Because of very strict pro-tenant regulations in San Francisco and some of the surrounding areas, purchasing multi-unit buildings/rental properties can be a daunting endeavor. More importantly, you can end up with issues with the property that have major effect on value if you don’t know your stuff before buying one.
Here are just a few of the issues that have impact on value:
- Rental Income: This is a huge component of valuation, although one must also look at rent potential and gauge vs current rents to make an informed decision on price. This will have a great impact on the value of a multi-unit / investment property in San Francisco
- Tenant profile: How long a tenant has been renting a unit plays a big part in whether or not a buyer will be able to get them out of the unit, and frequently listing agents don’t supply all the information you need to make an informed decision. We have bought many multi-unit buildings in San Francisco for ourselves, in addition to representing clients, so we have a lot of hands-on experience with these types of buildings. All of our own purchases have included successfully negotiating buyouts including protected tenants, so we know what you have to be aware of and look out for before making a purchase.
- Eviction History: The eviction history of a building can have a huge impact on value. If evictions have taken place there can be potentially severe rental restrictions as well as loss of condo conversion rights. We know how to sift through all the information to find out the true eviction history.
- Number of Units: The number of units in a building has a big impact as well. Two unit buildings have special status as they can bypass the lottery and automatically condo convert as long as both are owner-occupied and have a clean eviction history. Three-six unit buildings can only condo-convert by going through a lottery, which can take a very long time. Eviction history can affect conversion rights on these buildings as well. Currently buildings with seven units or more cannot ever convert.
- Year Built: The year of construction determines whether or not the building is under rent control. The allowable rent increases varies in San Francisco, typically the are 1+% per year if they're under rent control.
We have the experience both as buyer and broker on these types of properties, so we can walk you through the risks and benefits to make sure you are totally informed about the process before you buy. And when you need an attorney’s advice we work with a partner in a local Real Estate law firm to get the added expertise whenever necessary.
Please note that there have been several recent changes to regulations regarding multi-unit buildings that can have huge impact on value. Contact us for more info before you even consider buying this kind of property.