All Forum Posts by: Amit M.

The SF rental market is very tricky now, and frankly has been hard to pin down. March-May was weird as we went into initial lockdown and nobody knew what the hell was going on. Then it improved a bit in the summer. And as of September it has gotten a lot worse. A big part I think is SF LL’s are/were in denial, and now some are getting more desperate and hence number of listing is up. (Personally I’m glad I dropped my rents as needed and got everything taken care of by late summer ;)

The other factor is that rent drops are highly dependent on location and unit/bldg type. High rise fancy condos in CBC are definitely down big time. Other neighborhoods are case by case. For example, I took a big hit on a 3BR rental in the mission, but only minor rent drops on my 3BRs in Bayview (which is more of an up and coming neighborhood.)

As for predictions, my crystal ball says: this winter we will reach nadir, and hopefully things will bottom and stabilize by spring/summer 2021. Then depending on a lot of things like vaccine, elections, economy, rents will start to slowly improve in 2022. This is for SF rentals only. 

In general, I think the FIRE movement is on “fire”, so I’d cast a cautious eye

@Sid Naik keep in mind that suckitsite (sic) is run by a pretty biased person with an axe to grind. As for San Francisco rent drops, again it depends on the neighborhood, unit size and amenities. Certainty new construction high rises In DT and SOMA are taking a big hit (like 20-25%) but others are much less, to the tune of 5-7%. I also think this winter will be the nadir, and spring 2021 will improve. Basically some of the LL’s in denial this summer are now getting desperate, so the rental market is particularly soft now with that hangover inventory. But hopefully that inventory will work itself down, and spring 2021 will be an improvement. (I’m glad I got my rent reduction sh!t together pronto this summer, and filled my vacancies without waiting too long ;) 

Numerous people here took the time to write quality suggestions. I’d be nice if OP made efforts to acknowledge this...

@Jonathan Levi

@Jonathan Levi shalom

I read your post and your bio, and yes you have a challenge in picking a viable RE investment strategy for your situation. While it sounds like you did well with your Bay Area townhouse, if you're not living locally it will be difficult to buy locally (my preferred approach) and add value to the project. Worse case just keep the townhouse until something clearly better comes along. Yeah we're in a market dip now, but you're sitting on prime real estate in Santa Clara (although holding an SFH would be more ideal) which will preserve value and appreciate long term. During that time rent will increase, you'll pay down the loan, write off depreciation, and keep property taxes low (prop 13). That's your default position IMO.

As for NNN, the challenge, as @Joel Owens mentions is that the safest properties aren’t usually appreciation plays. More like wealth preservation. And anything lesser in commercial, you better really know what the hell you're doing, which takes a lot of experience. Or, you end up doing deals with syndications, managing partners, funds, etc. Then you’re totally relying on their talents. Also keep in mind that they have a job- recruit funds for their projects. Cyclically we just started a down market, and I believe that some of the recently formed syndications (especially those based on pre covid analyses) are going to get spanked. Hence, I personally don’t like giving up control and investing passively. I prefer investing in prime quality markets which I know well.

Sooo given all that, I’d ask you if you gave any thoughts to investing locally in Tel Aviv. Although to an outsider reading this it may seem like a whatever market, we locals know that Tel Aviv is prime real estate. Even if it’s not SF or NYC, as long as they keep making Jews (joke;) Tel Aviv will always have a built in global market, which helps keep it stable in bad times, and juices up returns in boom markets (similar to SF, etc.) Plus with the recent peace accords with UAE and Bahrain the region just got a major development and investment financial boost.  I think it’s worth looking into. Personally I’m looking to buy a 2nd home in TLV in next year or two. Tama 38 is interesting to me for instance. And there may be other opportunities in less expensively markets for rentals. Only thing I find challenging in Israel in general with rentals is that the rents are low relative to the apartment costs. It’s the same thing in San Francisco, but here I know how to add a ton of value to change the fundamentals of the asset (I detail this in my BP profile). I imagine there are ways to do the same in Israel. I’d be interested in your take on this. 

@Ethen NA
You just said you’re not crazy about living in the city. So no, I think it makes little sense to sell now, pay commissions, buy in SF, and do the same in 2-3 years. Transaction costs will eat into potential profit, or even lead to a loss.

As for future values in SF, of course the city is going to bounce back in 2-3 years big time. S.F. is a prime, internationally recognized location. The “leaving the city” articles you’re reading feed on hype and are temporary. 

But, if you do like city living and were priced out before, I’d definitely ditch the townhouse and buy a condo in one of the areas taking a hit on prices like soma, downtown, etc. There are definitely some good deals available now, but I wouldn’t count on flipping it in 2-3 years. 5-10 years yes, the transaction costs may become much less of an issue. Or aspirationally, hold it as a pied-a-terre :)

keep

long 

term

—————-

3words/1chart

@Hung Dao

1- I agree with Brian, 2 separate contracts for 1 home sounds super shady to me. If it was a home, with an inlaw that would be different. 

2- There is little upside imo. Market inertia is not on your side for natural appreciation over the next 2-3 years. Usually sec 8 homes are run down with deferred maintenance, etc., so think PITA going forwards. Only value add is if you can add a decent ADU in the future, and that depends on the structure, and other factors, plus requires a lot of $$.

3- it's hard to get an SFH in SF to make sense as an investor. I'd look at 2-4 units. Bayview is a good appreciation play IMO. Some locations better than others. What street/cross street is this in BV?

Prop 21 is TERRIBLE!

For San Francisco, I bet that our board of stupidvisors will quickly pass vacancy controls (which will be permissible.) Other cities and counties in CA should keep that in mind, as their local politicians can pass these types of severe restrictions without Costa-Hawkins. 

I wonder what the likelihood of this turd passing? In 2018 prop 10 (similar) was soundly defeated. But we’re in different times now. OTOH CA recently passed  statewide rent control, as well as significant covid eviction protections. Jeez, isn’t that enough for 1 year!

I’m *really* hoping that the general population comes to their senses and prop 21 fails...

@Greg San Martin in SF it’s actually pretty straightforward IF it’s a 2 unit building. It needs to be owner occupied for 1 year then it qualifies. The process is pretty arduous and takes a year. And yes, different city departments take a bite out of your hide! You pay public works, planning and building dept fees, they inspect and nit pick Whatever they feel. And you have to prepay Your property taxes 1 year in advance.

The city used to allow 3-6 units to condo convert, but it was limited to 200 units a year. When that got backed up they instituted a wonky “lottery” system (of course you had to pay a fee every year to enter the lottery). When that started averaging 22 years until you get lucky and “win” The lottery, they created a bizarre “expedited” conversion to allow all those stuck in the lottery to convert. Of course they created extra (and $ large)“impact” fees for that pleasure. And lastly they abolished all future 3-6 unit conversions altogether.

Yup, SF  really encourages condo conversions!