Thinking About Renting Out Your Home in San Francisco? Here is What You Need to Know

San Francisco Property Management - Gordon Property ManagementRenting out your home in San Francisco is not as simple as it may seem. The most important thing to know is that your ability to terminate a tenancy in San Francisco is limited. Single family homes and condominiums are exempt from San Francisco’s rent control ordinance, but they are not exempt from eviction controls. Although the state of California passed the Costa-Hawkins Rental Housing Act which exempts single-family homes and condominiums from local rent control ordinances, it did not exempt homeowners from San Francisco’s just cause eviction provisions. Home owners need to establish what their long-term plans are for the home before they will be able to decide if renting out the home is the right decision.

Do you plan to rent out your home for a short term while you are on assignment in another city or country? Do you plan to move back into your home at some point? Are you planning to move away and sell your home eventually? It is important to know the answers because it is relatively easy – although expensive – to move back into your own home. It is not so easy to have tenants vacate in order to sell a home.

If you plan to move back into your home at some point, you can do what is known as an owner move in eviction. You will probably need a lawyer (which can cost about $2,500) and you need to pay a relocation fee of about $5,100 per tenant (although there is a maximum fee of around $15,000 in most circumstances). The rules allow an owner to do an owner move in eviction as long as they plan to stay in the home for at least 3 years after the eviction. If the tenants have been in the home for at least one year they need to be given at least 60 days notice.

If you plan to sell your home at some point, getting your tenants to move out is not so easy. Stephanie Gordon at Gordon Property Management in San Francisco advises homeowners that they will essentially have to wait until the tenants give notice and move out in order to have an empty house to sell. Because San Francisco limits your ability to terminate a tenancy, you cannot simply ask your tenants to move out once you have decided it is time to sell. And you do not want to sell with tenants in place, you will get a lot less than you would for a home that can be properly cleaned up, staged and marketed by a professional real estate sales agent.

Homeowners can raise the rent on their home as single family homes and condominiums are exempt from San Francisco’s rent control ordinance thanks to the Costa-Hawkins Rental Housing Act. You cannot however raise the rent sky high in the hope that the tenant moves out – that would be a constructive eviction and is not allowed. Any rent raise must be within the fair market rental value of the home.

Owners of single family homes who want to sell their property often make an offer to buy the tenant out of the lease agreement. Many tenants are co-operative and simply want time to find a new home and will accept a reasonable buy out to cover their moving costs. Others tenants are not very co-operative or very reasonable. When analyzing the income you will receive from renting out your home in San Francisco you need to consider what the costs will be in order to eventually move out the tenant.

There are actually 15 “Just Causes” to terminate a tenancy in San Francisco. As noted by the San Francisco Tenant Union they are:

  • Tenant fails to pay rent, bounces checks frequently or consistently pays late.
  • Tenant violates a term in the rental agreement or lease and the owner sends a written notice, but the tenant refuses or does not correct the violation.
  • Tenant is creating or permitting a nuisance in, or substantial damage to, the unit, or interferes with the safety of other tenants or landlord.
  • Tenant is using the unit for illegal purpose.
  • Tenant’s prior rental agreement or leases has ended and the tenant refuses to execute a written extension or renewal of the past agreement for the same period of terms and time.
  • Tenants refuse landlord entry to make repairs or agreed-upon improvements, or to show to prospective buyers.
  • The rental agreement expires and the only person left is an unauthorized subtenant.
  • Landlord or close relative of the landlord wants to do an owner move in (fees included).
  • Landlord seeks to sell a unit which was lawfully converted to a condominium and does so “without ulterior reason and with honest intent.”
  • Landlord seeks to demolish or remove unit from rental housing use, has necessary permits, and does so “without ulterior reason and with honest intent” (fees included).
  • Landlord seeks temporarily to remove the unit from housing use to carry out “capital improvements or rehabilitation,” has necessary permits, and does so “without ulterior reasons” (fees included).
  • Landlord seeks to carry out “substantial rehabilitation,” has necessary permits, and does so “without ulterior reason and with honest intent” (fees included).
  • Landlord seeks to withdraw from housing use all the units in the building or a unit detached from another structure on the same lot, pursuant to the “Ellis Act.”
  • Landlord seeks in good faith to temporarily recover possession of the unit for less than 30 days solely for the purpose of abating lead paint problems, as required by the San Francisco Health Code.
  • Landlord seeks to recover possession in good faith in order to demolish or to otherwise permanently remove the rental unit from housing use in accordance with the terms of a development agreement entered into by the City under Chapter 56 of the San Francisco Administrative Code.

For more information on rules and regulations: City and County of San Francisco Rent Board

Homeowners should also consider the cost of professional property management when renting out their home. It is extremely helpful to have someone local to represent your interests when dealing with tenants in San Francisco. If you are getting top dollar for your home then your tenants are going to expect prompt attention to their maintenance and repair requests. Stephanie Gordon at Gordon Property Management in San Francisco charges 6% of the monthly rent for full service property management (there is however a minimum fee of $200 a month). Additionally homeowners pay a leasing fee of 50% of one month’s rent for Gordon Property Management to place a tenant in the home.

 

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One Response to “Thinking About Renting Out Your Home in San Francisco? Here is What You Need to Know”

  1. Chris Hermanski June 14, 2013 at 12:27 pm //

    Well Said! Choosing rental property is a very difficult thing to do. Our newest blog is on this exact topic so take a look and let me know what you think

    http://blog.mainlander.com/how-to-portland-investment-property-find-good-rental-home/

    Chris

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