Buying vs. renting in San Francisco is an old-age debate which has no definite answer because it depends on personal preference. Some people prefer renting a house rather than buying while others prefer the opposite. Buying a home is among the biggest investments that one can make in his/her life. It requires you to plan appropriately, save, and be determined as well. Owning a home in the US is costly as it comes with various responsibilities like mortgage payment, property taxes, renovations, and maintenance.
On the other hand, renting a house is a bit hectic. Imagine paying rent monthly to someone else. Calculate the total amount of rent you have been paying since you started living in that house? It is a lot of money. But renting makes more sense to someone who is not ready to deal with maintenance and renovations. Buying or rating a house depends on one major factor, your residential location.
One of the most desirable places to live in the United Sated is San Francisco, California. The city has almost all the social amenities that you may need, therefore making it among the most expensive place for homeowners and renters.San Francisco real estate market is one of the most expensive real estate markets in the country.
Statistics about San Francisco Real Estate
According to the United States Census Bureau of 2013-2017, the median income for individuals is $74 841, and for households is $95265. This value is above the national average income, which is $61, 372. This is a sign that life in San Francisco city is expensive. If you decide to be a homeowner in San Francisco city, you will have to be making $ 129 000. On the other hand, if you want to live as a renter in the city, you would need an income of $188 000.
The price of San Francisco houses is $1.3 average, and its property tax rate after assessment of the home value is 1.16%. In terms of renting, let’s look at the average monthly rate for a two-bedroom in the city. It is approximately $ 4, 500. Put in mind that the mentioned figures do not represent the cost of living in San Francisco (it does not include transportation, food, and other necessities).
Buying a Home in San Francisco
As of April 2019, data from Zillow, a reputable real estate website showed that the average price of purchasing a house in San Francisco is $1, 299,000. San Francisco homes for sale mortgage delinquencies are below the national average, 0.22%. The federal average mortgage delinquencies are 1.1 %. There are three most expensive places in the city, namely: Corona Heights, Haight, and Buena Vista. Buying a home in San Francisco is the best idea that you should buy because it has an array of advantages. First, it is a long term investment, and you will have built equity for yourself and your family.
Secondly, the value of homes in San Francisco keeps on appreciating over time. The value of homes in the city has risen to 3% since 2018, as per Zillow statistics. It is more advantageous if you a mortgage whose rates are fixed. This means that your monthly payments will be predictable. A fixed-rate mortgage will help you have an excellent budget and plan of your money and knowing how much to save for your payments.
Some of the disadvantages of buying a home in San Francisco include property tax. The rate of property tax is averagely 0.8%, and this is lower than the national average, which is 1.19%. According to the Zillow real estate site, homeowners were charged 1.163% of their home values during the fiscal year 2018-2019. This means the average property tax bill for a home whose value is $ 1,375,500 was $ 16,000. Apart from the property tax bill, there are also other costs that you will incur upon buying a house.
Costs like maintenance costs need to be considered because you ought to maintain your home in a condition for it to keep improving its value. Upon buying a house, there are some changes that you might need to make in it. As a homeowner, you will also be the one responsible for utility bills like cooling and heating, electricity, sewer charges, and water.
Renting a Home in San Francisco
Renting in San Francisco is not cheaper in any way though it can come with fewer hassles. As stated earlier that the average rent of a two-bedroom in the city is $4,400, which means you will be spending more than $50 000 annually. For you to be able to rent San Francisco houses, you need to have a high paying job or a business that rewards you handsomely. Renting is costly in San Francisco though renters don’t pay property taxes and other house utilities.
Mind you rents in San Francisco tend to fluctuate depending on the economy if it weakens or strengthens. Landlords in the city can set any rental amount on a vacant unit. The advantage of renting in the town is that landlords are not allowed to increase the rental fees to a certain amount if the unit is occupied. For example, between February and March 2019, the city permitted homeowners to increase their rents by a maximum rate of 2.6%.
- Price-to-Rent Ratio
This is an essential factor that will help you, whether to buy or rent a house in San Francisco. The price to rent ratio enables you to make a better financial decision in the real estate market. To calculate the ratio, take the median sales price and dive it by the average annual rent of the particular home. The San francisco real estate market will favor you to buy the house if the ratio is less than 15. There are many houses for sale in San Francisco. It will favor renting if the ratio is more than 20. If the ratio is between 15-20, you can opt either of the two ways.
- Rent-to-own Concept
This is a special program that entails renting a house with an option or an intention to buy it later. Such homes are called verbhouses, where the owner locks in the rent with the purchase price up to five years. The verbees then make monthly payments for the specified duration and builds his/her equity towards owning the house. This program is meant for individuals who have small credit problems that won’t last for long.