Thinking of a condo investment in the City? The short term corporate rental market has been hot in San Francisco over the last 18 months, and you can profit from this trend. Owners love the flexibility of being able to use their investment when they want and having income as well as circumventing issues with long term tenants. I wanted to really get into specific details so you can purchase the right property in San Francisco to maximize your profits with this business model.
How does it work? As with all real estate investments, buy the right property that will best serve this business model. Keep your target market in mind — busy professionals who want the City “experience,” most require parking and a location close to downtown. A one bedroom with parking, washer/dryer in unit and some amenities is ideal in the Financial District, or North Waterfront. City and or water views can also add to the desireablility, but are not essential, and there are other neighborhoods that do work well, such as the Marina.
Not all buildings are created equal for short term rental profits. Many CC&R’s — the rules mandated for owners in a condominium complex — stipulate the terms under which owners can rent out their unit, and stock cooperatives, although rare in the City, do not allow rentals at all. Be sure to look carefully through these documents when considering a purchase, specifically for a “30 day minimum stay” policy.
Buildings that work best for this model in San Francisco are the Parc Telegraph, The Baycrest, Portside and Hills Plaza. The units in these buildings have been booked 98% over the last year. Stay away from buildings with a 6 month minimum, or more, on rental restrictions, which include The Towers, The Beacon, and most of the newer buildings.
Remember to budget about $15,000 to furnish the unit and completely supply it with everything from an alarm clock to hangers. Draft a design saavy friend to help if you decide to furnish and decorate on your own — futon sofas and grandma’s cast off furniture won’t cut it with this well-heeled group, and won’t get your unit rented.
Sign up with a local firm such as AMSI (www.amsires.com) to manage the booking, cleaning, and bookkeeping. AMSI also allows owners to view their bookings online and make reservations for when they’d like to use their property. AMSI also offers staging should you need help with that.
The company will assess your property and recommend a monthly owner return. You can expect $2300+ per month for a well appointed Parc Telegraph one-bedroom with a peek-a-boo view, $1900 for a junior 1 bed in the Portside and $3000-3300 in the Hills Plaza, and $1750 for a similar Baycrest unit. The Bridgeview at 400 Beale Street also books about 98% of the time with an average owner return of $2,000 per month for a 1 bedroom. And 88 Townsend has just changed their CC&Rs to allow for a 30 day minimum stay, so stay tuned for stats on this building.
Figure on spending upwards of $530,000 for an average 1 bed/1bath in the Baycrest, and more for a view unit in pristine, upgraded condition. An average Hills Plaza unit will run about $820,000 for a one bedroom over 1000 sq ft. Recent Parc Telegraph sales are running about $500,000 for such a unit, while in the Portside building a junior 1 bed — the best performing type of property for this business model — can be had in the range of $499,000-$512,000. Currently there is a 1 bedroom at the Bridgeview being marketed for $799,000.
One caveat is that the owner return is not guaranteed; if the unit is not booked for a period of time there is no return. You can offer an incentive of $100-$200 to the booker who secures a reservation to encourage the booking of your unit before others.
Finally, work with a realtor who is familiar with this business model to identify the right property. Happy investing!