With rents skyrocketing and prospective renters lining up around the block for open houses, landlords must be making a killing here, right? It turns out that may not be entirely true, at least for landlords who are buying now, due to the high cost of property. According to a new RealtyTrac study of rental returns, San Francisco actually has the third worst returns of any location in the country, following New York City and Eagle County, Colorado, home of Vail. The study looks at the 2014 fair-market rent for a three-bedrooom home in each market and compares it to the median sales price of property. Using these figures, San Francisco landlords are only making about 4% gross yields annually, a pittance compared to the haul of landlords in top areas such as Wayne County Michigan who are walking away with a 30% yield.
According to RealtyTrac's zoomable heat map, most places along the West Coast have low returns for landlords. The Midwest and southern states look more promising. Marin, San Mateo and Santa Cruz counties all join San Francisco in the top ten for lowest rental returns. However, it appears that the rental rates they used are applied across a region: San Francisco's are the same as San Mateo's and Marin's, while in New York the different boroughs are analyzed separately but the same rates are used for Manhattan, Queens and Brooklyn. Regardless, the Bay Area doesn't look like the hottest place to become a landlord right now.
· Best and Worst Markets for Rental Returns [RealtyTrac]