San Francisco, CA: Rental Property ROI Analysis
|75 U.S. City Avg.
San Francisco is one of the most renowned cities in the world and is continuously praised on all types of "best-of-the-best" lists. Walk Score considers it to be the second best on its list of the Top 10 U.S. Cities to Travel Car-Free, and was ranked sixth in a Biz2credit survey of the Best Small Business Cities in America, thanks to its proximity to Silicon Valley, the technology and venture capital center of the world. It seems like everyone knows that San Francisco is a great place to live, hence rental housing prices have risen dramatically in recent years as new residents have flocked to it year after year.
The Q1 2015 Rental Ranking Report ranks San Francisco as best in the West, and even the best in the U.S. as a whole, in terms of the return on investment you can get on rental housing. In fact, the San Francisco market is so good for landlords that it is consistently ranked as being the worst city in the country for renters! Indeed, other than securing earthquake insurance and finding parking, the biggest problem landlords face in San Francisco is the city council passing further rent control measures to reign in its rapidly-escalating rental prices. As problems go, landlords could do much worse.
San Francisco's cap rate of 5.2 percent looks relatively modest on paper; it ranked 66th out of 75 metros in the Q1 2015 Rental Ranking Report. That's the only category where San Francisco ranks below the top 12 markets in the country, however. The Golden Gate City posted superb rent increases of 5.45 percent last year, but those increases were eclipsed by a strong 11.15 percent property value appreciation. (Wherever you have home values rising twice as fast as rents, cap rates are going to appear unimpressive.)
The excellent job market and quality of life in San Francisco keeps the demand for housing strong, shoring up both home prices and rents and leading to a very low vacancy rate of just 3.6 percent, the sixth-lowest vacancy rate in the country.
What data is this Rental Ranking Report based on?
To calculate the statistics found in the Q1 2015 Rental Ranking Report, All Property Management gathered data, including the most recent government housing and jobs data, for 75 metros across the United States. Specifically, we looked at home vacancy, capitalization, home value appreciation and job growth rates, changes in rental prices, and the average number of days properties have been on the market to determine which U.S. metros will give investors the highest returns on rental investments. Click here to learn more about the Rental Ranking metrics.
Should I invest in San Francisco rental property?
Quite simply, there has never been a better time to invest in rental real estate in the San Francisco metropolitan area. From its solid rental price increases and outstanding home value appreciation, investors should see a strong return on their investment both in the short and long terms. San Francisco is perhaps a better market for price speculators than those looking to earn substantial rental income (when compared to home prices), due to the rent control issues San Francisco landlords face, but it remains an excellent market for both.
Thinking about renting out a property in San Francisco? Save time, avoid hassle and maximize your rental income by having a professional property management company operate your rental property for you. Click here to get a free quote from a local property manager or call 877-780-4510 to have the All Property Management staff get quotes for you.
All Property Management specializes in connecting rental property owners with professional property managers in communities across the United States. These property managers help set rental rates, advertise properties, screen and manage tenants, collect rent, manage vendor relationships and ensure compliance with local, state and federal housing regulations. They take the hassle and worry out of managing rental properties - all while maximizing rental property owners' rental incomes.