San Francisco has a huge market for multi-family properties. The high demand for housing, coupled with the overall desirability of the city, has made it one of the most competitive markets for multi-family housing in the United States.
What is a multi-unit?
A multi-family property has multiple dwelling units owned by one or several parties. Apartment buildings, condos, and duplexes fall under this category, except that with duplexes, the land and the property are recorded on one deed. With condos, the units are individually owned and owners enjoy shared ownership of the common areas.
A property with four units or less is considered residential. This means that the investor may opt for a residential mortgage if they intend to occupy one of the units themselves.
A property with five units or more is considered commercial. Investors must follow stringent lending rules when financing one of these properties.
One of the main reasons people invest in multi-family properties is because these properties generate a monthly income for each rentable space. Compared to single-family homes, where the investor only has one source of rental income, multi-family properties are a better investment because of cash flow from several sources.
Vacancies are less frequent and not as costly – even if one or two units become vacant, the investor will still generate income from the other units.
It’s also easier for investors to control the value of multi-family properties which is based on the rental income that the individual units generate.
Leasing out multi-unit properties in San Francisco
SF is a city of renters – 65% of homes are occupied by renters, and 35% are occupied by homeowners. Rent control applies to older multi-family properties, and not to buildings that were constructed after June 13, 1979 – the date when San Francisco’s Rent Ordinance took effect. It doesn’t apply to condos and single-family homes being rented out either. That means none of the newer housing stock in the city is rent-controlled.
Rent control simply means that units that come on the market are rented out at market rent level, but annual increases will be limited from that point onward, based on inflation.
Multi-family properties with more than five units make up 52% of SF’s housing units despite occupying a mere 19% of the city’s land area. Single-family homes, by contrast, occupy 62% of SF’s land area and account for only 27% of the housing market.
SF has some of the highest rents in the United States. There has been a recent spike in new construction, though the majority of it is at the high end of the market.
A leasing agency that offers tenant placement services can help you find the right tenants for your property. Call Ray Amouzandeh at (415)494-7009 or send an email to SFHomez(at)gmail(dotted)com.
Multi-unit properties for sale
SF is a great place to invest in multi-family properties. The demand for multi-family rentals remains strong, and limited development means there’s more competition among renters.
Many of these properties come with attached garages, as well as intricate woodwork, ornate molding, and wood beam ceilings.
To make the most of your investment, work with a reputable leasing agency that knows the local market. Get in touch with Ray Amouzandeh for more information on multi-family homes for sale San Francisco.