[arcticbull]

Personally I'm a huge fan of 855 Folsom (https://www.redfin.com/CA/San-Francisco/855-Folsom-St-94107/...). It's got that prison-chic aesthetic I love -- kidding, but not kidding -- the architect was Stanley Saitowitz [1]. I nearly bought a unit there. Went with something north of Market instead.

A similar unit is on HotPads renting for $4500/month (https://hotpads.com/855-folsom-street-san-francisco-ca-94107...).

So with 20% down, 30 Year Fixed, 3.905% Interest, you're paying $3353 in mortgage, $903 in taxes, $605 in HOA and $163 in homeowners insurance. Set aside 1%/year for damages and repairs - $74/mth. (total $5100).

66% of your mortgage in the first year and all those fees are tax deductible, so you can deduct a total of $3900/month. [2] Depending on your tax bracket you can expect to get back $1500.

So your total expenses ($5100) minus tax deductions ($1500) is $3600/month, and it's renting for $4500. You could realize $900 free cash flow, assuming you're a well paid tech worker. Not to mention you'd have your renter building equity in your unit for you -- another $1106/month. Depending on how you account for that, your monthly realized profit could be about $2000.

NOTE: That's after-tax cash flow, which is the model I went with when I was running numbers on my own unit, and it depends on your tax bracket. I picked pretty generous numbers so YMMV.

[1] https://en.wikipedia.org/wiki/Stanley_Saitowitz

[2] https://www.irs.gov/businesses/small-businesses-self-employe...

[conanbatt]

Thanks for sharing. It's true that the numbers are reasonably close there. I wonder if this results on the type of property, because my experience looking at this was that the business was banking on appreciation more than cashflow. Even real estate companies have decided to ignore SF (Open door, Unison, etc)

[*] I doubt that you can rent such a unit at 4,500. Its well above market, so it either has high rotation or high closing costs. Also really hope the US cleans up their act with their tax policies on housing.

[arcticbull]

I think many businesses do tend to focus on appreciation over free cash flow because a lot of the FCF in my model comes from tax deductions which aren't super relevant for a business which then distributes all its proceeds. The win here might be whatever the positive take on a lack of economy of scale might be called.

Remember 20%-down mortgages are 5X leveraged investments in real-estate so even a 1% appreciation in the underlying works out to a ~5% ROI. To the extent they break even on rental I could easily see why they'd rather take the appreciation.

OpenDoor would have a heck of a time in SF, buying units sight-unseen. On the one hand it would be lower risk thank Phoenix, but it would tie up an ungodly amount of capital.

Re [*]: Totally. $4,500 is a lot, no question, though in it's favor units at 855 come with deeded parking -- in the building, which is ~$300/month in extra value for downtown condos. They're also new, super-modern lofts, and quite large, and SOMA lofts are very reasonable on a $/sqft level. 10 minutes walk to the IG and FB buildings too. I think factoring in all the +'s it's not uncompetitive with similar units nearby without parking in the low 4000's range.