I recently closed on a condo in San Francisco and put it up for rent. The response has been ultra sluggish and slow. Been in the market now 3 weeks with very low inquiry rate. Anyone in the San Francisco market having similar experiences or has any insight on general market conditions? I am hearing there is a seasonal slowdown in rentals and a huge inventory glut. But can’t confirm either.
San Francisco rents are down 9% from last year. You may need to decrease your rent until you get more interest. Generally fewer people are looking to move during the holidays.
There are more people leaving SFBA than arriving. There reason is ridiculous housing cost. Not that many high paid jobs were added. East Bay- it is common to leave vacant 2-3 months these days. South Bay it is sluggish since 2016. Saratoga, Campbell, San Jose ditto. Those approaching me to list are expecting miracles. I kept telling every landlord even if your place is brand new, rent is way lower since 2015. Because people may have purchased in recent years and they focused only on cash flow. For decades if one put 20-35% down it was always negative cash flow for the first few years in SFBA. The only ones enjoyed better returns are the people who bought at 2009-2011 with cash or high down. They get 8-10% cap rate and have a positive cash flow.
This is the time to put in a new bath, new flooring. Your place must standout. Take out old range and put in new appliances, washing machine, driers. Those who really like your place will haggle for a discount. Most look once and turn around. Sometimes they want 20% less than asked for. On apts it is common to advertise 1st month free etc as there appears to be more empty housings today than 2011.
@Sam Josh what neighborhood and what bed bath count? I'm surprised you bought now with the intent to rent right away. Unless you paid cash I don't see anything cashflowing.
You could consider furnishing it and offering it as a corporate rental although that market is also getting more saturated. Maybe market it as you be willing to let tenants rent extra room on Airbnb?
Unless you do something creative like that you probably need to lower the price
Thanks Sean. I appreciate your input. It's a 2 bed 2 bath in the south beach area. I was not intending this to be a cash flow property as such.
Hello Sam Seuh. My unit has all top of the line appliances etc but I am just surprised at how sluggish the rental velocity has been.
Thank you Bettina. Seems like the market has softened and rents are rapidly heading lower.
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@Sam Josh as usual, it depends on where and what type of property you have. In your case there are lots of newly constructed condos competing in south beach and soma. Also, those units reached sky high rents 2015-16 (mostly over $4500 for 2BR). Those are the properties that took the largest hits in rent declines, 20-30% in some instances.
In my case my Bayview rentals have not declined at all, and my Mission units dropped ~5%. All my properties are small buildings which are renovated and nice. The hyped up rents that new amenities laden buildings reached in 2015-16 was somewhat fiction, as people got more practical in their approach.
You can rent your unit quick, if you price it well. Which is what I’d do. A- you don’t have rent control, so you can always raise the rent when the market turns. B- every month you sit vacant, you loose 8.3% of your monthly ask rent on an annualized basis. You might as well drop by a few hundred dollars and rent it out sooner, than get that extra rent and sit vacant for 2-3 months. It’s just math, but the challenge is more in the landlords psychology!
@Amit M, thanks for your very thoughtful and practical advice. Indeed every month of vacancy is 8.3% loss in annual rental income. The market at least for now is not exactly in the favor of the landlords esp in select neighborhoods.
Yep, the rental market is slowing down. Some units I manage in San Jose / Campbell area dropped rents around 10% to get them rented compared to one year ago. Part of the real estate cycle. Also, this time of year tends to be slower too.
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