In San Francisco, our fluid population sends owners in and out of the city for temporary and sometimes longer-term residence. Many homeowners who have changed jobs or expanded their families are moving on to a home that is larger, more conveniently located or both.
Skyrocketing rents have made the renting option appealing to many of these owners. They become landlords and get a nice return on the home in which they used to live. Many are thrilled with the great rents that they get, and those who bought homes before the market run-up are now reaping the rewards of an appreciating asset that The New York Times calls the best path to wealth available.
This taste of profit then inclines them to consider another investment property purchase. Here’s what you need to know about how your next investment may be different from your current one, especially if you buy in San Francisco:
1. It will be harder to get financing. Lenders have more stringent requirements on investment loans. While your number-crunching makes it look easy, they will be setting a higher bar.
2. The market has gone way up. The numbers on your current investment are wonderful because you bought when the market was much lower. Be ready for some sticker shock when you go out looking now.
3. The financing may not be as appealing. Non-owner occupant rates are higher
4. You may need to put more money down. Lenders look hard at what kind of income a property brings in. If the numbers won’t work with a standard 20 percent down, they will require a higher down payment.
5. You will be subject to rent control for many of the investments you consider. The exception to this rule is properties built after 1978, a reason newer condos are such a popular product among investment buyers right now.
6. It’s harder than it looks. This is especially true if you try to manage the property yourself from a distance. Middle-of-the-night phone calls about a burst pipe and flooded bathroom are no fun if you are 30 miles away from the property you buy. This challenge can be overcome by hiring a property manager, but then there is the added cost of doing so.
Dreaming of San Francisco? Cece Blase offers local advice to San Francisco buyers, sellers and owners– and feeds the dreams of those who wish they could live in Tony Bennett’s ‘City by the Bay.’ Call 415-577-0809 or email firstname.lastname@example.org. www.ceceblase.com