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.