{"id":77048,"date":"2016-03-04T14:30:13","date_gmt":"2016-03-04T21:30:13","guid":{"rendered":"https:\/\/www.biggerpockets.com\/renewsblog\/?p=77048"},"modified":"2021-03-16T11:53:42","modified_gmt":"2021-03-16T17:53:42","slug":"2016-03-04-live-free-san-francisco-great-part-town","status":"publish","type":"post","link":"https:\/\/www.biggerpockets.com\/blog\/2016-03-04-live-free-san-francisco-great-part-town","title":{"rendered":"How to Live for Free in the Most Expensive City in America"},"content":{"rendered":"

Special Thanks to <\/span><\/i>Mashvisor.com<\/span><\/i><\/a> for providing some of the critical data used to create this piece.<\/span><\/i><\/p>\n

Let me tell you something that most people hate to hear:<\/span><\/p>\n

Where you live is up to you.<\/span><\/i><\/p>\n

The wealth building process, including investing in real estate, is a direct function of both how much you <\/span>earn<\/span><\/i> and how much your life <\/span>costs<\/span><\/i> to maintain. If you live in an expensive city and you are an independent adult, <\/span>you<\/span> are responsible for your high cost of living.<\/span><\/p>\n

I made a very deliberate choice <\/span>not<\/span><\/i> to move to an expensive city upon graduating college and sacrificed some earnings potential for a very real <\/span>tens of thousands<\/span> of dollars in cheaper living expense. When you decide to live somewhere expensive, you forgo the opportunity to build wealth like those who live in other places.<\/span><\/p>\n

If we accept this, then you have to understand that when you live in an expensive city like San Francisco, you forgo wealth building opportunities for the luxury of living there. I didn\u2019t understand this choice personally.<\/span><\/p>\n

Then I visited.<\/span><\/p>\n

I had the good fortune of being able to visit San Francisco last week on a business trip for BiggerPockets. <\/span><\/p>\n

I loved it. <\/span><\/p>\n

I get why the people who live there must love it, too. <\/span><\/p>\n

There\u2019s the gorgeous scenery, the coast, the beach, the mild weather, the beautiful buildings, and the lovely parks.<\/p>\n

There\u2019s great food, beer, restaurants, and entertainment.<\/p>\n

But what really stands out are the people.<\/span><\/p>\n

The tech entrepreneurs with their boundless optimism, many of the very best young people just getting started in life and working at the greatest companies in the world. Those continuing the decades old San Franciscan counterculture movement. And of course, those left behind by the incredible progress of the city — the homeless and beggars that are impossible to ignore.<\/span><\/p>\n

\"San<\/p>\n

Overall, there\u2019s a culture in San Francisco that is impossible to replicate — and one that might (for some folks) be impossible to walk out on.<\/span><\/p>\n

If that\u2019s you\u00a0<\/span>and<\/span><\/i> you want to get involved in real estate, you are in a tough spot.<\/span><\/p>\n

That said, let\u2019s talk about the purpose of this article — how to get started in real estate in San Francisco (and expensive cities like it).<\/span><\/p>\n

First, let\u2019s define why traditional real estate investing is so difficult in San Fran. There are two main reasons:<\/span><\/p>\n

    \n
  1. Real estate in San Francisco is among the most expensive in the country.<\/span><\/li>\n
  2. Rents, while incredibly high, are some of the <\/span>lowest in the country relative to property purchase price.<\/span><\/li>\n<\/ol>\n

    That second point is the real key here for the aspiring real estate investor. Most barriers in real estate can be overcome by finding great deals and by partnering with those who\u00a0have the capital to fund your new business.<\/span><\/p>\n

    But if a property loses money, there\u2019s not much that can save you.<\/span><\/p>\n

    While the average citizen might think that rents are crazy expensive (and they are!), for the owner of real estate, the rents are only material <\/span>in relation to the purchase price.<\/span><\/i> Below, find a chart indicating some of the larger cities in the country. Here, we divide average Fair Market Rents (FMR) by the average sale price.<\/span><\/p>\n

    \"Avg_Home_Values_Across_Major_Metro_Markets\"<\/p>\n

    \"Avg_Annual_Rent_Across_10_Major_Metros\"<\/p>\n

     <\/p>\n

    \"Rent_to_Value_Ratios_Across_Major_Metros\"<\/p>\n

    Note* – These graphs are provided using the data from BiggerPockets’ real estate investment market index<\/a>.\u00a0<\/em><\/p>\n

    These three graphs tell us three things:<\/span><\/p>\n