San Francisco SFH: Rent or Sell?

[Jamie M.]

Hi!  I posted my situation in a general forum, but given that there are nuances in my decision specific to the SF market (and regulations) I thought I'd post here too:

 https://www.biggerpockets.com/forums/88/topics/451...

The in-law cottage is an accessory unit, which I believe prevents a rent control situation, but expert thoughts welcome!

[Katrina Razavi]

@Jamie M. thanks for sharing, really interesting situation. I'd def check w/ a lawyer on that piece. Even though your in-law is a legal ADU you still may be subject to RC. The workaround is to make sure that you're renting the ENTIRE property to one party, (not the 2 separate units b/c doing that will def. mean RC). An SFR w/ an in-law can def be considered RC according to the rent board. A true SFR isn't subject to RC. I'd also check the type of zoning on your property.

In terms of renting out vs. selling I think that it really depends on your financial situation. Personally, if I could afford doing so, I'd hang on to the property. I get the argument of selling it now to take advantage of not having to pay capital gains on the delta, but so long as you're in a situation where you're positively cash flowing the property by having a tenant in, there I'd keep it. Again, very personal decision. 

SF is a strong market for renting, rents are only going to increase IMHO (regardless of how property values fluctuate), and you live in a highly desirable area. You're also close to the property which makes it easier to manage and probably do some repairs on your own to save money on capital expenditures.

I've looked into a lot of LL laws and there's no question SF is NOT an LL friendly town. That being said, if you screen tenants properly and charge a high rent, you'll likely find that your tenants will be desirable ones.