Cirios Opportunities – Adding Value: A Garage in SF
This post first appeared in the June edition of: Cirios Trends: In Search of Real Estate Opportunities
Here at Cirios, we like to believe that every house should be viewed as an investment. From purchasing your first home to acquiring rental property, buyers should always factor in the value of the home based on current market conditions as well as what the future value could be. This forecasting isn’t just a wild stab in the dark, and should be considered not just based on the desirability of the location, but also improvements that can be made to increase the home’s value.
In the city of San Francisco, one of the most valuable commodities for any piece of real estate is parking. All other things being equal, homes with parking sell for a significant premium to those without, especially if that parking comes in the form of a private garage.
Installing a garage at a property can be a very time consuming and expensive process in the city. In neighborhoods like Telegraph Hill and North Beach, adding a garage is particularly difficult because of city fears that garages will replace affordable housing (apartments).
However, when it comes to single family residences, looking at homes without garages offers a more affordable way to acquire a desirable home in a desirable neighborhood. And if a buyer is prepared to build a garage in the future, the investment is likely to pay for itself, and then some.
We examined two properties that are a block apart on the edge of Noe Valley and Glen Park in San Francisco, to show what a difference a garage really makes.
11 Whitney St., 1-car garage
MLS no.: 369926
Bedrooms: 2
Bathrooms: 2
Living Area: 1,756 sqft
Sold: 7/1/2010
List Price: $1,250,000
Sold Price: $1,320,000
Description: Nice open floor plan, updated kitchen
Price per square foot: $752
1793 Sanchez, no garage
MLS no.: 371482
Bedrooms: 4
Bathrooms: 4
Living Area: 2,110 sqft
Sold: 7/13/2010
List Price: $1,189,000
Sold Price: $1,189,000
Description: Updated kitchen with city views, 1-br apartment in backyard
Price per square foot: $564
Based on condition and location, these homes should be considered very similar. While the difference in price per square foot is not completely due to their respective garage situations, the buyer of 1793 Sanchez bought a large home in a desirable neighborhood and can then add value by adding a garage at a later date.
If you apply the price per square foot that 11 Whitney sold for ($752) to 1793 Sanchez, you arrive at a potential value of almost $1.6 million. Now, it’s not entirely reasonable to say that adding a garage would increase the home’s value by $400,000, but it is an indication of just what a discount this home sold for, partly due to the lack of a garage.
Of course, putting in a garage is no simple task. The good news, however, is that because so many homes in San Francisco were built without garages, the garage-installation industry is well-established in the city. Permits can be tough to come by in certain neighborhoods, but in more residential areas like Noe Valley and Potrero Hill, adding a garage is really all about the money.
Depending on the location and the amount of rock that must be moved, whether changes must be made to the foundation and if the contractor must dig down below the ground, garage installations typically run between $150-200k.
Not cheap, to be sure, but as the example above helps show, given the premium attached to a garage, even such a large investment may end up being a great economic decision.
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