It is undeniable that San Francisco is a great place to live. Vibrant neighborhoods, an exceptional art and cultural scene, fantastic restaurants, world-class shopping and a stunning natural landscape have all helped San Francisco secure a place among the top cities in the country. With the release of the All Property Management Q2 2014 Rental Ranking Report, the City by the Bay can also add being the No. 1 city in the region – and No. 3 in the country – for rental real estate investment to its list of accolades.
The Q2 2014 Rental Ranking Report looks at metrics including vacancy rates, capitalization rates, home value appreciation, annual job growth, rental rate variance, and average days a property sits on market for 75 Metropolitan Statistical Areas to determine the top U.S. cities that are poised to give investors the highest return on their rental real estate investment. San Francisco took the top spot regionally, beating out cities such as San Jose, Seattle, Denver, and Los Angeles, while coming in 3rd only to Grand Rapids, MI (No. 1) and Poughkeepsie, NY (No. 2) in the country.
San Francisco Boasts High Rental Rate Variance to Secure Top Ranking
With rising San Francisco rental rates a main topic of conversation in the community, it will come as no surprise to locals that the city does quite well in the rental variance metric. In fact, with an 8.44 percent increase in year-over-year rental rates, San Francisco takes the No. 1 spot for rental variance among the 75 cities studied, according to the report. While performing generally well in most categories, this rental rate variance certainly helped San Francisco clinch the top regional spot.
San Francisco also boasts one of the lowest vacancy rates in the report at 4.9 percent (giving it a 10th place ranking in the country) and a good home value appreciation rate of 4.95 percent year-over-year. What might surprise you, however, is the city’s relatively low capitalization rate. The “cap rate,” which compares average property value to average rental rates to determine how profitable a rental may be, is 4.07 percent in San Francisco. This is the second-smallest cap rate in the report. By comparison, Grand Rapids, the No. 1 ranked city in the U.S., offers a cap rate of 9.64 percent. The low cap rate is partially fueled by San Francisco’s high property values.
If you’ve been sitting on the fence toying with the idea of buying San Francisco rental real estate, the All Property Management Q2 2014 Rental Ranking Report suggests you should make a move. Opportunity is waiting – will you take advantage?
This is a guest post from All Property Management.
Founded in 2004, All Property Management helps property owners maximize their rental income potential by connecting them with the largest network of property management services on the Internet. As part of that work we track a number of different metrics, from rental vacancy rates and home values to regional job growth, for 75 different metro areas in 5 regions of the country. We use that data, along with input from our nationwide network of over 5,000 property managers, to produce our quarterly Rental Ranking report, which measures a city’s attractiveness for real estate investment.