What are the best value areas in San Francisco to buy a home?

16 Replies

Hi everyone! 

My husband and I are looking to finally buy a home in SF. We've saved up and now that we've had twins - we think its time to make a purchase at $2-3MM even though this overheated market is a little terrifying. I'd love folks opinion on the following: 

1) Which areas are likely to represent the "best investment" in the next 5 years? I.E. Considering both the purchase cost of the house and appreciation rate, where would one buy for the highest ROI. We have 2 schools of thought. Buy in either:

- Established, affluent areas: Pacific Heights, Presidio, Cow Hollow, Sea Cliff OR

- Tier 2 areas that might become more affluent: Mission Bay, Potrero, Dogpatch, MAYBE "Outer Sunset" (although yes - it's probably in a lower tier than the others) 

2) Are we likely to make money if we invest in a cosmetic renovation of an older place or is the cost of labor and materials in SF likely to diminish our potential profits to a negligible amount. 

Look forward to hearing any and all opinions! 

First off congratulations on the twins! @Kusum Chanrai

If your end goal is to have good appreciation upside and a good chance at a purchase then I would look in the "tier 2" areas that are currently experiencing heavier gentrification and development. 

If your end goal is to live in a nice area from the jump and you will be ok with less house (in terms of size, amenities etc.) then buy the "tier 1."

Personally given your budget and familial situation I would lean to tier 1... thats my gut.

There are conflicting schools of thought which are generally going to be tied to your willingness to risk and the general environment. I know a lot of colleges say "buy the neighborhood not the house" and I know of those who say "you have to speculate to accumulate." The only way to really do it is to set a budget and start touring alot of houses. The answer will come naturally to YOU as there is no right or wrong answer. 

With the kids, I think you should buy the best neighborhood and schools possible. When I bought my current house, I was looking at Millbrae as a stretch, but settled on south city because it was realistic. Now I'm looking to upgrade and can't afford Millbrae with my current budget. As your primary residence, you should purchase the best house you can afford with your kids education and extra curricular activities in mind.

Problem with SF public schools is the lottery system, but that's a whole other discussion.

@Kusum Chanrai - I have a colleague who purchased a condo in the low $1M range a year or so ago in the Mission Bay area, as the cost of housing in that location will likely continue to appreciate due to the new stadium being built there. Lot of new restaurants popping up, etc.  Of course traffic is something to consider, as UCSF and SFPD are also located there.  

Right now it is very difficult to find contractors for renovation jobs as there is a severe labor shortage. As a result prices are high. plus San Francisco is not a easy city to deal with for renovations making the permitting process long which costs money. Renovating with twins is not going to be fun. Something to keep in mind.

Thanks so much everyone. 

@ Ana - I live in Mission Bay, and couldn't agree more. Sadly - the nice condos have now really shot up in the price. But great suggestion. 

@ Michael - Super helpful response. Which "Tier 2" neighborhoods would you propose are most likely to appreciate. We were close to buying in Potrero but then backed out because of the neighborhood and the fact that it hasn't changed much at all. 

@Kusum Chanrai  

One way to speculate on heavy upside is turning to areas which are soon to be better served by public transportation, for example Chinatown which will soon see the extension of the Muni Metro T Third line through the financial district. A station will be opened at Stockton/Washington with service starting in 2019 so expect the demand of property within walking distance of that station to appreciate in the following years. A great place to educate yourself is the SFMTA website where all the projects they are currently working on are listed.


The other way you could speculate is by following sheer density, such as Mission Bay or Potrero Hill where there are a lot of new developments going up - almost endlessly. The large corporations and REITs will bring transportation to them in some way or another which will spur the desirability and presumably, value.

Ultimately this will be a very long term play for you. So feel free to buy in a neighborhood you like and "ride" it out. Remember you still have to live there! I also like other areas in the lower part of district 5 ie. Noe Valley to Glen Park. These areas propose a very good reverse commute for silicon valley which is always going to be the anchor to SF real estate.

There are many different ways to look at it! Hope this helps!

of course there are many factors to consider. But one negative of mission bay and soma is that because they are building so much, that constantly puts new units on the market. Neighborhoods without that much building have a much more limited supply (although they change less too.) but the difference between living in a condo (a nice one) in mission bay vs say an SFH in glen park or Bernal are vastly different- one more neighborhood feeling, the other more urban. I'd prioritize my lifestyle preference over potential appreciation when deciding between those two different environments. Once you make that decision, you will only be looking at certain neighborhoods anyways.

But as for pure appreciation potential, I'd wager that a good SFH will be a more solid bet than a condo in a tower (different than a condo in a small 2-4 bldg.) But if you do want to speculate on major neighborhood transitions than Bayview and the hunters point shipyard will be the biggest transformations in SF over the next 10 years. We're talking massive echanges. Dog patch is not too far, but dog patch is already $1100-1200 PSF, where Bayview and the shipyard are around $700 PSF.

Unless you really need to live in the higher end hoods, I’d steer to the ones with more upward mobility like glen park, sunset, Richmond, Bernal, etc. Appreciation may be similar, it’s hard to say, but you can get a pretty nice, large  house with amenities for $2-3 mil there. In prime hoods like noe, pacific heights, etc. you’re looking more at a condo or starter home for $2-3 mil. 

I’d pass on renovations unless it’s minor stuff like painting refinishing floors, maybe a kitchen or bath redo. New layouts, moving walls or god forbid an addition...you’ll tear your hair out with SF’s nutty city approvals, and your neighbors will be all in your business if you’re increasing the size of the home. 

Good luck, and keep us posted on how you proceed!

What are the best value areas in San Francisco to buy a home?

Greater San Francisco. Otherwise known as: Oakland and the East Bay. Silicon Valley, if you must. 

The SF Zoo is a good value, however. 

One of my fav clients has lived in a rent controlled SF apartment for about a decade and a half now - I'll leave you to guess how low his rent is. He owns >20 doors in the East Bay (Richmond, San Leandro, Oakland, etc), none with rent control (Sec 8, Costa-Hawkins, a condo in there last I checked, etc). So each year he flips his own landlord the bird, and delivers notices of rent increases to all his tenants. 

I am an investor in SF (own and rent out condos in PH and South Beach) but I live in the South Bay. You have a solid budget and I concur with other posters that the appreciation is a stronger possibility in the hunters point and bay view areas. Unfortunately, if you are looking to live there in the short term (next 5 years) with a family it puts a whole different spin on the tale.
In SF there is a lot to consider given schools, proximity to grocery stores, ease of parking, safety to walk alone at most hours of the day, proximity to restaurants etc. Also consider if you need to be close to the freeways or more in the center of the city. Also it will be worthwhile to explore if you are seeking family centric areas (Noe V) vs more yuppie (lower PH or Marina) areas. Lastly do you prefer a full service modern condo buildings with parking, pool, security, gym etc or more an independent SFH with a yard.

I would personally keep a lifestyle theme more at the center of this decision. Good “branded” areas in SF will always hold value albeit with slower appreciation.

Hi Kusum, I am an Outer Sunset native. Please don't dis my area too much :)

There are a lot of great areas of SF that I haven't seen named. Lake Street (old money), Laurel Heights (near USF campus), Forest Hill and extension with great views, West Portal (muni station, some big lots), St Francis Woods (old money, huge lots), Merced Manor near Lake Merced, and Inner Sunset (demand from UCSF will always be there), Golden Gate Heights (great views), Noe Valley (trendy). It depends if you want a large lot, weather, close to transportation, in walking distance to food and transportation, or don't mind driving. 

I don't think you can go wrong with a SFH for the long term. I feel the same way about this market as you but SFH will always be in demand from those wanting out of the condo life and new SFH are hardly being built in SF. All the areas I named above are in demand for one reason or another. They maybe not as trendy as Pac Heights or Sea Cliff as they are the cream of the crop but your budget will go further.

My final thought is that some homes have a empty first floor that you can expand the livable space easily. A bit harder but still doable is expanding the house in the back if you have a large enough lot or even adding a floor to a house to force appreciate your house if the cost of building is cheaper than the price per sq ft to buy.

Hi Kusum,

Wonderful responses some of these helpful folks gave above so don't want to beat a dead horse but....

I will be operating under a few assumptions:

I am operating under the assumption that you would like a neighborhood that is more or less safe for yourself or a relative to walk around the area with the young ones. For this reason I will rule out HP, Bayview, etc. I was born and raised in SF and although I do see these areas changing quickly, I don't believe it will be quick enough for you to feel safe.

It sounds to me like you are not scared of getting your hands a little dirty and doing cosmetic remodels. Although contractors are definitely extremely spoiled right now and have tons of work and are charging an arm and a leg, you can still find reasonable work by being proactive in 1. Going with contractors to buy the materials so you pay directly and 2. Negotiating on labor costs by interviewing multiple contractors. Of course, remember that you do get what you pay for but you can at least avoid a lot of the price gouging that's going on. 

As an SF native, here are the areas I recommend (considering I don't know where you work) that would meet your criteria of 1. Nice safe family neighborhood 2. potential for appreciation through cosmetic remodel and price appreciation.

1. The Richmond District. It gets a bad rap because it's a bit cloudy, but come on are you kidding me?? Beautiful, large, Edwardian homes, some built over 100 years ago and still as absolutely solid as ever. Many of these need ONLY cosmetic remodels (paint, floors, kitchen, bath, etc.). You have a wonderful family friendly community. You are right next to the beach, golden gate park, golden gate bridge, the presidio, land's end, and much, much more. OK, OK, this is where I grew up so I'm a little biased lol. But also the best public schools in the city. 

2. Forest Hill Extension / Miraloma Park / Sunnyside. Right smack dab in the middle of SF. Most beautiful views of the city. It gets windy here sometimes though. Just a short drive to 280 and 101, very close to Glen Park Bart station. It seems like nobody knows these neighborhoods exist for some weird reason. The homes are built well (much nicer than Glen Park in my opinion), the neighbors are wonderful (still one of those places where people know each other) and room for appreciation (Prices are well below Glen Park for reasons that are beyond my comprehension).

Honorable Mention: Outer sunset. The only reason I wouldn't rank this higher is because those small doelger homes are not built as nice as the Richmond district Edwardians yet are going for almost as much. I think it's just because it's getting that hipster trendiness. 

Those are just my 2 cents ;)

Hi Kusum,

I currently live in Richmond district. I believe Richmond district is one of good option for family in San Francisco. You can get a good duplex for 2~3M. So you can live in one of the unit and rent other unit out. There are good public schools here. Also It is quite close to commute to downtown. The price goes up from land end toward downtown.

@Kusum Chanrai   Congrats on having twins and saving enough to buy a house in the SF!  I just want to bring up the school situation in SF.  I'd highly suggest doing tons of research on it before buying in any neighborhood.  As I've done the research in the past year,  some elementary schools' tuition is on par with Stanford.  

Congrats on the twins, typically better location attracts Better tenant, where as upcoming neighborhoods doesn’t, so your exit strategy comes into play.

I would find a cosmetic fixer. 

With that budget, you have plenty of options. Your first step is to figure out if you're comfortable committing to the full 2-3M  If you decide you want to live in the more prestigious areas, you'll probably need it. 

If you decide you'd rather diversify your risk and spend less on the primary residence, there are plenty of options for that as well. 

In terms of return on money, you're almost always better off purchasing a fixer, and even better if you have the time and patience to build out.  Renovating an existing structure will run around $250/sqft.  Building additional square footage will run $350-$500/sqft depending on your choice of finishes.  With the permitting, it'll likely be at least a year before you can break ground and another six months or more for the work to complete.  With renovated homes going for $900/sqft on the low end, the delta is your forced equity.  

I live in the Parkside along Sunset ave, so I'll make the case for Sunset. If you've ever wondered where all the SF natives are, that's where we are. It certainly isn't the trendiest part of the city, but it's great for families. The areas closer to the beach are definitely hipsterfying. The public schools in the area are all highly rated, and you have several good private schools to choose from as well.  If your kids can test in, Lowell is one of the best high schools in the country.

Location-wise, 36th and 37th ave near Judah and Taraval are the most convenient since they're close to the train lines and have plenty of street parking, which is a rare luxury in SF. 

The biggest downside is that Sunset, Richmond, West Portal areas have the worst micro-climates.  The fog comes out of the ocean from the west and hits those neighborhoods first.  Most mornings I'll get on the train in mist and fog and come out to a sunny FiDi. 

Good luck on your search and congrats on the twins! And feel free to reach out if you have any questions about the city.  I know it pretty well.

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