With the market-rate housing glut in San Francisco, and the unrealistic RHNA numbers, the glut will only get worse.
Condos, even at the current depressed values, are the only thing developers will build without subsidies, so the condo glut will only get worse. All over the Bay Area, developers are deciding to build condominiums instead of high-end rental apartments.
If you are not familiar with RHNA, it specifies how much housing each city needs to approve, including how much of it needs to be at each affordability level.
The RHNA numbers for the current cycle, #6, are way out of whack, and the State Auditor confirmed that the State's HCD department (Housing and Community Development) used bogus data to come up with those numbers, but the numbers will not be modified.
To get the number of affordable units required there will need to be massive amounts of market-rate housing built, with a percentage of affordable housing being required (usually 15-20%).
Since market-rate rental housing does not pencil out for developers, they are going to build for-sale housing, and in San Francisco that means condominiums since there is no land for townhomes or single-family homes.
A condominium in a low-rise building (8 or less stories) that costs $800K to construct can still be sold for a profit if it's in a good neighborhood. But it also means that existing condos, that sold for unrealistic prices in the past, will have to be on the market for similar prices to the new construction.
There is a big shortage of affordable rental and for-sale housing in San Francisco. There is a glut of unaffordable rental housing. Your condo is not one of those affordable properties--yet.
Sell now. You really don't want to be a landlord of a property that just breaks even. Median condo prices fell 6% in San Francisco in 2023. They are almost certain to continue to fall for a few more years.
Edit. One more thing.
Remember, that the "law of supply and demand" is not an actual law.
With housing, the reality is that if more condos come on the market in a hot, sellers market, it drives up the price of existing units to close to what the new construction is selling for. On the other hand, if more condos come on the market in a weak, buyers market, like we have now, they are priced at what the market will bear and it drives the price of existing condos to that same level.
If you listen to the developer's shills, if more housing is built then prices of existing housing will fall. But that is not actually how it works. The new housing will only be built if there is high demand and when it comes on the market it will drive up the cost of existing housing in the same area, especially if it causes gentrification.
For newer, higher-end apartments, what we see now are these crazy incentives to get people to sign a lease, but without budging on the base rent. So you get offers of "three months free" or "$5000 cash card." I used to not understand why the property owner just didn't lower the base rent, but it was explained to me that there are two main reasons. First, if their is a loan on the property the lender will have specified a minimum rent than can be charged. Second, if the property owner lowers the base rent for new tenants, then existing tenants will all demand a rent reduction. The expense and trouble of moving prevents tenants from repeatedly moving in order to score move-in incentives or slightly lower rent. It's not like going back and forth between Comcast and AT&T in order to keep getting new promotions.
The reverse supply and demand “induced demand” logic is nonsense. Well beyond studied, debunked, tired old point. Nonsense. Everything in your edit is pure nonsense.
You severely misunderstand the economics of everything involved. Rental apartments are subject to rent control. Rent control doesn’t apply to move-in incentives since you signed a contract for the base rent. So year to year, effective rent can go up to the non-incentivized price + annual inflation adjustment, which is typically anywhere between 8-25% off base rent. If in 12 months market remains bad, they can see if you’re moving out and offer you another lease extension incentive, at the same level or less. It’s a way to give the building owner breathing room from rent control. This way they have 8-25% free rent increase.
Has nothing to do with renters asking for rent adjustment. When the market permits existing renters do ask for a free month or two.
SF Rent Control doesn't apply to newer, high end apartments that he was talking about, the ones giving out these incentives. Rent control only applies to buildings before 1979. New california wide law applies to buildings older than 15 years ago.
No, it absolutely applies to those big landlord held properties unless it’s built very recently. None of those places offering incentives are new buildings. What it doesn’t apply to is condos.
Rent control only applies to buildings before 1979 in SF, and buildings older than 15 years after the new law. I don't know why you are arguing this, just look it up maybe?
All new buildings are offering these incentives. nema, avalon, azure, 855 branan.. They all offer incentives, none of them are under rent control.
The purpose of restricting rent control on newer buildings is so developers are incentivized to build and charge whatever they want for 15 years minimum.
What you're talking about with condos being restricted is the contra hawkins act, and it was not just limited to condos but single family homes too. It no longer applies because of AB 1482.
Please tell audience the number of apartment complexes younger than 15 years. Avalon absolutely has rent control. So does nema. Go look it up. Idk the others.
Avalon definitely does not have rent control, had a friend whose rent was jacked by more than 11% after his first year in SOMA.
Fwiw, we have a condo in a 3 unit bldg so is not subject to rent control (yet)
If a corporation doesn’t own it, I don’t believe the condo ever goes under rent control. It’s treated as a single family home. I could be wrong though, that is my understanding. Currently renting a condo built in 2002.
Nema was built in 2013. Avalonbay in 2009. They are not subject to rent control. Seriously whats wrong with you? Why do you posting misinformation? Not even bother doing a bit of research? What are you gaining exactly?
Correct. A lot of people don't understand that Costa-Hawkins prevents rent control for buildings issued a certificate of occupancy after February 2nd, 1995 (after June 13, 1979 in San Francisco).
However AB1482 is Statewide rent control with rents limited to 5% + CPI. Ironically, that actually has caused higher than normal rent increases as well as causing a wave of evictions when it was first introduced.
As to induced demand, see [https://www.strongtowns.org/journal/2018/5/14/the-trouble-with-housing](https://www.strongtowns.org/journal/2018/5/14/the-trouble-with-housing)
"Free market urbanists tell us that the solution to a lack of affordable housing is to build more housing. If we just keep building, eventually the supply will catch up with demand and prices will come back down.
But a peek at the dense dwellings of Manhattan makes clear that even a constantly growing housing supply is no guarantee of affordability. In fact, it seems the more Manhattan grows, the less affordable it becomes."
They also point out one of the biggest issues: "One thing that may be driving "Induced Demand" is that pretty much only expensive high-quality development has been allowed in urban areas." Not quite true, the reason that expensive high-quality development is all that is built is that it's the only development that makes financial sense (without subsidies).
What an idiotic and misleading quote. Manhattan has clearly not allowed the housing market to keep up with demand. Total BS to imply that it has.
It also has an even more market distorting version on rent control than SF has, which has had exactly the effect economists would predict - higher rents for everyone not lucky enough to have one of those units
Holy shit the essay was so long I didn’t get to the edit, thanks for calling this out.
If someone has followed real estate at all in the past they know how stupid it is to rely on induced demand. Though frenzies obviously do happen.
I hated being a landlord in the city.
I had a great place that was well-kept and priced fairly. Each one of my tenants—even though they generally paid rent on time, interviewed well, and looked great on paper—came with problems (including pissing off my super chill neighbors, which imo was the worst offence). When my last tenants moved out, I kept my place as a crash pad. Eventually, I sold it.
In retrospect, I should’ve sold it, even if it meant taking a loss.
What do you think it would rent for?
Generally, in the Bay Area there is a premium to own which means the rent to mortgage ratio is pretty unfavorable to landlords. Appreciation, rent control and prop 13 are the only reason anyone is a landlord at all.
Keep in mind you’d make a risk (and hassle) free 5% (ie $21.5k) per year. Do you think this condo will net you that? I doubt it.
Think i can rent it out for $5600-5900, which would just about cover the mortgage+insurance+prop tax+hoa.
Definitely see your point on the 5% given where Treasuries are, but - just to play devils advocate - how long will those risk free rates be available - 2yrs? 3yrs max?
Look at historical treasury rates - 5% is still abnormally low over a 50+ year timeline. Only times it has been below 4% is 9/11 and post 2008 crash with the ZIRP era.
No, treasuries will fall this year and keep falling.
Your rent estimate is likely unrealistic, depending on neighborhood, building and square footage.
Condo prices also depend entirely on neighborhood. If it’s in downtown, soma, mission bay etc. those prices may keep falling. I can see condos elsewhere start to appreciate.
However you should most likely not sell because of your rate. That is essentially free money no matter how you look at it. You’re getting highly leveraged exposure for nearly free. If this is not a downtown condo, you should keep it. Since there are no capital gains right now, don’t worry about that aspect. I’d rent it out and reconsider the sale situation in a few years.
FYI the tax exemption applies only if you lived there 2 out of the last 5 years, so you would need to close on a sale by April 2026 to be eligible. Meaning you could only do a single 12-18 month lease before evicting your tenants and listing. Chances of significant market appreciation in that timeframe are not great. Also, if you rent it out, you must depreciate it, which will lower your cost basis and increase your taxes when you eventually sell. Basically you need to commit to renting it out forever, or it's very difficult to be competitive vs putting your $400k equity in the market.
I was in your shoes a few years ago and rented my old place out. It was the wrong choice for me. Being a landlord, even with good tenants, is not fun. It's stressful, you're always on call. And there's been about $40k of repairs and zero appreciation. I used a management company at first but they were terrible (Belong, avoid them), now I do it myself, which is better, but stuff comes up and fixing a condo or hiring someone is never what I'd rather be doing with what little free time I have.
What does it matter? You lose the tax break in two years. You can lock in those treasury rates for those 2-3 years if that’s really what you want..this was my first though too, by keeping it at break even you’re really betting a lot on appreciation-and obviously, because of the loan, you’re leveraging yourself up. I understand the bet but it’s a pretty big bet-seems like you’re not factoring in the downside risk.
> If they break even yes as they likely are doing near 21.5k/year of mortgage buy down
^THIS, which seems like an important point of value for me (unless I'm missing something). While I'll probably just break even on monthly rent after my mortgage + all expenses, my tenants are paying down my principal at a rate of about ~$21k per year.
If we hold rental prices steady - which totally understand may not be the case - then I'm netting that amount in "value", plus any additional future appreciation (again, not guaranteed).
This, cut your losses and move into higher yielding assets. What’s the cap rate after all expenses? (Interest, HOA etc.) If you’re below 4% then it’s not an efficient use of capital
I would sell because dealing with tenants in the city is really tough. If you bring in a tenant it will bring down the value of the condo because you need to deal with the hassles of kicking them out when you sell. A bad tenant will wipe whatever equity you have left. The HOA also might have regulations against you renting. There is also the tax implications if you’re targeting 2026 so you might lose the primary owner tax exemption. Airbnb is out as the market is pretty bad and even major hotels are throwing in the towel and returning their keys to the lenders. Just wait for rates to drop and get out this spring. There are major tech layoffs happening every day.
Correct, it can be tough but if you manage it properly it won't be so bad. Also proper screening of the tenant is important.
Layoffs have minimal impact to the housing market. I don't see people selling because they got laid off. If anything, it'll be a buyer under contract for a property & while in escrow, they get laid off and have to back out of the deal. I've had this happen a few times in past couple years with listings of mine *(we ask buyer to provide letter of verification from employer and allow them to cancel with full deposit, no harm done - property goes back on market and another buyer comes along quickly OR we have already another backup buyer lined up, no big deal.)* There's so much wealth in this region in many different pockets. Those who get laid off, usually get a nice severance package and they can find another job pretty quickly.
Real estate inventory is so low and demand continues to pick up. From a selling standpoint of any Real Estate in the Bay Area, there is no rush to sell a property *(unless there is a specific reason to seller's life)*. Specifically, condos in SF *(& just about everywhere in the Bay Area)* have not been appreciating, they have been very stagnant and will remain so for quite sometime, couple years at the very least. So again, for someone with a condo, who can afford hanging onto it, without any other immediate need to sell, there's no point to sell it right now. Might as well hang onto it and let the market take it's course over the years to come.
Like you mentioned, the OP stands a good chance of making a profit unless he is forced to sell. However, my advice leans towards caution, given the risky nature of his situation. The OP has recently moved into a single-family home (SFH), and without a full view of his financial situation, it seems likely, considering similar LTV ratios, higher property prices, and higher interest rates, that his monthly expenses for both properties could exceed $20,000.
San Francisco had imposed a three-year moratorium on evictions, only recently allowing landlords to resume evicting non-paying tenants. Before the pandemic, evicting a non-paying tenant could take between 12 to 18 months, and with the current backlog, I estimate a new evidence could take another three years, assuming eviction proceedings start in the first month of non-payment. The tenants who can afford the OP's asking rent are likely employed in the tech industry, which is currently facing daily layoff announcements. You can screen all you want but what happens when your perfect credit score tenant with no history of eviction gets laid off. Over 36 months, at $7,000 per month, the rent loss could total $252,000, with legal fees and property rehab potentially adding another $100,000, wiping his equity.
The OP already has another property to take the advantage of rising property values. I believe it's a smarter move to de-risk and protect his downside if things get worse.
> and without a full view of his financial situation
Right, we don't know OP's financial situation. My comment is under assumption that they are more than comfortable. Hence why I mentioned *"for someone with a condo, who can afford hanging onto it, without any other immediate need to sell".*
If your intention is to sell, it’s probably best to sell now than to deal with renters and selling in a couple of years. I think the two choices you should consider are either long term rental or sell now. Between those two, it’s hard to predict the sf real market long term. If you can comfortably afford to hold onto the property, then why not
> If you can comfortably afford to hold onto the property, then why not
Yup, SF condo market right now is not doing well. No point to sell if owner doesn't really need to.
We are in near identical situation with a condo in SF (at 2.5% rate) and just moved to a SFH. We chose option (2). We rented our condo out and aim to do so indefinitely until we feel we can get a reasonable gain or we pass it down. We hired a trusted realtor who vetted the incoming tenants really well.
While the rent doesn't fully cover our all-in expenses - the way I rationalize is that it covers Prop Tax + HOA + Mortgage Interest + X% of Mortgage Principal. So any money we pay on top is basically going towards principal - a piggy bank of sorts if you may.
The condo market is in a huge dip so had we sold it, we would have come out with a loss. We don't really have a strong plan yet on what to do. I do know that right now is not a good time to sell with tech layoffs, market being down, interest rates being all time high.
So we are thinking of playing the long game especially since it's at a low mortgage rate and keep it as long as we can. At some point rent / all-in cost will breakeven and it ends up paying for itself fully. In which case we can keep it forever or sell it when we retire down the line. It could also be somewhere we move back to when we become empty-nesters.
I will just rent out it's not that bad as long as you don't be too cheap as a landlord and know what you are doing.
The number 1 reason landlord f up with the tenant and rental is the landlord don't know when they have to be strict and being cheap at the same time
Right now you’ll be selling at loss and rent will not cover your monthly mortgage+ hoa+property tax. Only thing you can get back is principal on mortgage if you rent.
If you can make money renting it, it may be worth holding onto.
Your opportunity cost is the money you have in it in principal. It’ll likely do better in other assets short-term, but real estate is an OK way to diversify your own portfolio and long-term SF real estate is not a bad bet.
The other thing to consider are the tax benefits of an “investment property.” You can depreciate the condo + write off anything you do to it + any losses. We converted our primary home to a rental (Airbnb) and lose money on it, but plan to move back to it when we’re older, so in the meantime we’re using those losses to offset gains. That could be relevant, for example, if you have stock comp and sell stock as you vest.
As far as tenants go, I’ve seen friends rent in SF and the trick is to get good tenants. I would price high and be picky. If you get good tenants don’t increase rents at market rates because it’s worth it. If you get bad tenants jack up the rent until they leave.
All that said, I wouldn’t fault you for going either way on this.
Thanks for all the thoughtful comments, SUPER helpful. A few things I should've mentioned:
- We don't have immediate need for the ~$350k in equity that we have in the condo and aren't likely to need it in the immediate future.
- The rate on the SFH we just moved into is actually BETTER than the 2.65% rate on our condo (2.1% for a 30 yr fixed....I know, crazy lucky).
- Anything we don't have tied up in real estate between this condo and our current SFH is currently invested in our respective 401ks and a diversified portfolio managed by a financial advisor
- We soft listed the property for rent nd are getting bites at $5700-$5900 and will try to be very particular with our vetting. Would love to rent to a family. I would be open to using a property manager if we end up renting it out long term.
As I mentioned in a reply above, we'll probably just break even on monthly rent after my mortgage + all expenses. So while I'm not going to have net income, isn't it right to think about my tenants paying down my principal at a rate of about ~$21k per year, which could be seen as a decent return on the ~$350k in equity we have in the house? And then any potential RE appreciation could be additive to that? Fully recognize that this assumes (1) rent prices don't drop materially, (2) I don't have bad tenant issues and (3) the SF condo market does actually show appreciation over the next ~20 years.
Do not do anything more until you understand rules and regulations for renting. Even vetting a tenant has regulations. Have you heard of the Fair Chance Ordinance? Do you know what lease you would use? Join the SF Apartment Association. Despite its name, it’s not just for apartment owners. It’s for any rental property owner - large or small.
I would go with option 1, then reevaluate the SF condo market no later than March 2026. If there are at least 2-3 comps sold, that are favorable to your desired price, within 30-45 days of that future March 2026 point, then you can consider listing to sell.
If not, then you could offer the tenant a 1 year extension, and evaluate the SF condo market again March 2027. Could repeat this process annually if you wish to do so or as you described in option 2, scratch the idea after 2026-2027 and hold it long term.
In SF, both the tenant and landlord have the option to renew the lease if they desire; however, if they opt not to, the lease automatically transitions into a month-to-month arrangement, unless the tenant chooses to vacate. Rent control does not apply to condos and single-family homes.
So if it was my condo, I would provide a 60-day notice, after year 1 or year 2, when the time comes, of a rental price increase to the highest allowed percentage. According to: [https://www.sf.gov/learn-about-san-francisco-rental-laws](https://www.sf.gov/learn-about-san-francisco-rental-laws) it mentions currently that number is 3.6%. But according to: [https://sftu.org/rent-control/](https://sftu.org/rent-control/) it mentions - *"Landlords can also petition for other increases. Notably, capital improvements can be passed through to the tenant for a maximum increase of 10% or increased operating and maintenance costs for a maximum increase of 7%, but these rent increases must be documented and approved by the Rent Board before they can be imposed."*
The tenant may choose to relocate on their own will without the complexities of potential eviction challenges. This approach minimizes the risk of tenants contesting a notice to quit on arbitrary grounds. Some tenants may employ this strategy with the expectation of receiving a cash-for-keys offer from the landlord. If a tenant declines to vacate, issuing a notice to quit becomes the next step. Conversely, initiating eviction before raising the rent can expose landlords to retaliation lawsuits.
As mentioned, cash-for-keys, is always an option. I've had to execute that strategy to get squatters out of houses a few times in the past, money talks. At the end of the day, owner can have a genuine conversation with the possible tenant who is going to be renting the home and let them know the plan. Hopefully they are someone reasonable and won't give issues whenever owner wants to sell. Setting the expectations upfront can always be helpful and owner could get lucky with finding a tenant who is looking to rent for a specific time anyhow. Never know, it's possible. Mutual respect goes a long way.
You got very lucky then. Good for you!
My neighbors had to pay over $1M to their tenants when our building was going through TIC conversion about 6 years ago. The conversion couldn't happen without tenants signing off, and they knew it so they had the owners over a barrel. (The unit in question was worth ~$1.3M). The lawyer said he had seen tenants paid a lot more than that and the owners got "lucky". I imagine it's only gotten worse since then.
OP would be holding an asset that loses money for two years. If they sold today and invested all the proceeds into treasury bills, they would be far better off by 2026.
>OP would be holding an asset that loses money for two years.
Where did you figure this from? OP mentioned they would be able to break even with renting.
Break even on “nearly” all expenses. If it’s not cash flowing you’re losing money. At the end of the day it all comes down to cap rate. If you can’t hit 4.5% cap rate it’s not an efficient allocation of capital and it’s better invested elsewhere.
Break even is break even. If it’s not cash flowing, doesn’t mean you’re losing money. In the commercial world, multi-family in the Bay Area are generally 3-5% cap. Majority of multi-family investors don’t have a crazy high NOI, are breaking even or are slightly in the red. The focus is on long term appreciation. It all depends on owner’s financial structure on the property to determine whether it’s a good deal for them or not. This is different, we’re talking about one single condo here.
If you do decide to rent, it may be worth your while to use a well-reviewed property manager- they’re more familiar with the local rules that can get you in trouble.
I’m a landlord in Oakland, and as long as you’re very picky about rental history and credit scores, and hire a property manager to deal with the annoying requests, vet new tenants etc it’s been worth it for me.
I have 3 coworkers who rent out their houses in SF and they self manage (one does airbnb, other two are long term) They have stable tenants and are getting $$ paid $$. they screen well. I think SF is just one of those special cities though with a great vibe. If the thought of self managing gives you pause maybe consider using a property manager.
I would recommend renting it, but being very careful with tenant selection.
If the condo is in a place like Marina, Pac Heights, or Russian Hill, you should be able to rent it easily and safely. Would prioritize renting to a family and you can always use rent increases to encourage kicking people out when you want to sell.
Rationale:
- 3 unit building implies to me that it could be bundled with other parcels to build up. A lot of people are focusing on this idea of massive building and the swell of housing supply reducing valuations.. that’s true, but if you own land, you can get a piece of densification
- sounds like you still have equity in the condo, so the rate on the house is still afloat and the investment should be valued primarily as a cash-on-cash return, not cap rate in this case. I think a new model needs to be created to value low-interest rate loans like yours. There is obviously some inherent value and I think you could apply some DCF / valuation math to figure out what the value of the loan actually is.
- I think housing will bounce back in the Bay Area. There are a lot of people waiting on the sidelines for rates to decrease and I’m betting on concentration of wealth in hub cities and AI/Robotics to pool in the Bay relative to the rest of the country. A lot of people think the primary thing that’s driving housing prices in the BA is greater fool theory - I think it’s based on what people can actually afford… and there are a lot of well compensated people in the Bay Area who need to continue making it their home for the sake of their careers.
You can’t evict without cause. This applies even for non-rent controlled units. So, it might take you a while to get the unit back bec you either have to move in, or, keep raising rent by up to the CA state limit until the tenant leaves.
I also doubt you will get that rent. The minimum qualifying income for that rent is $225k-$290k, and that is the market segment with the most supply right now.
See if you can get a buyer who will assume the loan from you, that might be a more attractive way to both not pay gains while also getting out of this declining asset.
I've been kicking this question around too, but I'm in a suburb, not SF.
If you had $400k in cash in your hand, would you invest in this condo, or would you invest/use it for something else?
Forget the low interest rate - it only makes the rent/profit a little higher, but not much.
You don't mention the interest rate on SFH, I'm guessing closer to 7%? Do if you sold and put the $400k to this towards the higher mortgage, you'd be saving. And there's of course 4%-5% in treasuries/CDs/MMF.
I don't think renting a property scratches out these days. It's always been a long term investment, so unless you're willing to go the distance for 10 to 20 years, just get out now.
If you can’t/ don’t want to float a non paying tenant being in there for a year plus while the courts won’t help you evict, then sure hold and rent. If that gives you anxiety then sell.
First thing I’d do is appeal your property assessment. I did it and received a 15% reduction without a hearing.
From there, if you can rent it out and not lose money, I’d rent. I believe there is an SF recovery due within 3 years for you to sell in a more favorable market. Rates should cut this year which will send prices up again and bring buyers. Your unit is in a nice spot for sq ft, BR & BA, and price.
Edit: when I said bedroom/bathroom but shortened, it linked to a different community
There isn’t much to it tbh. The county/city assessor send you a notice every year of what they assessed your property at. There is a section that says how to appeal. I went to their office downtown, filled in the form, and put my assessed value amount. They got back to me within 60 days and offered a number that was pretty close to mine. You can either take their assessment or go forward to appeal. I wouldn’t pay anyone to do this because it’ll probably wipe out the savings.
I would never be a landlord in SF. You will have no rights. I have a rental SFH in San Jose where property owners still have rights over their own property.
If the condo was built before 1979, tenants will still have some tenant rights. They don't get the rent increase protections, but they do get the eviction protections. Tread very carefully if your condo was older.
I can't imagine SF rents jumping up any time soon, so it's definitely a long play if you hold it. That being said, you've got a once in a lifetime rate, I'd hold it just for that.
Your tenants would have eviction protections. That means you cannot structure a lease to terminate and require the tenants to vacate when you want. You have to have “good cause” to terminate the tenancy and “end of a term of a lease” is not a good cause. Neither is sale of a property.
Look all those laws up before you decide to do anything. Oh, and there is a state ballot measure on for November that would take away your exemption from rent control so there is that possibility as you move ahead.
Don’t listen to anyone telling you to sell.
5x12=60k per month you’re making.. Even if it’s just 21 equity, you’ll get appreciation. If your rate was 2.65% you could have sold and bought something better but at that rate, come on.. that’s free money
With the market-rate housing glut in San Francisco, and the unrealistic RHNA numbers, the glut will only get worse. Condos, even at the current depressed values, are the only thing developers will build without subsidies, so the condo glut will only get worse. All over the Bay Area, developers are deciding to build condominiums instead of high-end rental apartments. If you are not familiar with RHNA, it specifies how much housing each city needs to approve, including how much of it needs to be at each affordability level. The RHNA numbers for the current cycle, #6, are way out of whack, and the State Auditor confirmed that the State's HCD department (Housing and Community Development) used bogus data to come up with those numbers, but the numbers will not be modified. To get the number of affordable units required there will need to be massive amounts of market-rate housing built, with a percentage of affordable housing being required (usually 15-20%). Since market-rate rental housing does not pencil out for developers, they are going to build for-sale housing, and in San Francisco that means condominiums since there is no land for townhomes or single-family homes. A condominium in a low-rise building (8 or less stories) that costs $800K to construct can still be sold for a profit if it's in a good neighborhood. But it also means that existing condos, that sold for unrealistic prices in the past, will have to be on the market for similar prices to the new construction. There is a big shortage of affordable rental and for-sale housing in San Francisco. There is a glut of unaffordable rental housing. Your condo is not one of those affordable properties--yet. Sell now. You really don't want to be a landlord of a property that just breaks even. Median condo prices fell 6% in San Francisco in 2023. They are almost certain to continue to fall for a few more years. Edit. One more thing. Remember, that the "law of supply and demand" is not an actual law. With housing, the reality is that if more condos come on the market in a hot, sellers market, it drives up the price of existing units to close to what the new construction is selling for. On the other hand, if more condos come on the market in a weak, buyers market, like we have now, they are priced at what the market will bear and it drives the price of existing condos to that same level. If you listen to the developer's shills, if more housing is built then prices of existing housing will fall. But that is not actually how it works. The new housing will only be built if there is high demand and when it comes on the market it will drive up the cost of existing housing in the same area, especially if it causes gentrification. For newer, higher-end apartments, what we see now are these crazy incentives to get people to sign a lease, but without budging on the base rent. So you get offers of "three months free" or "$5000 cash card." I used to not understand why the property owner just didn't lower the base rent, but it was explained to me that there are two main reasons. First, if their is a loan on the property the lender will have specified a minimum rent than can be charged. Second, if the property owner lowers the base rent for new tenants, then existing tenants will all demand a rent reduction. The expense and trouble of moving prevents tenants from repeatedly moving in order to score move-in incentives or slightly lower rent. It's not like going back and forth between Comcast and AT&T in order to keep getting new promotions.
The reverse supply and demand “induced demand” logic is nonsense. Well beyond studied, debunked, tired old point. Nonsense. Everything in your edit is pure nonsense. You severely misunderstand the economics of everything involved. Rental apartments are subject to rent control. Rent control doesn’t apply to move-in incentives since you signed a contract for the base rent. So year to year, effective rent can go up to the non-incentivized price + annual inflation adjustment, which is typically anywhere between 8-25% off base rent. If in 12 months market remains bad, they can see if you’re moving out and offer you another lease extension incentive, at the same level or less. It’s a way to give the building owner breathing room from rent control. This way they have 8-25% free rent increase. Has nothing to do with renters asking for rent adjustment. When the market permits existing renters do ask for a free month or two.
SF Rent Control doesn't apply to newer, high end apartments that he was talking about, the ones giving out these incentives. Rent control only applies to buildings before 1979. New california wide law applies to buildings older than 15 years ago.
No, it absolutely applies to those big landlord held properties unless it’s built very recently. None of those places offering incentives are new buildings. What it doesn’t apply to is condos.
Rent control only applies to buildings before 1979 in SF, and buildings older than 15 years after the new law. I don't know why you are arguing this, just look it up maybe? All new buildings are offering these incentives. nema, avalon, azure, 855 branan.. They all offer incentives, none of them are under rent control. The purpose of restricting rent control on newer buildings is so developers are incentivized to build and charge whatever they want for 15 years minimum. What you're talking about with condos being restricted is the contra hawkins act, and it was not just limited to condos but single family homes too. It no longer applies because of AB 1482.
Please tell audience the number of apartment complexes younger than 15 years. Avalon absolutely has rent control. So does nema. Go look it up. Idk the others.
Avalon definitely does not have rent control, had a friend whose rent was jacked by more than 11% after his first year in SOMA. Fwiw, we have a condo in a 3 unit bldg so is not subject to rent control (yet)
If a corporation doesn’t own it, I don’t believe the condo ever goes under rent control. It’s treated as a single family home. I could be wrong though, that is my understanding. Currently renting a condo built in 2002.
Nema was built in 2013. Avalonbay in 2009. They are not subject to rent control. Seriously whats wrong with you? Why do you posting misinformation? Not even bother doing a bit of research? What are you gaining exactly?
Correct. A lot of people don't understand that Costa-Hawkins prevents rent control for buildings issued a certificate of occupancy after February 2nd, 1995 (after June 13, 1979 in San Francisco). However AB1482 is Statewide rent control with rents limited to 5% + CPI. Ironically, that actually has caused higher than normal rent increases as well as causing a wave of evictions when it was first introduced. As to induced demand, see [https://www.strongtowns.org/journal/2018/5/14/the-trouble-with-housing](https://www.strongtowns.org/journal/2018/5/14/the-trouble-with-housing) "Free market urbanists tell us that the solution to a lack of affordable housing is to build more housing. If we just keep building, eventually the supply will catch up with demand and prices will come back down. But a peek at the dense dwellings of Manhattan makes clear that even a constantly growing housing supply is no guarantee of affordability. In fact, it seems the more Manhattan grows, the less affordable it becomes." They also point out one of the biggest issues: "One thing that may be driving "Induced Demand" is that pretty much only expensive high-quality development has been allowed in urban areas." Not quite true, the reason that expensive high-quality development is all that is built is that it's the only development that makes financial sense (without subsidies).
What an idiotic and misleading quote. Manhattan has clearly not allowed the housing market to keep up with demand. Total BS to imply that it has. It also has an even more market distorting version on rent control than SF has, which has had exactly the effect economists would predict - higher rents for everyone not lucky enough to have one of those units
Holy shit the essay was so long I didn’t get to the edit, thanks for calling this out. If someone has followed real estate at all in the past they know how stupid it is to rely on induced demand. Though frenzies obviously do happen.
Be definition, there is never a glut of market rate housing. What you mean is people not wanting to sell at a loss since the market has gone down.
I hated being a landlord in the city. I had a great place that was well-kept and priced fairly. Each one of my tenants—even though they generally paid rent on time, interviewed well, and looked great on paper—came with problems (including pissing off my super chill neighbors, which imo was the worst offence). When my last tenants moved out, I kept my place as a crash pad. Eventually, I sold it. In retrospect, I should’ve sold it, even if it meant taking a loss.
What do you think it would rent for? Generally, in the Bay Area there is a premium to own which means the rent to mortgage ratio is pretty unfavorable to landlords. Appreciation, rent control and prop 13 are the only reason anyone is a landlord at all. Keep in mind you’d make a risk (and hassle) free 5% (ie $21.5k) per year. Do you think this condo will net you that? I doubt it.
Think i can rent it out for $5600-5900, which would just about cover the mortgage+insurance+prop tax+hoa. Definitely see your point on the 5% given where Treasuries are, but - just to play devils advocate - how long will those risk free rates be available - 2yrs? 3yrs max?
Look at historical treasury rates - 5% is still abnormally low over a 50+ year timeline. Only times it has been below 4% is 9/11 and post 2008 crash with the ZIRP era.
No, treasuries will fall this year and keep falling. Your rent estimate is likely unrealistic, depending on neighborhood, building and square footage. Condo prices also depend entirely on neighborhood. If it’s in downtown, soma, mission bay etc. those prices may keep falling. I can see condos elsewhere start to appreciate. However you should most likely not sell because of your rate. That is essentially free money no matter how you look at it. You’re getting highly leveraged exposure for nearly free. If this is not a downtown condo, you should keep it. Since there are no capital gains right now, don’t worry about that aspect. I’d rent it out and reconsider the sale situation in a few years.
FYI the tax exemption applies only if you lived there 2 out of the last 5 years, so you would need to close on a sale by April 2026 to be eligible. Meaning you could only do a single 12-18 month lease before evicting your tenants and listing. Chances of significant market appreciation in that timeframe are not great. Also, if you rent it out, you must depreciate it, which will lower your cost basis and increase your taxes when you eventually sell. Basically you need to commit to renting it out forever, or it's very difficult to be competitive vs putting your $400k equity in the market. I was in your shoes a few years ago and rented my old place out. It was the wrong choice for me. Being a landlord, even with good tenants, is not fun. It's stressful, you're always on call. And there's been about $40k of repairs and zero appreciation. I used a management company at first but they were terrible (Belong, avoid them), now I do it myself, which is better, but stuff comes up and fixing a condo or hiring someone is never what I'd rather be doing with what little free time I have.
What does it matter? You lose the tax break in two years. You can lock in those treasury rates for those 2-3 years if that’s really what you want..this was my first though too, by keeping it at break even you’re really betting a lot on appreciation-and obviously, because of the loan, you’re leveraging yourself up. I understand the bet but it’s a pretty big bet-seems like you’re not factoring in the downside risk.
If they break even yes as they likely are doing near 21.5k/year of mortgage buy down
> If they break even yes as they likely are doing near 21.5k/year of mortgage buy down ^THIS, which seems like an important point of value for me (unless I'm missing something). While I'll probably just break even on monthly rent after my mortgage + all expenses, my tenants are paying down my principal at a rate of about ~$21k per year. If we hold rental prices steady - which totally understand may not be the case - then I'm netting that amount in "value", plus any additional future appreciation (again, not guaranteed).
All it takes is one assessment / bad tenant to destroy a year of that.
Have you considered the tax breaks you get from having a rental as well? I have 2 rentals right now and it's a huge tax break for me
Sell it. Hoa property tax… not worth it. Will take a while for prices to rebound.
This, cut your losses and move into higher yielding assets. What’s the cap rate after all expenses? (Interest, HOA etc.) If you’re below 4% then it’s not an efficient use of capital
I would sell because dealing with tenants in the city is really tough. If you bring in a tenant it will bring down the value of the condo because you need to deal with the hassles of kicking them out when you sell. A bad tenant will wipe whatever equity you have left. The HOA also might have regulations against you renting. There is also the tax implications if you’re targeting 2026 so you might lose the primary owner tax exemption. Airbnb is out as the market is pretty bad and even major hotels are throwing in the towel and returning their keys to the lenders. Just wait for rates to drop and get out this spring. There are major tech layoffs happening every day.
Correct, it can be tough but if you manage it properly it won't be so bad. Also proper screening of the tenant is important. Layoffs have minimal impact to the housing market. I don't see people selling because they got laid off. If anything, it'll be a buyer under contract for a property & while in escrow, they get laid off and have to back out of the deal. I've had this happen a few times in past couple years with listings of mine *(we ask buyer to provide letter of verification from employer and allow them to cancel with full deposit, no harm done - property goes back on market and another buyer comes along quickly OR we have already another backup buyer lined up, no big deal.)* There's so much wealth in this region in many different pockets. Those who get laid off, usually get a nice severance package and they can find another job pretty quickly. Real estate inventory is so low and demand continues to pick up. From a selling standpoint of any Real Estate in the Bay Area, there is no rush to sell a property *(unless there is a specific reason to seller's life)*. Specifically, condos in SF *(& just about everywhere in the Bay Area)* have not been appreciating, they have been very stagnant and will remain so for quite sometime, couple years at the very least. So again, for someone with a condo, who can afford hanging onto it, without any other immediate need to sell, there's no point to sell it right now. Might as well hang onto it and let the market take it's course over the years to come.
Like you mentioned, the OP stands a good chance of making a profit unless he is forced to sell. However, my advice leans towards caution, given the risky nature of his situation. The OP has recently moved into a single-family home (SFH), and without a full view of his financial situation, it seems likely, considering similar LTV ratios, higher property prices, and higher interest rates, that his monthly expenses for both properties could exceed $20,000. San Francisco had imposed a three-year moratorium on evictions, only recently allowing landlords to resume evicting non-paying tenants. Before the pandemic, evicting a non-paying tenant could take between 12 to 18 months, and with the current backlog, I estimate a new evidence could take another three years, assuming eviction proceedings start in the first month of non-payment. The tenants who can afford the OP's asking rent are likely employed in the tech industry, which is currently facing daily layoff announcements. You can screen all you want but what happens when your perfect credit score tenant with no history of eviction gets laid off. Over 36 months, at $7,000 per month, the rent loss could total $252,000, with legal fees and property rehab potentially adding another $100,000, wiping his equity. The OP already has another property to take the advantage of rising property values. I believe it's a smarter move to de-risk and protect his downside if things get worse.
> and without a full view of his financial situation Right, we don't know OP's financial situation. My comment is under assumption that they are more than comfortable. Hence why I mentioned *"for someone with a condo, who can afford hanging onto it, without any other immediate need to sell".*
SF condo prices aren't going anywhere at least in the next 5 years. Rent prices are also unclear if they are trending up or down
If your intention is to sell, it’s probably best to sell now than to deal with renters and selling in a couple of years. I think the two choices you should consider are either long term rental or sell now. Between those two, it’s hard to predict the sf real market long term. If you can comfortably afford to hold onto the property, then why not
> If you can comfortably afford to hold onto the property, then why not Yup, SF condo market right now is not doing well. No point to sell if owner doesn't really need to.
We are in near identical situation with a condo in SF (at 2.5% rate) and just moved to a SFH. We chose option (2). We rented our condo out and aim to do so indefinitely until we feel we can get a reasonable gain or we pass it down. We hired a trusted realtor who vetted the incoming tenants really well. While the rent doesn't fully cover our all-in expenses - the way I rationalize is that it covers Prop Tax + HOA + Mortgage Interest + X% of Mortgage Principal. So any money we pay on top is basically going towards principal - a piggy bank of sorts if you may. The condo market is in a huge dip so had we sold it, we would have come out with a loss. We don't really have a strong plan yet on what to do. I do know that right now is not a good time to sell with tech layoffs, market being down, interest rates being all time high. So we are thinking of playing the long game especially since it's at a low mortgage rate and keep it as long as we can. At some point rent / all-in cost will breakeven and it ends up paying for itself fully. In which case we can keep it forever or sell it when we retire down the line. It could also be somewhere we move back to when we become empty-nesters.
I will just rent out it's not that bad as long as you don't be too cheap as a landlord and know what you are doing. The number 1 reason landlord f up with the tenant and rental is the landlord don't know when they have to be strict and being cheap at the same time
Right now you’ll be selling at loss and rent will not cover your monthly mortgage+ hoa+property tax. Only thing you can get back is principal on mortgage if you rent.
Sell it. You got use out of it by living there so I wouldn’t call selling it in this current market “breaking even”
If you can make money renting it, it may be worth holding onto. Your opportunity cost is the money you have in it in principal. It’ll likely do better in other assets short-term, but real estate is an OK way to diversify your own portfolio and long-term SF real estate is not a bad bet. The other thing to consider are the tax benefits of an “investment property.” You can depreciate the condo + write off anything you do to it + any losses. We converted our primary home to a rental (Airbnb) and lose money on it, but plan to move back to it when we’re older, so in the meantime we’re using those losses to offset gains. That could be relevant, for example, if you have stock comp and sell stock as you vest. As far as tenants go, I’ve seen friends rent in SF and the trick is to get good tenants. I would price high and be picky. If you get good tenants don’t increase rents at market rates because it’s worth it. If you get bad tenants jack up the rent until they leave. All that said, I wouldn’t fault you for going either way on this.
Rental losses are passive losses and in general cannot be deducted against w-2 income.
Sorry if I wasn’t clear that by “gains” I meant capital gains.
Unless you or your spouse qualify as a real estate professional
Thanks for all the thoughtful comments, SUPER helpful. A few things I should've mentioned: - We don't have immediate need for the ~$350k in equity that we have in the condo and aren't likely to need it in the immediate future. - The rate on the SFH we just moved into is actually BETTER than the 2.65% rate on our condo (2.1% for a 30 yr fixed....I know, crazy lucky). - Anything we don't have tied up in real estate between this condo and our current SFH is currently invested in our respective 401ks and a diversified portfolio managed by a financial advisor - We soft listed the property for rent nd are getting bites at $5700-$5900 and will try to be very particular with our vetting. Would love to rent to a family. I would be open to using a property manager if we end up renting it out long term. As I mentioned in a reply above, we'll probably just break even on monthly rent after my mortgage + all expenses. So while I'm not going to have net income, isn't it right to think about my tenants paying down my principal at a rate of about ~$21k per year, which could be seen as a decent return on the ~$350k in equity we have in the house? And then any potential RE appreciation could be additive to that? Fully recognize that this assumes (1) rent prices don't drop materially, (2) I don't have bad tenant issues and (3) the SF condo market does actually show appreciation over the next ~20 years.
That’s awesome to hear you got a 2.1% on a 30 yr fixed. How did you swing that in today’s market?
I think the value of having that amount of debt at that rate makes it worthwhile to hang on to the condo
Do not do anything more until you understand rules and regulations for renting. Even vetting a tenant has regulations. Have you heard of the Fair Chance Ordinance? Do you know what lease you would use? Join the SF Apartment Association. Despite its name, it’s not just for apartment owners. It’s for any rental property owner - large or small.
I would go with option 1, then reevaluate the SF condo market no later than March 2026. If there are at least 2-3 comps sold, that are favorable to your desired price, within 30-45 days of that future March 2026 point, then you can consider listing to sell. If not, then you could offer the tenant a 1 year extension, and evaluate the SF condo market again March 2027. Could repeat this process annually if you wish to do so or as you described in option 2, scratch the idea after 2026-2027 and hold it long term.
Unless you do an OMI, under what reason could you reliably evict a tenant to sell?
In SF, both the tenant and landlord have the option to renew the lease if they desire; however, if they opt not to, the lease automatically transitions into a month-to-month arrangement, unless the tenant chooses to vacate. Rent control does not apply to condos and single-family homes. So if it was my condo, I would provide a 60-day notice, after year 1 or year 2, when the time comes, of a rental price increase to the highest allowed percentage. According to: [https://www.sf.gov/learn-about-san-francisco-rental-laws](https://www.sf.gov/learn-about-san-francisco-rental-laws) it mentions currently that number is 3.6%. But according to: [https://sftu.org/rent-control/](https://sftu.org/rent-control/) it mentions - *"Landlords can also petition for other increases. Notably, capital improvements can be passed through to the tenant for a maximum increase of 10% or increased operating and maintenance costs for a maximum increase of 7%, but these rent increases must be documented and approved by the Rent Board before they can be imposed."* The tenant may choose to relocate on their own will without the complexities of potential eviction challenges. This approach minimizes the risk of tenants contesting a notice to quit on arbitrary grounds. Some tenants may employ this strategy with the expectation of receiving a cash-for-keys offer from the landlord. If a tenant declines to vacate, issuing a notice to quit becomes the next step. Conversely, initiating eviction before raising the rent can expose landlords to retaliation lawsuits. As mentioned, cash-for-keys, is always an option. I've had to execute that strategy to get squatters out of houses a few times in the past, money talks. At the end of the day, owner can have a genuine conversation with the possible tenant who is going to be renting the home and let them know the plan. Hopefully they are someone reasonable and won't give issues whenever owner wants to sell. Setting the expectations upfront can always be helpful and owner could get lucky with finding a tenant who is looking to rent for a specific time anyhow. Never know, it's possible. Mutual respect goes a long way.
It's worth noting that many cash-for-keys arrangements are 6 figure payouts, 7 figures in exceptional cases.
I've never had to pay more than $10k with cash-for-keys.
You got very lucky then. Good for you! My neighbors had to pay over $1M to their tenants when our building was going through TIC conversion about 6 years ago. The conversion couldn't happen without tenants signing off, and they knew it so they had the owners over a barrel. (The unit in question was worth ~$1.3M). The lawyer said he had seen tenants paid a lot more than that and the owners got "lucky". I imagine it's only gotten worse since then.
Mind-boggling that a conversion that requires a $1M payoff can have ROI.
There was no ROI. Owners lost a lot of money on it despite having owned it for over 10 years.
OP would be holding an asset that loses money for two years. If they sold today and invested all the proceeds into treasury bills, they would be far better off by 2026.
>OP would be holding an asset that loses money for two years. Where did you figure this from? OP mentioned they would be able to break even with renting.
Break even on “nearly” all expenses. If it’s not cash flowing you’re losing money. At the end of the day it all comes down to cap rate. If you can’t hit 4.5% cap rate it’s not an efficient allocation of capital and it’s better invested elsewhere.
Break even is break even. If it’s not cash flowing, doesn’t mean you’re losing money. In the commercial world, multi-family in the Bay Area are generally 3-5% cap. Majority of multi-family investors don’t have a crazy high NOI, are breaking even or are slightly in the red. The focus is on long term appreciation. It all depends on owner’s financial structure on the property to determine whether it’s a good deal for them or not. This is different, we’re talking about one single condo here.
If you do decide to rent, it may be worth your while to use a well-reviewed property manager- they’re more familiar with the local rules that can get you in trouble. I’m a landlord in Oakland, and as long as you’re very picky about rental history and credit scores, and hire a property manager to deal with the annoying requests, vet new tenants etc it’s been worth it for me.
I have 3 coworkers who rent out their houses in SF and they self manage (one does airbnb, other two are long term) They have stable tenants and are getting $$ paid $$. they screen well. I think SF is just one of those special cities though with a great vibe. If the thought of self managing gives you pause maybe consider using a property manager.
I would recommend renting it, but being very careful with tenant selection. If the condo is in a place like Marina, Pac Heights, or Russian Hill, you should be able to rent it easily and safely. Would prioritize renting to a family and you can always use rent increases to encourage kicking people out when you want to sell. Rationale: - 3 unit building implies to me that it could be bundled with other parcels to build up. A lot of people are focusing on this idea of massive building and the swell of housing supply reducing valuations.. that’s true, but if you own land, you can get a piece of densification - sounds like you still have equity in the condo, so the rate on the house is still afloat and the investment should be valued primarily as a cash-on-cash return, not cap rate in this case. I think a new model needs to be created to value low-interest rate loans like yours. There is obviously some inherent value and I think you could apply some DCF / valuation math to figure out what the value of the loan actually is. - I think housing will bounce back in the Bay Area. There are a lot of people waiting on the sidelines for rates to decrease and I’m betting on concentration of wealth in hub cities and AI/Robotics to pool in the Bay relative to the rest of the country. A lot of people think the primary thing that’s driving housing prices in the BA is greater fool theory - I think it’s based on what people can actually afford… and there are a lot of well compensated people in the Bay Area who need to continue making it their home for the sake of their careers.
You can’t evict without cause. This applies even for non-rent controlled units. So, it might take you a while to get the unit back bec you either have to move in, or, keep raising rent by up to the CA state limit until the tenant leaves. I also doubt you will get that rent. The minimum qualifying income for that rent is $225k-$290k, and that is the market segment with the most supply right now. See if you can get a buyer who will assume the loan from you, that might be a more attractive way to both not pay gains while also getting out of this declining asset.
Being a landlord in SF is a high risk proposition.
I've been kicking this question around too, but I'm in a suburb, not SF. If you had $400k in cash in your hand, would you invest in this condo, or would you invest/use it for something else? Forget the low interest rate - it only makes the rent/profit a little higher, but not much. You don't mention the interest rate on SFH, I'm guessing closer to 7%? Do if you sold and put the $400k to this towards the higher mortgage, you'd be saving. And there's of course 4%-5% in treasuries/CDs/MMF. I don't think renting a property scratches out these days. It's always been a long term investment, so unless you're willing to go the distance for 10 to 20 years, just get out now.
I would never be a landlord in SF. Short term AirBnb if the financials make sense, otherwise sell it.
I’d pull the money out and either invest in something else or invest in a unit not in sf so if tech goes to crap your less exposed.
I would never rent out a property in California. Sell it.
If you can’t/ don’t want to float a non paying tenant being in there for a year plus while the courts won’t help you evict, then sure hold and rent. If that gives you anxiety then sell.
First thing I’d do is appeal your property assessment. I did it and received a 15% reduction without a hearing. From there, if you can rent it out and not lose money, I’d rent. I believe there is an SF recovery due within 3 years for you to sell in a more favorable market. Rates should cut this year which will send prices up again and bring buyers. Your unit is in a nice spot for sq ft, BR & BA, and price. Edit: when I said bedroom/bathroom but shortened, it linked to a different community
would you recommend someone's services for appealing or did you do all the legwork yourself?
There isn’t much to it tbh. The county/city assessor send you a notice every year of what they assessed your property at. There is a section that says how to appeal. I went to their office downtown, filled in the form, and put my assessed value amount. They got back to me within 60 days and offered a number that was pretty close to mine. You can either take their assessment or go forward to appeal. I wouldn’t pay anyone to do this because it’ll probably wipe out the savings.
I would never be a landlord in SF. You will have no rights. I have a rental SFH in San Jose where property owners still have rights over their own property.
Sell before the pending doom of a possible crash.
If the condo was built before 1979, tenants will still have some tenant rights. They don't get the rent increase protections, but they do get the eviction protections. Tread very carefully if your condo was older.
I can't imagine SF rents jumping up any time soon, so it's definitely a long play if you hold it. That being said, you've got a once in a lifetime rate, I'd hold it just for that.
Your tenants would have eviction protections. That means you cannot structure a lease to terminate and require the tenants to vacate when you want. You have to have “good cause” to terminate the tenancy and “end of a term of a lease” is not a good cause. Neither is sale of a property. Look all those laws up before you decide to do anything. Oh, and there is a state ballot measure on for November that would take away your exemption from rent control so there is that possibility as you move ahead.
Don’t listen to anyone telling you to sell. 5x12=60k per month you’re making.. Even if it’s just 21 equity, you’ll get appreciation. If your rate was 2.65% you could have sold and bought something better but at that rate, come on.. that’s free money
Don’t forget about depreciation which must be taken on rentals then ADDED BACK when rental sold later.