Monday, February 26, 2007

UPDATE: Downtown Condo at The Mills #522

I'm updating a prior post on a unit at the Mills. The price has actually been increased on 2/22/2007 from $469,000-$499,900 to $479,000-$509,000 which is interesting as I don't think any of the loft units at the Mills have ever been resold and a number have been for sale for quite a long time.

The previous post is below with everything the same except the numbers have been updated.

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The Mills is an apartment conversion on Cortez Hill. The lofts units are probably the most over-priced real estate downtown so this price cut to a large loss comes as no surprise.

Type: Listed on MLS(#066083981)

List Price: $494,000
(Range priced $509,000 to $479,000)
Cost: $557,900
Loss@6% Sales Expenses: $93,540
Loss%: 16.77%

Purchase Date: 03/29/2005
Holding Period: 23 months and counting...

Bedrooms: 1
Bathrooms: 1
Square Feet: 953

Purchase Details: view

7 comments:

Anonymous said...

There's an Acqua Vista short sale for you to add to your blog.
425 BEECH ST #206, SD - Downtown, CA 92101**
MLS #: 072015979

Dave said...

I actually just bought one of these lofts in November although it was a FSBO so it didn't show up on the MLS. I'm a huge bear and the seller was pretty desperate so we did a bizarre transaction. I "paid" $500K for the unit BUT the owner left $150K of equity in the property. So, I put down $100K, borrowed $250K and the seller has $150K in the deal. In April 2010 we will have the unit appraised by three appraisers. If the unit appraises at above $350K I will have to pay the seller the difference between the appraised value and $350K. If it appraises at or below $350K the seller will lose the equity he left in the deal. So the way I view it is I've got a 3 1/2 year interest-free loan that I may or may not have to pay back, depending on where the market goes over the period. Also, I extended the unit's loft over the kitchen adding over 160 sq. ft. to the unit (for $20K all in, or $125/sq. ft.) so that I'm into the property for about $370K total, or $330/sq. ft. (which is still a lot to my way of thinking). Per our contract, the seller does not get the benefit of my improvements in the appraisal. The seller bought the unit for $560K and put $20K into it, so he had an immediate loss of 14%. His ultimate loss (or gain) is (obviously) yet-to-be-determined. There are two loft units renting for $2100/mo. and $2150/mo. (I don't understand it either) so I'm thinking that a 40% loss from peak to trough on a PPS basis is pretty likely which would be a break-even for me come April 2010 (that is, the seller would lose all of his equity). But, we'll see - I'm kind of indifferent. If I owe the guy some money in a few years, that's ok. Or if the price drops below my break-even that's ok too. I love the unit, the fifth floor where I live (which was designed differently than the other floors - the builder owns a unit on the 5th floor so he tricked it out), the location (my office is 6 blocks away) and the look of the exterior of the building. Having said that, these units are still eggregiously priced... I think there's a long way to the bottom... hence the complexity of my transaction.

Mr. Brightside said...

Dave,

Thank you for an awesome post! I do like the layout of the lofts and think they're overpriced. I love the idea that you wrapped the loft over the kitchen. I've been in a few of the lofts and can visualize exactly what took place.

What was the process like for getting approval to make the change?

Very innovative move both in terms of the design change to the unit but also the transaction you put together.

Dave said...

In my case, there was no "formal" approval. I told the seller what I wanted to do and explained that I would not buy the unit if I couldn't get approval. We spoke to an HOA board member who spoke to the other HOA board members who gave a verbal (and via email) "ok" because we didn't have time to go through the formal approval process. After the work was completed I did submit a formal "Notice of Completion" (with pictures, etc.) and the Board sent me a letter of approval. Now, at least two other people on my floor are planning the same renovation. I have no idea why the builder didn't do this themselves during the construction phase. It adds over 160 sq. ft. of living space including a large closet. Also, if your view is east, as mine is, you can see over the building across the street all the way to the mountains from the loft.

If the prices of these things REALLY tank I'd love to buy another one and do the same loft extension but also add a bathroom in the loft (which can be done). So, for about $35K, you could turn a 953 sq. ft. 1 bedroom/1 bathroom + loft into a 1115 sq. ft. 2 bedroom/2 bathroom. But, I'd like the see the "base" unit selling for about $325K before I'd undertake that project. But, who knows...

Mr. Brightside said...

dave,

I've seen a lot of corners cut by developers because the extra work isn't seen as worth it or they are cranking out units and that little bit of tweaking that makes a good idea great doesn't get done.

A second bathroom, small with a high end shower (no tub) would be a great idea.

I do think prices need to come down more before these units make sense to spend a lot of money on.

Thanks again for the information

Anonymous said...

I believe that technically you need to get a building permit for such addition. They are very difficult to get for multi unit, multi story buildings. The County then reappraises your home to include the improvements.

If the code enforcement people hear of this, they can force you take it down.

It happens all the time in Del Mar because they have strict liveable space to lot size requirements. People would build 2 story tall spaces then add the 2nd floor after the fact. The city makes them take it out but they put it right back in.

You're going to have to disclose this upon sale.

If I were you, I wouldn't tell a soul. I would just say that's how the unit came.

The code enforcement people won't come looking but don't give anyone a reason to complain.

Dave said...

Agreed, technically you would need a permit for this type of addition. But, as I used a licensed contractor who built the addition to code I might have to pay a small fine and be required to file a permit after-the-fact IF someone from code enforcement ever got wind of the addition... which is pretty unlikely. The key, of course, if you're going to do work without permits is to make sure that the work is up to code. Personally I'm not planning on ever selling the unit - I'll keep it and rent it out if I decide to move - so I think it's a non-issue. But your point is well taken. If I were buying a unit that I had any plans on selling I would definitely go through the hassle of getting a permit; otherwise it can bite you in the ass when you're ready to sell.