I hope you don’t mind if I throw in an ’80s story …
When I was a kid back in 1978 several families up and down the street, including my parents, bought “investment” units in a condo conversion. These were 2 BD, 1.5 BA townhouses in a so-so part of Marin County. Even then they went for about $89K. Somehow everyone managed to get “owner occupancy” financing with a wink and a nod from the S&L.
Things went wrong almost from the start. The first two tenants lasted a grand total of three months. Then came an El Nino year, which is when everyone found out that the developers had forgotten to disclose a little thing about flood maps … By then credit contraction and recession had left everyone underwater in another sense of the word. The units that didn’t go into foreclosure filled up with less desirable tenants. Comps bottomed out around $60K, when units could be sold at all.
Ten years later the condos were cash-flow positive, but my parents decided to get out of the landlording business after another bad set of tenants trashed the place. They sold for a small paper profit around 1989. Zillow shows that the place was sold several times between 1995 and 2001 for $130K – $140K. So in 23 years it appreciated a grand total of 57 percent.
Since then it sold for $300K in 2003, then apparently got the full hardwood and granite treatment. I saw it on the market for about $400K a year ago, but looks like the flip turned into a flop. Comps are down around $300K again. And the cycle continues.
