Over the past few decades, the San Francisco Bay area has seen impressive economic growth. The impact of the region’s tech boom is noticeable across many sectors and the city’s urban expansion doesn’t appear to be slowing down anytime soon. In particular, one sector that has been massively affected by this growth is the San Francisco real estate market. In recent years, prices have soared and demand seems to be insatiable.
But what does all this mean for real estate investors? Is investing in San Francisco real estate a good idea? In this article, we’ll answer these questions and we’ll provide you with valuable data that will help you navigate the San Francisco real estate market.
San Francisco Real Estate Market Data
Touting the potential of the San Francisco housing market without any real estate data to substantiate this claim would be purposeless. This is why Mashvisor puts many metric-driven tools at your disposal. Our investment property calculator is a prime example. You can find out more about this tool by clicking here. But first, here is some investment data that pertains to the San Francisco real estate market.
- Median Property Price: $1,566,399
- Price per Square Foot: $998
- Price-to-Rent Ratio: 30
- Rental Income: $4,376
- Cap Rate / Cash on Cash Return: 1.1%
As it is the case with any multifaceted sector, these numbers don’t tell the full story. Let’s take a closer look at the San Francisco real estate market and go over some of its main selling points.
Related: Mashvisor: The Best Rental Property Calculator You Can Ask For
The Factors That Make the San Francisco Real Estate Market Lucrative
Some conservative investors tend to have qualms about investing in the San Francisco housing market. The rationale behind this stance is rooted in the belief that overpriced housing markets come with a risk that outweighs the upside potential. However, we believe that this is a misconception. As a matter of fact, some of the country’s most expensive markets offer tremendous investment opportunities, and the San Francisco real estate market is a good example of this.
Here are some of the factors that should make you consider buying a rental property in San Francisco.
1- San Francisco boasts one of the best economies in the US
The strong economy of San Francisco continues to defy even the most optimistic projections. At just 2.9%, the city boasts one of the lowest unemployment rates in the country and its GDP per capita has recently exceeded the $100,000 mark. Furthermore, the GDP of the city registered a growth rate of 29% in the first half of the decade, making San Francisco one of the top 10 fastest growing economies in the US.
The great health of the city’s economy has positive implications for the San Francisco real estate market. The continuing economic growth, the low unemployment rate, and the high median salary are the typical hallmarks of an ideal location for investment properties. Above all, these solid economic fundamentals are integral to maintaining high rental property demand and ensuring a good return on investment.
2- San Francisco’s population is growing at a decent rate
The population of a city is inexorably linked to its economic health. In San Francisco’s case, the tech industry continues to attract people who are looking for better job prospects. In addition, this influx is projected to continue in tandem with the region’s ever-expanding tech sector. More importantly, this growth is expected to sustain the high demand for San Francisco rental properties.
It’s also worth noting that despite reports of bay area residents fleeing the region en masse, the actual numbers tell a different story. San Francisco’s population has in fact grown at a rate of 9.52% since 2010. This rate is significantly higher than the national average of 5.96%.
Convinced that San Fran is a great place to invest? Start looking for a rental property right now.
3- The appreciation rate is high
Thanks to all the factors discussed above, the bay area has one of the highest appreciation rates in the California real estate market. In fact, the latest data from NeighborhoodScout reveals that the rate is just shy of 10%. This puts the San Francisco real estate market in the top bracket of appreciating markets in the US. The good news is that all the variables that contribute to this appreciation continue to trend upwards. Consequently, the rate is expected to hover around its current level for the foreseeable future – another reason to consider buying an investment property here.
Related: Where to Invest in Real Estate for Appreciation in 2018: 5 Top Cities
4- San Francisco investment properties offer high rental income
This factor is rather simple and straightforward. One of the main reasons to consider investing in the San Francisco real estate market is the high-profit potential that it offers to investors. In fact, the average rental income for traditional San Francisco investment properties is around $4,376, which is well above the national average. You should also keep in mind that this figure is a city-wide average. Investment properties that are situated in the best neighborhoods in San Francisco can generate higher rental income. For this purpose, you can find a more thorough neighborhood breakdown below.
Related: Traditional Rental Strategy: Best Cities for Rental Income 2019
Investment Data for the Best Neighborhoods in San Francisco
Investors looking for San Francisco real estate investment opportunities should know that data can vary tremendously from one neighborhood to another. According to Mashvisor, these four options are the top neighborhoods to invest in:
South of Market
- Median Property Price: $881,095
- Price per Square Foot: $870
- Price-to-Rent Ratio: 15
- Rental Income: $4,821
- Cap Rate / Cash on Cash Return: 6.3%
Inner Sunset
- Median Property Price: $1,745,833
- Price per Square Foot: $808
- Price-to-Rent Ratio: 32
- Rental Income: $4,593
- Cap Rate / Cash on Cash Return: 1.1%
Potrero Hill
- Median Property Price: $1,198,250
- Price per Square Foot: $863
- Price-to-Rent Ratio: 22
- Rental Income: $4,477
- Cap Rate / Cash on Cash Return: 1.8%
South Beach
- Median Property Price: $1,946,333
- Price per Square Foot: $1,717
- Price-to-Rent Ratio: 32
- Rental Income: $5,043
- Cap Rate / Cash on Cash Return: 2.72%
Despite the high barrier to entry, the San Francisco real estate market remains an attractive option for real estate investors. If your budget allows it, consider adding a San Francisco rental property to your portfolio.
To start investing in the San Francisco real estate market, click here to begin your 14-day FREE trial now!