BELOW MARKET RATE UNITS IN THE SAN FRANCISCO BAY AREA

9 Replies

Hi All,

I am currently a tenant in the SF bay area, and I am planning to buy a below market rate (BMR) one BR residential property or condo in the SF bay area (San Francisco, Daly city, San Bruno, South San Francisco, and up to Millbrae). 

There are pros and cons, good and bad, of buying a BMR unit. They make me nervous, especially the bad ones.

If you have any experiences in BMR units, would you please share with me your thoughts. 

Thank you in advance.

Can't give you too much advice but  don't be like this guy...

Be aware that San Francisco is beginning to crack down on people who abuse the BMR system. I'll assume that you are an upright person. Best of luck!

Updated 9 months ago

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Hello Andy,

The one thing that concerns me about BMRs in SF is that you will never get to capitalize on appreciation. The mayors office of housing keeps those sales prices low even as the market climbs. It would seem that buying a BMR is like living in your savings account. Hope this one perspective helps. Best of luck to you!

Hi Andy,

Upside:

- You get to feel like a homeowner.

Downsides:

- One of the nicest things about homeownership in the Bay Area is appreciation potential. That goes away with BMR, where the gov't determines sales price.

- Typically if you convert to a rental, that's a no-no.

- Have to literally win the BMR lottery.

The "lottery ticket" is of course free. By all means enter the lottery and see if you "win." But evaluate if it makes sense or not AFTER you've won the lottery, don't hang your hat on it or make it your life plan to win a lottery.

Hi All, 

Thank you all for your thoughts. I still welcome more feedback from you. 

Anyway, I live in Daly City. My main reason of buying a BMR unit is the only unit that I can "afford" it. Secondly, my heart has been broken since my new landlord increased my rent by 42% last year. 

I have one BR BMR unit in mind, and I have already submitted an application last week. Like Chris Mason said, hopefully, I win the lottery. If I win, I don't want to miss the opportunity. Unfortunately, I don't have a buyer agent yet , who is specialized in BMR units. I don't know the process in details.  I would love to have one who can advise me the time line of the process, starting from the date of winning the lottery. The time line will help me to be prepared. Please advise.

The only thing that makes it worthwhile to buy a house in the Bay Area is appreciation. If this is your primary home and you will stay there for a long time, it may be ok but I wouldn't touch it if I have other choices.

Don't the BMR homes also appreciate somewhat as the market does? My understanding is that if you hold it for awhile, you could eventually sell it down the road at BMR but still capture some appreciation. 

In either case, you're buying to have a personal home in this awesome city so if the mortgage is similar to the rent I see the pros of purchasing a BMR. I actually looked into the process but don't qualify as I own a home in SoCal.

From my understanding, to get the benefit on BMR is, only buy BMR if you plan to live there for a very very long time (like forever time), then it is worth to buy it. If not, don’t buy it, like other said, you cannot rent it out, and it does not appreciate much.

One of my mom’s friends bought a BMR long time ago, and very regret it now. Heard that the reason is, she does not live there anymore and cannot sell it at a good price. (Not much appreciation.) she claims that it is not a good investment.

Certainly it is not a good investment since the government want you to buy it for primary residence only.

Originally posted by @Andy M. :

Hi All, 

Thank you all for your thoughts. I still welcome more feedback from you. 

Anyway, I live in Daly City. My main reason of buying a BMR unit is the only unit that I can "afford" it. Secondly, my heart has been broken since my new landlord increased my rent by 42% last year. 

I have one BR BMR unit in mind, and I have already submitted an application last week. Like Chris Mason said, hopefully, I win the lottery. If I win, I don't want to miss the opportunity. Unfortunately, I don't have a buyer agent yet , who is specialized in BMR units. I don't know the process in details.  I would love to have one who can advise me the time line of the process, starting from the date of winning the lottery. The time line will help me to be prepared. Please advise.

It's worth a try if you plan to stay in the Bay Area forever.  

If buying a market rate unit is not an option, a BMR unit seems to be better than paying rent.

Otherwise, you can also consider buying an investment property elsewhere.

I looked at BMRs in SF back in 2008. Different time - prices started to come down so I was able to buy market rate condo in 2009. What was helpful is that I went to BMR workshops and through the workshops got connected with a good loan officer. She connected me with a good RE agent. Also found out about non-profits that did free counseling for first-time home buyers.
Otherwise, it’s weighing the pros and cons. One thing is that HOA fees are not BMR. I remember looking at a BMR unit in downtown SF with HOA fees starting at $600 :)

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