Silicon Valley versus San Francisco . Investment property for rent

Asked by Nigel, Cupertino, CA Tue Nov 27, 2012

Which area would you recommend as an investment property?
I'm looking to purchase and rent out. Looking for a 700k property that will provide capital appreciation. Not interested in du/quadplexes.

Help the community by answering this question:

+ web reference
Web reference:

Answers

9
Michael Cheng, Agent, San Jose, CA
Wed Nov 28, 2012
If you're seeking to speculate on capital appreciation, you should look at a prime location on the peninsula or the city. For $700K, you can get a nice 2 bedroom unit that would be only a minor drain on your cash flows. Mt. View and San Mateo offer good choices.

For positive cash flows, there are other areas where investors have been executing on that model.
Web Reference:  http://www.archershomes.com
2 votes
Sam Shueh, , San Jose, CA
Wed Aug 6, 2014
As prices have risen, it is important about cash flow, and reasonable cap rate.

http://x299322.yourkwagent.com

Sam Shueh
Keller Wms Realty
0 votes
Oggi Kashi, Agent, San Francisco, CA
Sat Dec 1, 2012
If interested in SF, I recommend looking at properties built after 1979 so you are not subject to rent control.

Oggi Kashi - 415.690.3792 direct
Broker Associate, Paragon Real Estate Group CA DRE 01844627
All data from sources deemed reliable but subject to errors and omissions, and not warranted.
Web Reference:  http://www.oggikashi.com
0 votes
, ,
Wed Nov 28, 2012
Nigel:
If you're planning to be a landlord, particularly if you've never been one before, you may want to
consider all of the other factors in addition to price, demand, and potential appreciation such as
> do I want to be close to the property?
> do I want to manage or hire a professional?
> do I want my investment to be nearer or farther from an earthquake fault?
> do I want to chase the crowd = Mission Bay, or fight for the most in demand locations in old
established neighborhoods?
> do I want to compete with the Silicon Valley money?
> do I want to limit my search for good investments to these two areas?
0 votes
Jerry Guay, Agent, San Francisco, CA
Wed Nov 28, 2012
You should also consider Cap rates e.g. your net operating income ratio to the value of your property. You may get a 10-15% Cap rate in the Bay View (inferior location) vs. 1% in the Marina (superior location). For pure cash flow, go with the higher Cap rate. Your potential equity gain will better with the superior location.

Basically.. per the housing rights committee of SF, all buildings built before June, 1979 are covered under rent control. If you live in a building that was built before June 1979 you should be covered--unless the building was condo-converted. Or you live in a single-family dwelling that you moved into after January 1, 1996. Condo-converted buildings are not covered under rent control unless the original owner who did the condo conversion still owns it. However, if you moved into the condo before January 1, 1996, you are still covered.

Tenants who rent single-family houses, which used to be under rent control, are no longer under the price control portion of rent control. However, as with condos, if you moved in before January 1, 1996, then you can only receive the allowable yearly rent increase. Both condos and single-family dwellings are protected by just cause eviction protections, provided they were built before 1979. If you live in a single-family dwelling and there is an in-law unit attached to it, or a garage or basement apartment (whether or not this unit is legal), then your building is considered to have two units and you are fully protected under rent control.
0 votes
david klein, Agent, San Francisco, CA
Wed Nov 28, 2012
Contact me if you would like information on a bank owned home that is being sold via an on-line auction in Sunnyvale. Market values in the neighborhood are $400,000 to $600,000. The bidding may reach into the mid $300,000 range. All cash, no loan required. Other properties are also available on this website.

To answer your question in general, SOMA condos have huge rental demand and are NOT subject to rent control. I wouldn't recommend buying a home in SF that is built prior to 1979 as it IS subject to rent control.

Here's the priorities for a good investment property

1. EXACT location: good neighbors, close to transit and/or commute streets/freeways, shops.
2. Good floor plan

Any house or condo in any city in San Mateo or Santa Clara co. that meets those criteria that you can buy for a reasonable price is a good investment.

David Klein
Prudential San Francisco
415 810 6973
davidlouisklein@gmail.com
0 votes
Philip Cabral, Agent, San Jose, CA
Wed Nov 28, 2012
Hello Nigel,

I wanted to expand on my earlier answer. Currently, there are exactly 700 active properties (single-family homes, condo, townhomes) for sale in San Francisco and Santa Clara county at or under $700K. I, or any one of a number of great realtors in this area, can furnish you that list of 700.

If you like a more suburban feel, I recommend the Richmond or Parkside area of San Francisco. If you like to be closer to the action but only a walk away then I would suggest Pacific Heights. I have a friend who owns a condo over there and he generates a positive cash flow. His tenant is a lawyer that lives in Marin County and just uses the place for 2-3 days a week to run his office in the city. If you want to be closer still then the SOMA area, Noe Valley, maybe even West Portal, or Glen Park.

As far as in the Silicon Valley area, have you visited any of the cities in the area? Do you like Palo Alto? Los Altos (Hills)? Mountain View? Sunnyvale? Cupertino, which is the city you are currently in? Santa Clara? Campbell? Saratoga? All these cities you cannot go wrong in and each have a more residential area as well as a more bustling downtown area. Are you interested in schools for your tenants?

As far as the type of property, single-family or townhome/condo? If you are looking for appreciation, then I recommend single-family homes. Single family homes are less restricted on remodels and updates to the property than condos/townhomes, thus not limiting the appreciation just on the real estate market alone.

I can go on and on, 700 properties worth. I would need more what your preferences and what your individual situation is if you require more of a focused recommendation.

Good luck!
0 votes
Alina Aeby, Agent, San Francisco, CA
Wed Nov 28, 2012
Hi Nigel,


-One big difference: San Francisco rental properties are subject to the rent control ordinance. You can't simply raise the rent every year with the amount you please if you buy an older building( pre 1979) Here are more information:
http://www.sfrb.org/.
Silicon Valley is rent control free.
-continuing this idea, San Francisco architecture tends to be older than in Silicon Valley; if you want to avoid the rent restrictions, then a safe bet will be to invest in a new development condo or single family home, assuming you can find a new one within 700k range.
-both SV and SF have a lot of rental potential.

In the end, it all comes down to how much you pay for the property, how much you can rent it for, the amount of loan you take, property taxes, HOA dues, etc...


Good luck.

Best,

Alina

Alina Aeby- Broker Associate
Pacific Union International/Christie's
http://www.bestsfhomes.com
415.744.4844
0 votes
Philip Cabral, Agent, San Jose, CA
Wed Nov 28, 2012
Hello again Nigel,

As I mentioned in one of your other questions I grew up in San Francisco and currently live in Santa Clara which is in Silicon Valley. I have rental properties in both areas so I know both areas very well.

At a budget of $700K you have some restrictions. Condo/Townhouse vs. single family residence? Do you want more of a suburban feel or are you interested more in the middle of the city? How much of a down payment do you have? If you have a large enough of a down payment there is the possibility that you can have a positive cash flow from the start. Are you looking for a certain size of home? How many bedrooms, baths, square footage, size of lot, backyard, etc? There are a lot of details that you need to fill in.

I can certainly help you or you can contact any one of a number of great realtors in the area.

Good luck!
0 votes
Search Advice
Search
Ask our community a question

Email me when…

Learn more