Have you been keeping tabs on the rental market in San Francisco lately? Spoiler alert: It’s gone bananas!
Vacancy is just 3.5%—half the national average—and median rent rose 11% in June YoY, which is the highest rise nationally. With return-to-office mandates and the AI boom bringing more high‑income demand back to the city, competition is fierce and pricing is soaring!
We’re currently working with several clients who are relocating back to San Francisco after a few years away. When they look for 2-3 bedroom rentals in good neighborhoods (i.e., Marina, Cow Hollow, Pac Heights, Noe Valley, etc.), they are facing an incredibly competitive rental market, with apartments getting multiple applications for over the listing price within 24-48 hours of being on the market!
They’re quickly finding that they need a monthly budget of at least $7k! Meanwhile, the condo market has cooled, with prices still 10–15% below peak levels.
This creates an interesting opportunistic moment where the rent vs. buy equation shifts in favor of ownership for many people.
One of the biggest mistakes that people make when calculating the financial differences between renting vs owning is that they fail to consider:
- the appreciation potential of an owned property, and…
- the tax benefits of homeownership (both annually & at the time of sale).
So, let’s dig in and run an all-encompassing comparison…
BY THE NUMBERS
This means that your monthly mortgage cost = $7,777.41.
When you prorate the property taxes on a monthly basis and add in the HOA fees, this increases to $9,850.75 / month.
So, renting @ $7k/month seems better, right? WRONG!! Keep reading…
Let’s factor in the TAX BENEFITS*
- You can deduct your interest on the first $750,000 of the loan, which amounts to ~$220,000 (over 5 years). Multiplied by a 32% tax bracket, that amounts to $70,400 (over 5 years), or a monthly savings from interest of $1,173.
- You can deduct your property taxes. Now, with the Big Beautiful Bill, this SALT deduction can be up to $40,000. In this case, that would be all of your property taxes. So, $1,573.33 (monthly property taxes) × 0.32 = $503.461
Total Monthly Tax Savings = $1,173 + 503 = $1,689.61
AKA: Net Monthly (After Tax Savings) = 9,850.75 – 1,689.61 = $8,161.14
So, renting @ $7k/month still seems better, right? WRONG!! Keep reading…
Now, we have to factor in, the assumed appreciation on the home, the closing costs to buy and sell, and the portion of your monthly mortgage that is going towards paying down the loan (the “principle”).
Appreciation: Assuming a gain of $160,000, spread over 60 months = $2,666.67/month offset
Principle paydown: Over 5 years is $147,500, spread over 60 months = $2,458.33/month offset
Closing costs:
- Purchase closing costs (2% of $1.6M) = $32,000 → $533/month over 5 years
- Selling closing costs (6% of $1.76M) = $105,600 → $1,760/month over 5 years
NOW…When we combine all components…
Monthly rental equivalent = $8,161.14 + $533 + $1,760 − $2,666.67 − $2,458.33 = $6,329.14/month
Compare this with current rents of $7,000/month for a comparable property, and buying becomes not just a lifestyle choice, but potentially a smarter financial move!
(By the way…we believe 10% appreciation over 5 years to be quite conservative. But, if the home appreciates more than that (or, you hold it longer than that), then these numbers even more strongly favor owning over renting. Real estate should always be considered a long term investment. And, generally, the longer the better. But, we also want to acknowledge the reality that many of our clients hold their homes for around 5 years.)
THE BOTTOM LINE
Right now, renting in San Francisco can actually be MORE expensive than many people think—especially when you look beyond the surface. With condo prices still soft and rents continuing to rise, locking in a purchase could save you money, while building long-term equity.
Plus, buying not only has financial benefits, but it also means you have the freedom to make it your own, which - as they say - is priceless!
Thinking about making the jump from renting to owning?
We are always happy to run a personalized rent vs. buy analysis for your situation and help you understand whether buying today is the right move for you. Regardless of what your personal analysis and goals are, we’re here to help you make a well-informed decision!
*We aren’t tax professionals, and this is not tax advice.
