Leave your Heart in San Francisco, But Not Your Investment Dollars

Leave Your Heart in San Francisco… but Hang Onto Your Real Estate Investment Dollars

San Francisco: a Great Place to Visit, but You Might Not Want to Think Twice about Investing.

Amazing views await you at the top of every San Francisco hill. From the fabled Golden Gate Bridge to historic Coit Tower, the “City by the Bay” cityscape is punctuated with unique landmarks. Need to get across town? Hop one of the red cable cars that crisscross the city. Craving a quick bite to eat? Dig into the fresh catch of the day on Fisherman’s Wharf.

From rows of colorful Victorian houses to a bustling tech job market, there’s a lot to love about San Francisco. However, a plethora of profitable investment properties isn’t one of them.

When investing in real estate, your criteria for success includes many factors, from the dwelling itself to the surrounding job market and demographics. Naturally, one of the most critical elements to consider is location. When sizing up San Francisco, it’s apparent that a lot of negatives are stacked against the would-be landlord.

San Francisco Real Estate Market

What’s Wrong with the San Francisco Real Estate Market?

As Mays Kuhail of Mashvisor puts it, “The high property prices, strong tenant rights, rent control, low rent-to-home-value ratio, among other factors all contribute to making the San Francisco real estate market very difficult. Being a landlord under these circumstances has become rather challenging.”

While renter demand in San Francisco is quite strong and vacancy is low, the price of mortgages makes it almost impossible to earn high returns. Regarding first-time investors, Mr. Kuhail continues, “If you are considering purchasing a buy-to-let property, you will require a large down payment if you expect to have a positive cash flow right away. Investing in San Francisco has long-term benefits, meaning a property will appreciate very well in this city but it’s not necessarily the optimal city for short-term benefits.”

Ingo Winzer, Contributor to Forbes.com, offers his perspective: “A shortage of housing often means that rentals are a good investment. But even with the exceptionally high rents, single-family rentals will give a poor return in the area because home prices are so high unless investors also plan to flip those properties.”

Simply put, the San Francisco property market can be great for seasoned investors, but newer investors will have a hard time getting a foothold. Bidding wars, high home prices, and all-cash buyers will ultimately price them out of the process.

What This Means for Real Estate Investors

Don Ganguly, CEO of HomeUnion®, shares one trend that is emerging from the situation: “One of the highest-priced markets in the country, single-family-rental investors in San Francisco are focusing on farther-flung submarkets where cap rates are highest. With entry prices exceeding $1 million, most investors are seeking alternative markets.”

For help in determining the best location for your real estate investment, turn to HomeUnion®. We put key data at your fingertips and help you evaluate all of the important criteria for identifying profitable properties that make sense for your financial goals. From start to finish, we’re there to assist you during every step of the acquisition process, and then oversee the day-to-day details of property management.

 Interested in learning more about how we can help? Schedule a consultation with HomeUnion®.

Have Questions?


Jeffrey W. Jun 9 2017 - 3:22 AM
A lot of people, that includes me, consider other possible sources of income to augment an individual’s or family’s cash flow. The problem is most of us are not aware of the risks in each alternative. In this case, this city’s real estate market can be a nightmare for novice investors, which means help is needed or another alternative might be a better option.

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