The SF Rental Market – Bubble, Fizz, or Pop

Recent news is filled with stories about the new tech boom in San Francisco and the resulting astronomical rental prices.

Then, there’s the promise of the America’s Cup for short-term leases at sky-high prices. What’s really in the wind for San Francisco landlords? How do you chart the right course now and in the future?

As a long-term San Francisco landlord and forward-looking investor, here’s some perspectives:

1) In the rental market, what you read is old news. This spring’s bubble of high demand and even higher rents is now starting to fizzle. For landlords, it’s time to get realistic about what you can expect in rents, and what renters expect from you.

2) You can’t expect quality tenants if you don’t provide quality. The tech-savvy tenants who can afford the high rents are looking for sleek, sophisticated surroundings that include the latest technology. Wires are out. Smart apartments with digital networks are in. The technorati want to live how they work.

3) Spend money to make money. If you’re riding the wave and getting high rents, it’s time to re-invest in your property and make the improvements to your building that will payout in the future. Think about upgrades that will increase the value of your entire building, not just one unit. New paint, fixtures, upgrades to common areas, and energy-efficient windows will make your units more desirable, regardless of market conditions.

4) If you can’t afford to provide the luxury amenities that attract the big rents, get realistic. Don’t charge them. Know your competition. With an eye on the details, there is a way that you can attract quality tenants who can’t afford the soaring rental prices. Pencil it out. Even with a small budget of one or two month’s rent, you can make improvements that will bring you higher rents and better tenants.

5) With your budget in hand, hire a designer for the day. It’s well worth having a trained eye look at your property and suggest big impact improvements. Make the most of a paint job. Think beyond Navajo beige. Have a designer help you choose colors that can enhance your property inside and out. New, quality fixtures can make a huge difference. Lighting pays a key role in setting the stage for stylish living.

6) Money doesn’t look like it used to. Don’t make assumptions about a potential tenant’s income or credit worthiness by clothes or cars. Hoodies don’t mean a thing (unless you’re Mark Zuckerburg). And, that car, forget about it. Look at the bike. And, don’t forget the bike racks. You’re competing against complexes with shared bike maintenance and storage areas.

Last word, the America’s Cup. It’s just a month away. If you haven’t rented your unit for a princely sum by now, forget about. It was a fleeting moment. Pull up a chair on the beach, pop the cork on the champagne and enjoy the race. Have a great summer.