With the real estate market showing signs of a slow recovery, buyers are again looking at rental property as an investment opportunity. After all, prices are down and it seems like great deals are everywhere. But with the overall economy still looking shaky at best, many potential investors are still hesitant. But Nick Scarabosio of Jackson Group Property Management in San Francisco says that if you can afford it, now’s the time. As director of operations for a family-owned company that’s been buying property since 1930 and managing property since 1982, Scarabosio has a unique understanding of both the real estate and rental markets. Here Scarabosio talks about the current San Francisco rental market and whether now is the right time to invest in a rental property.
At Jackson Group, we’re often approached by potential property owners about the local real estate market and whether it’s a good time to buy. Because we’ve been investing in and managing property in San Francisco for four generations, we have unique perspective. We look at rental property from a completely financial point of view - as a comparison of income to expense. If a property breaks even or makes money for you, it’s a good investment no matter when you bought it. In that sense, there really are no good or bad times to buy; there are simply good and bad investments.
That said, I believe strongly that if you have the available cash, now is a fantastic time to invest in San Francisco rental property. Thanks to a nationwide drop in real estate prices, there are some great deals available now. That means a lower mortgage payment - one of the biggest considerations for any rental property owner. Financing continues to be problem for potential investors, though. It simply isn’t readily available. But if you’re able to put together down payment of 30% to 50%, you can definitely save a lot of money on a property that could ultimately become profitable.
Despite a downturn in the economy, the rental market in San Francisco has remained strong. Tenants, however, are becoming more frugal than they’ve been in years past. Not long ago, when the tech boom was at its height, it wasn’t uncommon to find single young professionals living in three-bedroom apartments simply because they could afford them. These days tenants are making more conservative choices and rents have gone down across the city as a result.
The rental market is also benefiting from the troubles in the real estate market. People are tightening their belts across the country, and San Francisco is no exception. The rental market is filled with people who’ve left behind a $3,000 to $5,000 monthly mortgage payment in favor of a $2,000 rent. While $2,000 a month isn’t cheap, it still represents a monthly savings for them. There are some vacancies in San Francisco, largely due to the fact that a number of condominium complexes have sprung up in the last few years. But assuming you have a good product that’s priced fairly, renters are available in every neighborhood.
I believe rental property in San Francisco is always going to be a good investment. The reason is that, as any real estate expert will tell you, no matter what may be happening today, values will always go back up eventually. While you certainly can’t expect to make a major profit on any property within the next five years, if you’re looking at a 20- to 30-year investment on a property that will rent well, you really can’t go wrong.
