but I bet there are more than that. There are plenty of investment properties out there that have illegal units, with varying degrees of disclosure. Add in converted garages, basements, etc, and from Tiburon to Novato, there’s plenty of them.
I sold a building to a client last year with an illegal third unit, and the agent put it in the MLS listing. Others don’t say anything, but price it high relative to the income. When you visit the property, there is clearly an additional unit, but it is not stated, nor mentioned on the income statement.
Either way, a legal additional unit will almost always add value. Affordable rental housing is in such short supply that even small studios, in a good location, will get $1000 a month. Splitting one unit into two, as I have often seen done, can boost the income for a space significantly.

Take advantage of this if it applies to you. Plenty of buyers are scared off by illegal units, so it makes it tougher to sell. The more people you can appeal to, the more you’ll be able to get for your property.

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Why? Over time, rents and real estate prices typically move in tandem. As prices go up, rents follow. We’ve had five years of price appreciation, a time in which average sale price nearly doubled. Rents did not move. Now, they’re starting to catch up.

Lost in all of the press about the drop-off in residential sales is that sales volume for rental properties (duplexes,

triplexes, and four-plexes) has been consistent for the last several years. Year to date, volume is the same this year as it has been for the last several years.

Savvy investors are buying rental properties all over Marin County, even though relative to many markets in the US, prices for rental properties are relatively expensive. They understand that while many of the gains the last few years have been from appreciation, future gains will come from rising rents.Great properties in good locations, like this triplex in Larkspur, are getting lots of attention.

Being a landlord is not for everyone. But for the right person, it’s a great way to supplement income, fund retirement, and even, just maybe, provide a place for the kids to live some day in Marin County.

One of my specialties is investment properties. If you’d like to see my presentation, “Investment Property 101″, contact me, and I can help you understand the tax benefits, appreciation, and pitfalls of owning investment property in Marin.

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One of the great pleasures of this job is meeting and being able to help so many really nice people. I just spent a long time talking to a guy named Roy (he doesn’t want me to use his last name) about his experience as a landlord, and he has some great, really useful ideas for anyone who owns or is thinking about buying residential income property in Marin County.

He’s owned a duplex in San Rafael since 1971, among other properties, so he speaks with wisdom and authority. Here’s a couple of great ideas I picked up.

1. When selecting a tenant, ask to see their last three cancelled rent checks. Look at the date they were deposited, not the day they were written. He believes most landlords hold checks only for a day or two, and the deposit date will be a pretty good indicator of when they pay. So if they’re deposited on the second or third day of the month, they’re probably paying on time. If they’re deposited on the 15th, then that may tell you when the check actually got there.

2.Once you’ve focused on a couple of possible tenants, stop by their current residence without an appointment and visit them unexpectedly. Ask to come in. The way they keep their current apartment will be a good indicator of the way they will live and maintain their unit in your building.

3. Visit your property often, and get to know the neighbors who live around the property. If there is anything happening there that is unusual or dangerous, they’ll let you know.

Ray is a very savvy guy. I’ve talked to other landlords about the importance of being physically present at the property often, but never heard the idea about talking to the neighbors. It makes sense, and I look forward to working with him.

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