Question on foreclosure properties in San Francisco

**lilbrave** · 01-18-2012, 12:32 AM

I am looking to buy a property in downtown San Francisco. There are a lot of foreclosures, which doesn't make much sense to me. Because the market rental for a one bedroom one bathroom (~850 sqft) in a highrise is about 2500~3000. And that is about the mortgage payment + insurance + HOA etc.

If so, why would people forclose on those properties but not just rent them out?

What may be the possible reasons?

Thanks

**Greg** · 01-18-2012, 06:13 AM

Your numbers work ay today's prices. If they took out equity loans on the properties then they owe more than the rents can carry.

Maybe it is harder to rent them out than you think.

**sfcruiser** · 01-18-2012, 11:16 PM

The rental market just started to get hot again in San Francisco about 3 months ago. Prior to that there were a lot more rentals competing for a limited number of tenants moving to the city.

If you are just calculating the overall cost at mortgage+HOA+insurance, you need to add 20% down payment and taxes, that would bring you into negative cash flow for the size condo currently renting on Berry street for $2850; unless you can compete for tenants willing to pay more for the condo you will be buying a money pit. You need to collect rent at the $3000+ range to make ends meet.

Also, if you look at the rental listings on CL you will notice that the Sunset and Richmond listings are currently in a high supply situation due to the desire to live closer to downtown, but as people figure out that they get more space for less money and only add 30 minutes max to their commutes they move out to the sunset and richmond.