Battle Royale: San Francisco’s Infinity Towers Versus Some Peninsula Townhouse

We haven’t done a Battle Royale in a while, but we thought this recent email could not only shed some light on the steals and deals being thrown out by The Infinity to get their Towers sold, but also a bit of debate as to whether it’s better to put your money in San Francisco, or Peninsula real estate.
infinityt21
From the reader (edited slightly for syntax):

Hi,

Love your blog!

I would like your opinion…

I’m looking to purchase either a new 2 bedroom townhouse in the peninsula or else a 1-2 bedroom condo at The Infinity. I will be purchasing with 4-6 other people for The Infinity (volume discount, we each get our own place, 3 people will be in the $800K -1.4mil range so i think we will have a lot of bargaining power), or trying to find a good discount for a new townhouse in the peninsula. Which would be the better investment?

I’m [f*cking young!], make $110K a year, first time home buyer, would probably rent out a room at either the condo or the townhouse, and prefer not to do any remodeling.

Thanks!

Go Giants or go home! San Francisco all the way. Way better investment in our eyes (we are biased), way better location, and at your age, you’ll likely have a helluva lot more fun. Just make sure we get an invite to the housewarming party (have you heard about our fresh lime margaritas), and there is no lifeguard on duty when we cause a ruckus in the pool! Marco…Polo…Fish Outta Water!.

Thanks for the email, glad you like the blog. We like you.

22 thoughts on “Battle Royale: San Francisco’s Infinity Towers Versus Some Peninsula Townhouse”

  1. “a new 2 bedroom townhouse”
    unless you state a specific address and list amenities, the question is not even a question, the battle is no where close to being royale. The Infinity without hesitation.

    The Infinity is a landmark. The Infinity will be on all the SF postcards soon. The Infinity is a cool spot, and as stated, you have some GREAT leverage (make sure to use all your best cards – that includes an excellent Realtor working for you)

    Then, you want to compare to God knows where. There are locations that could be considered for this battle, but many many more that shouldn’t. I don’t know all the new developments in the peninsule, but my guess is that I wouldn’t consider anything but uber-downtown PA (if there is any development there) for this contest. (and maybe uber downtown Burlingame)

    (assuming your age, and the size of your bachelor pad. Were you married, kids, semi retired etc.. it’s a whole different story)

    Most of the peninsule is a suburb in the sense of transportation, shopping, walking (or lack off), night life etc.

    If we can guess your age, there is nothing best than waking to and from night life, never choosing between drinking and driving (and that goes for all your guests and friends should you host a party), enjoying a cool view and no privacy issue, etc

    The Infinity is located so that business life is right there, as in 101, 280/80, BART, walking, consulting, etc the night life is right there, as in walking, cab/bus to NorthBeach, BART to Mission/Valencia etc and the leisure life is also right there, minutes to Ikea, Marin, the beach, ferries, etc.

    Now on the Peninsula side: again it all depends on the location. Most new developments are too close for me from train (2am railroadcrossing bell), Highway (noise, pollution), too far from a convenience stores (again, it depends, some developments have a WholeFood or similar at ground level) etc.

    One condition for the above debate: I have NOT visited the Infinity, and I’m just assuming upper finished, acceptable sound proofing (neighbors and windows), etc (ie not loosing anything to a Peninsula townhome – and vice versa).

    Please give more info on your peninsula consideration so we can fine tune our answers.

  2. Why the infinity? There are other great towers, e.g. The Brannan, which is in a more established neighborhood and won’t be a construction zone for the next 20 years. I like the infinity a lot but having the city’s main bus terminal across the street until 2014 at the earliest is not going to be pleasant, at least on the weekdays. I live nearby and hope I am mistaken but in three months we will know.
    Also, no offense, but what happens if you lose your job? Can you afford to pay mortgage, HOA, property tax, and insurance for a year? Make sure you have a freakin enormous cash cushion.

  3. i’m the reader that asked TFS this question. if i buy at infinity, i would go for a smaller, cheaper unit than my friends. Something i can negotiate between 400-500K if one bedroom and if i get a 2bedroom (600K), i’ll definitely get a roommate. I work in fremont so this is really more of an investment that i plan to live in maybe a year or two and then rent it out. as an alternative, i would purchase a house in either mountain view or somewhere in that vicinity, however discounts in that area are not as large – maybe 10-15% only. I also would have more to risk since it would be more expensive – but it will be easier to live with roommates in a house. my job is stable, but you never know.

    i’m single but i don’t HAVE to live in the city. the reasons i like infinity are: because it’s close to the freeways, i have other friends who will buy so we can probably do some good negotiating on price, since it’s a new development i can also cash in on the 10K refund, they are discounting so heavily, and of course it’s fun to live in the city!

    reasons why i don’t like infinity: high HOA might mean it’s hard to sell later, increased supply of condos might hinder property appreciation.

    i really want to find the best investment but yet it should not be a dump that i need to spend 100K to fix up.

  4. Condos are just starting to really tank in SF.
    I would stay clear of any of them…real problems with over supply and falling demand.
    Not sure how much you intend to put down, but I would expect any 20% downpayment to be underwater in the next year, especially when selling costs are factored in.

  5. I had a condo in the south bay when I was 28, because I was working there and I thought I should live closer to work. I regretted not buying in SF instead. I learned I would rather commute for work than to commute for fun. So – I suggest you buy in SF.

  6. You’re insane to be buying a condo in SF before at LEAST mid 2010. Don’t be a fool just rent or kiss your downpayment bye bye.

  7. dave. I got the same music in 2001. about an “overpriced” condo in a *** location. yes it has tanked recently, but I’m still at 170-180% of closing price …

    Once you have decided to buy, then you ALWAYS take a risk, even in a healthy going-up market. What is the unit burns? what if the tower crumbles in an earthquake? what if …
    And if you are a renter, what if etc.

    I can tell you the story of friends who are renters and were forced to move 5 times in 3 years for serious and not negotiable reasons (all within the same zipcode). So renting is not always an easy or safe option either.

  8. a condo – in sf – at 170-180% of its 2001 closing price??
    what do you think it was at as a % before it ‘tanked’? (for which I would substitute starting to tank..).
    the SF MSA condo index is basically back to 2001 levels..yes, I know that’s the MSA, but SF is well represented in that index I think (less so for SFHs).
    anyone else out there think condo prices are still 80% above 2001 prices?

  9. 2001 was a down year coming off the dot-com bubble… but typical place is probably 25%-30% higher now vs. then

    agree with those who say “wait”. SOMA has more to come down. you’ll get to buy from a distressed under-water original Infinity buyer in a year or so.

    and i think the “volume discount” idea is a bit wishful… you all will have to find units you like… and then someone beat out other negotiators.

    as for the Pennisula… ick

    as for Infinity being on SF postcards…. fat friggin chance. no one outside of a 5 block radius gives a crap

  10. Hey TFS reader,

    I’m actually about to submit an offer to the Infinity as well. I’ve been to the development twice so far and will be going up again in about a week and a half. (I live in San Diego at the moment and will move up for work)

    My situation is similar to yours. I’m young and straight out of law school. I would love to join your group of potential purchasers. I figure the more the merrier. Plus, I have no desire to compete against any other potential buyers.

    I actually know someone who bought there at a pretty good price so I have an idea of what we can aim for. Personally, I am looking toward the $500-$600k range myself.

    If you are interested, email me at:

    [removed by editor]

    [Editor's Note: Pretty gutsy putting your email for all to see, we'd be happy to hide that for you if you like.]

  11. dothemath. not in SF, and the top was around 220-230%. (and at the time, I payd about 5% too much – no time to play the clock and bargain).

    one important thing is that the (long term) wave shifted and created some human migrations.
    A simple example: 15 years ago, SOMA was not a residential area. And no matter how much some condos have lost in the past 1-2 years, it’s nearly impossible to compare a street/building/address today with the same place 15 years ago. So cold numbers such as ppsf are quite irrelevant – and don’t reflect enough of livability and safety etc.

    and the same goes for the place I bought. there are steps that cannot be undone and some relative value that won’t just disappear. A simple example in the Bay Area: bart SSF. ok, price is dropping for the condos and townhomes at the station (BART street). but in 5 years or 20years, it’s a reasonable bet the BART will still be there and running. Which is very different from google housing or trend which organically moves (locations, timeframe etc).
    see http://www.zillow.com/homedetails/charts/15626593_zpid,10years_chartDuration/
    (1400 ElCamino) it’s still at +50% from 2001.

    For that reason, The Infinity (the reader’s choice, I never said it was the best tower in that area) is a more anchored address than a townhome. Plus commuting BART SF-Fremont is much better (I’ve done it) than driving MV-Fremont.

  12. sorry but i find it hard to believe condos increased around 125% from 2001 to peak.
    but i agree that they have lost 20-25% since peak values.
    i do think hangemhi is about right when he says they are now around 25% above 2001 values – but in real terms that won’t be very much at all.
    maybe 5% – closing costs, basically.

  13. You need to factor in that $10k CA tax credit will likely be gone by the time you close. They blew through 75% of it in 3 months. I’m betting the rest will be gone before the end of the month due to the spike in May new dev sales. You dont qualify for the $8k Fed credit because you make too much money (a good problem to have).

    As far as waiting for 2010 for a better price (aka dothemath) MAYBE but I highly doubt it. End of 2010 should see most of the new developments sold out, then you are looking at resales and no new projects any time soon. There are screaming deals on barely used distressed properties already but no one seems to be biting at those… Want a ridiculous price on a 1 bdrm? Look to the Palms – 555 4th St for a bunch of 2 yr old 1 bdrms in the mid $400k range, most that wont cost you the added minimum $20k in upgrades (aka flooring, window coverings, w/d) and you cant cheap out on those and expect people not to notice come resale. People have since the first tower opened always preferred the Infinity. I thought it was overpriced when the first tower came on – now I’m plugging buyers in there because I agree with you that it’s good value.

    As far as peninsula vs SF goes – sheeze that’s a no-brainer for all the reasons listed above. But if you aren’t going to live there, and only plan on holding for a couple of years that’s risky. Normal appreciation on real estate before the past 10 year run up varied between 2-7% per year so to be safe I would bank on no more than 4% and you have to factor that on your final – post upgrade price + 7% selling costs which assumes you wont have to stage your place to sell it. Not to be rude but if this is your first pad, it’s unlikely it wont need to be staged for maximum price.

    Just food for thought. I still think this is quite possibly one of the best windows to buy a property we are likely to see for a long time. Go for it, just have realistic expectations about your future appreciation.

  14. Meredith: You are right. The $10K will almost certainly be gone by the time this closes. Given that California is 2 weeks away from bankruptcy, I don’t see this plan coming back.

    TFS Reader: SF is definitely more fun than the peninsula. Restaurants are way better up there. People rave about the fabdled PA downtown, but honestly, it is no comparison to the city. And I haven’t found a single restaurant there that really knocked me out.

    Also, if you plan on renting this place out in a year or two, you will lose money on a monthly cash flow basis, and will have to rely on appreciation to bail you out. Given that we’re coming off the largest real estate boom in the history of the world, SF was one of the most inflated markets in that boom, interest rates are going higher, the move-up market has been decimated by REOs, and these factors are only *just* starting to impact high-end homes ($800K – $1.4M), the chances of appreciation being there for you are zero. You will almost certainly lose your downpayment. Then it will be up to you if you want to subsidize the renters who are living in your new place for below what it’s costing you to keep it.

  15. Thanks for all of the feedback! All of this is a lot to ponder. I have only begun to look and am in no rush. so just doing my research before I make a move. :) If there are any other resouces you find helpful, please let me know.

    thanks!

  16. To Sophie and meredith –

    chances are this young person won’t want to live in a condo for a long time so i would say NO to this purchase. The inventory of $1mm homes in CA is now over 18 months and will ONLY go up. So if you think this pressure won’t trickle down to condos that are priced at $500k well…

    do yourself a favour – read this presentation (in the attached blog) on why the mortgage mess is JUST getting started for high end housing:

    http://valueplays.blogspot.com/2009/06/tilsons-updated-housing-analysis.html

  17. I used to commute from west portal to PA, the commute was brutal for me. I could not stand being in the car 2 hours a day 10 hours a week. Going from SF to Fremont even if it’s 4 days a week will be a huge pain, you’ll be too tired to enjoy the city most nights.

  18. TFS reader- I suggest you continue reading this blog (and others) focusing on SF RE to get more, and varied, opinions.

    But, I think YOU first need to decide if you prefer palo alto or SF! For god’s sake dude, life is short and first and foremost, live where you will enjoy it the most. (anecdotally, I lived a few years in shallow alto, and was much happier relocating to SF- you have a broader range of people/cultures/lifestyles here which is very stimulating, IMO.)

    Also consider the commute. If you live in SF close to Bart, that will probably be your best bet and will beat driving.

    As for investing, I understand where you’re coming from as I own investment props in the city. SF will probably be the best for long term appreciation. But I think you are grossly underestimating the time frame required to achieve that. And you will need to committ to living in your unit for minimum 3-5 years. And you may still have a negative cashflow when you want to rent the condo out. But at least 5 years from now you have a better chance at higher rents and your negative may be minor at that point. The good news is that SF is a solid rental market- rents may fluxuate, but you will always be able to get the unit rented. Also, condos are not under rent control, which is a huge advantage. As far as speculating if now, 6 months or 1-2 years is the best time to buy, you will hear many opinions, and ultimately you will have to decide yourself what makes the most sense with your particular circumstances.

    Bottom line: I think you’re smart for trying to get into a modest unit, and eventually turning it into a rental. That’s what I did in ’94, and was able to leverage that into several properties. Now I live off the rental income and sip lattes in my backyard, commenting on blogs :). (btw, SF has the best coffee roasters/cafes around, especially in the mission.). Best of luck!

  19. infiniti is nice, but i’d stick with prime properties in the marina and pacific heights. no new supply, that is key as demand recovers.

  20. SOMA would the be last place I’d buy in SF. It lacks any sort of SF feel, there is no personality nor night-life. But it sounds like that is the type of place you are looking for.

  21. twist of fate, I’m in that market too. what can you get for half a mil in the city?

    for reference, mls#357364 = 650sqft 1/1/1 for 540K.
    I’ve been checking every MLS listing in 375K-550K in districts 1, 5-9
    I need to get my hands much more dirty than typing on my laptop – but the infinity unit(s) has some STRONG elements vs anything else in those 274 or so listings. (like, it’s new, it’s not TIC or any “I need to be in good terms with my neighbors or it will be hell”, it has parking, some “views”, earthquake, electrical etc code, it’s clean of mold, dust, it’s new, painted, has elevator, etc)

    the only other listings that caught my eye are by BonnieS – at the other end of the spectrum: super victorian, super charm, super architecture etc. (and might well need some work).

    it’s scary – how can you pick something in such a galore of listings?

  22. FYI The Infinity contract has clause protecting them from flippers that want to sell their property in a year and they also have some clause about having first-right-of-refusal if you want to sell in the 2nd year.

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