This is the best-built building of the three we're looking at. The owners took a 1954 E.A. Ries building down to its systems: a new 400-amp electrical service and panels, copper water lines, about 120 feet of new sewer lateral, mini-split heating and cooling in six of the seven units, in-unit washers and dryers, new windows, a steel-reinforced structure under the upstairs corner unit, and finishes you don't see in Pacific Beach rentals. The state-required balcony and stair inspection came back clean on October 9 with no repairs. It sits on a corner about 400 feet from the sand. Day one, there's almost nothing to fix.
We walked the building today with Jeff Diller, the listing agent and one of the owners, and toured both Emerald buildings while we were there. Bayard is in a different class. 849–855 Emerald is the closest comparison, about half a block away, and it sits on an interior lot with significant deferred maintenance on the outside. Its listing agent confirmed known defects in the electrical and sewer systems. Our assessment is that it would take about $1 million of capital to bring 849–855 Emerald to Bayard's finish and quality. Bought near $4 million, that's about $5 million all-in for a building on a lesser lot, plus a year of construction and the risk that comes with it. Bayard's corner and site improvements are far superior, and owning it should be close to hassle-free.
The visit also showed the building is ready to grow. There are seven electric meters plus two more capped and ready for the ADU conversion, and every unit has its own gas meter, with two more gas stub-outs already looped in. If you convert the four garages into two ADUs, most of the utility work is already done.
The asking price is $5,000,000, or $714,286 a unit. On the owner's October rent roll, the current $4,500 insurance premium the owners confirmed, and 5% management, the building returns at that price, against the 4.02% in the offering memorandum. The difference is the OM's 2% vacancy and 4% management, and a vacant garage it counts as rented. The rents are already near the top of the market. The two leases signed after the September Zillow ad, which drew 25 inquiries at $3,600, closed at $3,350 and $3,250.
The comparable sales and the financials alone support about $4.25M to $4.45M. That's what the data can measure, and it isn't what an asset like this is truly worth. The rebuild, the corner, 400 feet from the sand, and what it would cost to create the same thing down the street all carry value the recorded sales can't capture. Taking those into account, my most probable value is $4,500,000, with a supported range of $4,375,000 to $4,700,000.
The upside belongs to you, and it's real. The one long-term tenant, in Unit 4635 since 2013 at $2,181, is likely to move in the next 12 to 24 months according to the listing agent. That alone is worth about $12,500 a year. Add the vacant garage, garages at market, a utility billing program and the two garage-to-ADU conversions, and the building can earn well above today's numbers.
My recommendation is to open at $4,375,000, target $4,500,000, and stop at $4,700,000. At these prices the financing is the constraint, so please look at this closely. On U.S. Bank's letter as written, the terms issued for 1478 Hornblend (6.74%, 30-year amortization, 1.25× coverage), the loan sizes to a little over 40% of the price, and your $2,350,000 covers a purchase up to about . At the $4.5M target you'd need about more in cash. Interest-only payments at 1.20× coverage would close most of that gap, but they need the bank's approval. The explorer below opens on the letter as written so you can test every option.
The owners are motivated. The primary owner wants out as quickly as possible and the other four want to sell. Our opening number is $625,000 under the ask, so I expect a counter. What we bring is certainty: a bank letter in hand, proof of funds, short contingencies and a close before year-end.
With Gratitude,
![Kip Boatcher signature]()
849–855 and 2003 Emerald figures are from their October 26 and 27 opinions. The 849–855 capital estimate is from our October 28 site visit and a conversation with its listing agent. Bayard's fit includes 1.5% closing costs and the 1% mortgage broker fee in U.S. Bank's letter. Needs verification