SF Bay area high priced neighborhoods produce poor rental return

If you purchase a home to rent out for income. Think twice where you purchase.   In pricey areas like San Francisco Bay area the rents are high but home prices are even higher.

Rents are rising faster than median home prices in nearly more than half of the US cities.  On national level the average annual cap rate is 9.4% (rent/home prices).  Assuming there is a 5% appreciation rate the cumulative investment return would be 14.4%.  This is probably better than buying REITs which has been attaining 6.5% return with a service fee and restrictions on when to sell .

The area that provides low below the US average rate is in Washington DC. While the rest four are all in San Francisco Bay Peninsula. As a realtor I know these counties homes have appreciated a lot less than past quarters as market seem to have maxed out.

Here are the top five counties with the highest returns. There are also some home appreciation rate associated with homes. 

It appears the single family rental market has been cherry picked over. It is harder and harder to identify good markets. In South San Francisco Bay people are willing to commute longer going to South Santa Clara County and East Bay going north to Fremont to find deals.

* Source: Realty Trac uses average rent divided by median home prices in the county and compare to other areas.

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Sam Shueh Realtor

 I've called San Francisco South Bay home for over 37 years. We love this area and all it has to offer, and I enjoy sharing what I know about homes.  I documented in several books about Silicon Valley history. I have much expertise in real estate...please give me a call.    Silicon Valley Realtor Sam Website                                                                                                (Four-O-Eight)  425-1601