Buying Multifamily in San Francisco?

Question

Some friends and long-time roommates of mine have decided that we want to buy property in SF, and eventually decided on multifamily as it looks like we'll get the most sqft/$ that way, as well as individual units.

Our plan is to buy a 3-unit and split it 3 ways. Of course this has risks involved which will require a good contract in case someone decides to pull out early, etc. But specifically I wanted to know the risks and what to be aware of when buying multi in SF.

I know that SF is a very different beast, and I want to make sure that we are making a smart investment, both as a place to live and as a place that we can sell or rent later on down the road.

I'm thinking that the end of this year will be an ideal timeframe as many landlords will be struggling due to mortgage forbearance ending and looking for a way to unload.

What advice can you give on buying multifamily in SF?

Amit M. · Answer

FYI- TIC to condo conversion only possible for 2 units, not 3+

Tommy Hoang · Answer

Hey @Tyler D'Alessandro, fellow SF resident and multifamily investor here. Listing a few things for you and your friends/roommates to consider.

• - You guys will want to buy a completely vacant triplex since you can only do an owner-eviction on one unit if others are occupied. Even then, owner-evictions are are pause right now.
• - If you do an owner move in, keep in mind that tenant has the right to re-rent that unit if one of you ever moves out.

• - Consider multiple exit strategies as things may change for you and your partners. TIC is one. TIC to condo conversion is another. You have the right idea to hammer out these details early.

• - Multifamily properties can be capital intensive. Consider the cap ex, and where that capital will come from, for things like roofs, maintaining common spaces, or renovating units.

Tyler D. · Answer

I will check this out, thanks for the information.

Albert Ng · Answer

It's much cheaper than buying 3 separate houses. On the other hand, it could get really messy if there's a disagreement in the future.

Amit M. · Answer

TIC

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Darius Ogloza · Answer

You should familiarize yourself with the TIC rules as I suspect you will want to hold the property as tenants in common rather than as joint tenants.  You will need an agreement reflecting who gets to live in which spaces, etc.

Tyler D. · Answer

With all respect did you read my post? We are looking primarily to live in it, not use it as an income property.

Chunyan Song · Answer

Familiarize yourself with the rental ordinance in SF first. Rent control, very strict eviction and buyout rules. If you take a wrong move it can decrease the value of the property.

Good deals on multi family are very rare in Sf. It’s hard to find one that’s even cash flow positive, forget about the cap rates you see in BP discussions in other areas. Unless you put 50% down or something but then if you have that cash there are so many better ways to invest