Real estate investing strategies are often complex, especially for a dynamic city like San Francisco with a variety of property types, ownership structures, landlord/tenant rights and neighborhoods.

Many hands-off investors, especially those who are out-of-state, prefer the safe returns in newer condo complexes, such as neighborhoods like South Beach or Mission Bay for example. This investor class is looking to park their funds into stable properties delivering consistent yearly  returns.

New construction condos bring about certain advantages over more traditional apartment building investing. Rent control should be at the forefront of the decision-making process. In the city, properties built after May of 1980 are not subject to traditional rent control or eviction laws protecting tenant rights.  The advantage is that it minimizes the risk of a tenant failing to pay their rent. That is not the case in older apartment buildings, where strict rent control laws make it difficult to evict tenants, even with just-cause evictions.

Choosing the right neighborhoods to invest in is also critical. Remember the old adage of “location, location, location”? That is especially true for San Francisco, with over 88 different neighborhoods, each with their own characteristics, conveniences and lifestyles.  For owner-occupying residential buyers, this will be very important to consider. For the investor, what’s most important is the proximity to jobs, transportation, and the path of progress.  

The hot spots for jobs in the city are anchored to a few locations. The vibrant Financial District has been the main location of commerce for over a century, located just north of Market Street and starting at Embarcadero. South of Market (SoMa) started making substantial strides forward in the last 10 years, and is now home to many successful technology companies and startups. The neighborhood corner of South Park is home to more than 14 venture capital groups helping to fuel growth in that area. A few blocks further south is the new UCSF Medical Center in Mission Bay, bringing medical and biotech jobs. Mission Bay is also home to the San Francisco Giants and Golden State Warriors, whose stadiums also keep this location thriving.

As the city continues to grow in population and density, the local government has adopted an agenda with a focus on public transportation. There is a network of transportation options consisting of trains and buses servicing the whole city, though the commute is much longer the further out one lives.  South Beach, SoMa, and Mission Bay have the added advantage of freeway access to the East Bay via the Bay Bridge, and south towards Silicon Valley, via the I-80.

Another consideration that newer complexes offer is a higher level of safety and security for owners and tenants.  Amenities are also increasingly popular and appeal to prospective tenants as many consider lifestyle and healthy living when choosing where to live. Some complexes have pools, gyms, yoga/pilates studios, office and business centers, music rooms, club rooms, theater rooms and even pet grooming.

In conclusion, prospective investors should always tour the complexes and neighborhoods they’re considering for investment. Conduct your own due diligence based on your budget, projected return on investment (ROI), and risk tolerance.  Know the buildings and the values in each complex, understand the market trends, and always try to negotiate the best deal possible!