Rental Market in San Francisco is on Fire

SF Bay
The rental market in San Francisco has been on fire for months. I first noticed the trend around March 2011 when I called to get information on a nice little apartment building for sale in the Mission. The broker said he had 3 offers over asking. I knew immediately that the market had turned, and it has only goten stronger over the ensuing months as anyone in the real estate world can attest.

Young tech workers flush with huge salaries and stock options flock to desirable neighborhoods, driving up prices in an already competitive rental market. And when renters get priced out of San Francisco where do you think they go? You guessed it Oakland. Consequently the East Bay rental market, which lags about six months behind San Francisco, is beginning its run up. This is first seen in top markets such as Lake Merritt and Rockridge where BART provides easy access to San Francisco.


Apartment prices in the Bay Area are growing in an extraordinary, unprecedented way due to tremendous job growth but also because of the lack of new construction in the multi-family sector. The first quarter of 2012 saw 15.8% increase in rent compared with the same time in 2011, to an average of $2,663 for all size units. Studio apartments are up 16.5% to an average of $2,075 in a year. One-bedroom, one-bathroom apartments, are up 19.9% to an average of $2,611 in 2011 and up 30% from 2010.

San Mateo County also experiences the same kind of rental growth. Units of all sizes up 15.6% to an average of $2,003 in a year. Santa Clara County’s rental increase is up 12.5% to an average of $1,857 in a year. Growth was strong in Alameda County, where units of all sizes average $1,519, a 7% increase which is big compared with other areas of the country.

Oakland’s rental growth is largely due to its proximity to San Francisco. A recent report from the National Low Income Housing Coalition states that San Francisco is the most expensive metropolitan area in the country for renters. The report said the annual income that is required to rent a two-bedroom apartment in the counties of San Francisco, Marin and San Mateo is $76,200. By contrast, the required annual salary is only $56,950 in the New York metropolitan area which includes eight counties.

I have owned investment property in San Francisco and in Oakland. While I believe the Bay Area in general is a fantastic place to own rental property, the East Bay in particular has tremendous value. Dollar for dollar it is hard to beat the returns you can get with multi-family investments in Oakland. Oakland is very close to San Francisco, there are a growing number of high quality restaurants, clubs and shops luring young hipsters from SF. It is only a matter of time before Oakland comes into its own as spillover tenants stream in from overpriced markets.

If you have ever wanted to invest in income producing property in the Bay Area, please contact me. I will sit down with you and generate a list of the top ten best properties that fit your profile. You will get personal attention from me, along with honesty, integrity and hard work.

Thanks for reading!
Nick

Image from beautifulfreepictures.com
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About BayApartmentAdvisor

Nick Myerhoff is a Bay Area apartment market specialist. He owns and operates his own multi-family real estate and assists clients and prospects with their purchases and exchanges of residential commercial real estate in the bay area.
This entry was posted in Investing in Multi-Family, Market Conditions, Stories about Commercial Real Estate and tagged , , , , . Bookmark the permalink.

2 Responses to Rental Market in San Francisco is on Fire

  1. Kanchan Charan says:

    I have a couple of properties – house in Foster City mkt around $1.4m and owe $1m and house in Daly City mkt 600k owe $400k. What would you suggest be my next move?

    • Thank you Kanchan for posting a comment on my blog. I would like to speak with you on the phone and gather more details about your situation and come up with a strategy that works for you. My inclination would be to sell both single family homes and exchange them into cash flowing small apartment buildings. It is a much cleaner and better way to create passive income than with single family homes. However there are tax implications to consider. If you are able to take advantage of the home owner exemption I would definitely do that. Your on the right track, but owning more units is the way to go!

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