• HomeUnion recently released its Bay Area Single-Family Rental Investment Report.
  • It revealed that the best local investment conditions were to be had in Oakland.
  • The overall report shows that San Francisco proper has the lowest cap rate of the big metros measured.

Ever wanted to get in on the hot real estate market in the Bay Area, but wondered where was the best spot to park your money there?

Wonder no longer.

HomeUnion, an online real estate investment management firm with a focus on value investing in single-family rental (SFR) properties did all the homework for you.

The company recently released its Bay Area Single-Family Rental Investment Report. It revealed that the best local investment conditions were to be had in Oakland.

Cap rates for SFR homes in Oakland average 3.9 percent, In Oakland, high occupancy rates are expected to push average single-family rents up 4.5 percent this year to $2,634 per month.

Last year, rents soared 9.4 percent.

San Francisco cap rates are also on the lower side, coming in at 2.7 percent. Those cap rates were found to be the lowest for any metro in the country. Rock-bottom cap rates for the region were found in Berkeley which registered 2 percent.

Cap rates are the relationship between an investment property’s net operating income (rents minus expenses) and the market value of the property.

Oakland’s median single-family rental home sales price is $420,000. That’s the lowest price in the cities in the Bay Area in this survey.

“SFRs in the Bay Area are attractive though yields remain very low. Single-family homes are almost entirely an appreciation and capital preservation play, rather than a cash-flowing asset,” said Don Ganguly, CEO of HomeUnion, in a statement.

Ganguly suggests that investors who seek yield look to cities in the Southeast and Midwest offer much higher returns than Bay Area properties and are also outperforming the S&P 500.

Based on cap rates, the top major SFR investment markets in the Bay Area are:

City Cap Rate (percentage):

Year-End 2015

Median Sales Price:

Year-End 2015

Avg. Rent:

Year-End 2015

Oakland 3.9 $420,000 $2,634
Emeryville 3.4 $440,000 $2,595
San Jose 3.3 $610,000 $3,060
San Mateo 2.8 $880,000 $3,831
San Francisco 2.7 $1.19 million $4,893
Berkeley 2.0 $910,000 $2,956

“Other asset classes underperformed in 2015, while single-family rental investors saw healthy returns in terms of income and appreciation in markets across the country,” explained Steve Hovland, manager of HomeUnion’s research services, in a statement.

“Favorable supply and demand fundamentals and shifting views about renting among Millennials and seniors, created increased occupancy rates, which resulted in higher rent prices.”

For the curious, here are the highest cap rates that Oakland across the nation:

Metro Area Cap Rate (percentage)
Memphis 7.3
Oklahoma City 6.9
Pittsburgh 6.4
Cincinnati 6.4
Houston 6.1
Indianapolis 6.0
Cleveland 5.9
Baltimore 5.9
Milwaukee 5.9
Tampa 5.9

Email Kimberley Sirk.

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