What your San Francisco building is worth, and what your options are.

For many San Francisco apartment buildings, value begins with the rent roll.

Most rental units in buildings constructed before June 13, 1979 are subject to the city’s rent-control provisions. During an existing tenancy, rent increases are generally limited by the Rent Ordinance. When a lawful vacancy occurs, an owner can generally establish a new initial rent, subject to applicable exceptions.

Over time, that creates a rent roll where each unit can tell a different story. One may be near current market rent while another, occupied by the same tenant for many years, may be substantially below it.

Buyers price that difference.

They look first at the income the property produces today, then at the relationship between in-place rents and current market rents. That is why two otherwise similar buildings on the same block can have materially different values.

Unused allowable increases may also be relevant. San Francisco permits certain annual increases to be banked, but applying a banked increase involves specific eligibility, notice, timing, reporting, and licensing requirements. It should be reviewed tenancy by tenancy rather than treated as automatic.

Our property review starts with the rent roll. We compare each unit with current market rents, examine the building’s existing income, and identify where rent differences may affect valuation.

For questions involving a particular tenancy, rent increase, exemption, or obligation under the Rent Ordinance, we recommend consulting qualified legal counsel. Our role is to show how the building’s income and tenancy profile are likely to be viewed in the market.

An occupied building can be sold. In fact, much of San Francisco’s multifamily market consists of properties with existing tenants.

The tenancy does not disappear when ownership changes, so buyers spend considerable time understanding the rent roll and the rights and obligations attached to each unit.

That typically means reviewing leases, rent histories, tenant records, estoppel certificates when appropriate, operating expenses, service contracts, permits, improvements, and maintenance history.

Good records matter. A buyer who can understand the property quickly has fewer unknowns to price into the transaction.

The tenancy profile matters as well. Long-term and below-market tenancies can influence both current income and a buyer’s view of future income, so they need to be reflected accurately in the valuation rather than treated as a simple adjustment.

Not every sale needs a large public campaign. Depending on the property and the owner’s objectives, a process can range from broad market exposure to targeted outreach to a limited group of qualified buyers.

Preparation does not necessarily mean renovation.

Sometimes the best approach is to address obvious maintenance or safety issues and present the building cleanly. Other times, major improvements are better left to the next owner. An investor may prefer to control the renovation, choose the scope, and capture the opportunity themselves.

The question is whether the work is likely to create more value than it costs or simply make the property easier to sell.

In some cases, the smarter preparation is simply to organize the records, understand the deferred maintenance, obtain estimates where useful, and make sure buyers can clearly see both the property as it stands today and the opportunity ahead.

An inherited San Francisco property often comes with more than real estate.

There may be long-term tenants, decades of maintenance history, deferred decisions, incomplete records, and several family members with different ideas about what should happen next.

The first step is understanding what you own.

What does the building earn today? What are the units renting for compared with the current market? What does it cost to operate? What work is likely ahead? And what might the property be worth in its present condition?

Once those questions are answered, the options become easier to compare.

That may mean leasing vacant units, improving the building’s income or presentation, or preparing it for a sale. Where ongoing management is part of the plan, AMSI can handle that as well.

Inherited property can also involve important tax, estate, trust, probate, and title considerations. Those questions belong with the appropriate CPA and legal advisors.

Our role is on the real estate side: establish the income picture, analyze the market, develop a value range, and help you understand how the property is likely to be viewed by buyers.

When several people have a stake in the decision, having the same facts on the table can make the conversation considerably easier. We are happy to walk through the review with everyone involved, together.

There is rarely one number that determines what an apartment building is worth.

Buyers typically look at the property from several angles.

The income approach examines what the building earns. Gross income can be expressed through a gross rent multiplier, or GRM. Net operating income can be compared with price through a capitalization rate, or cap rate.

The sales comparison approach looks at what comparable properties have actually sold for, including price per unit, price per square foot, location, condition, unit mix, and tenancy profile.

The importance of each measure changes with the property.

Two-to-four-unit buildings can attract both investors and owner-occupants, so comparable sales and the residential characteristics of the property may carry considerable weight.

Larger apartment buildings tend to be evaluated more directly as income-producing investments. Buyers focus closely on NOI, cap rate, rent levels, operating expenses, and the potential risks and opportunities within the rent roll.

A preliminary broker opinion of value brings those perspectives together.

We analyze the building’s income and expenses, compare it with relevant closed sales and competing properties, and develop a value range supported by the market rather than a single metric.

For an income-producing building, the rent roll is one of the most important pieces of the valuation.

But it is not the only one.

Buyers also consider operating expenses, vacancies, unit mix, building condition, deferred maintenance, capital improvements, seismic work, permits, location, financing conditions, and the depth of the buyer pool.

Some of those factors are outside an owner’s control.

Others are not.

Accurate records, a well-understood rent roll, and thoughtful property preparation can make a meaningful difference in how buyers evaluate a property.

Thoughtful preparation does not always mean spending money. Sometimes improving a property before sale creates value. Sometimes the opportunity itself is part of what attracts the buyer.

Knowing the difference is part of the strategy.

A property review can be useful simply to understand where you stand today, what may be affecting value, and how the property could be positioned for the market.

AMSI has served San Francisco since 1970 and today operates from Van Ness Avenue.

Through AMSI and NOVO Real Estate, we work with owners across San Francisco on property management, leasing, investment sales, and real estate strategy.

We also own property ourselves, so we look at buildings from more than one perspective. That helps us understand how a property performs today, where value may be created, and how to position it when the time comes to sell.

Our work spans neighborhoods throughout the city, including Russian Hill, Nob Hill, Pacific Heights, Cow Hollow, the Marina, North Beach, the Mission, the Castro, Hayes Valley, Potrero Hill, Bernal Heights, the Richmond, and the Sunset, as well as mixed-use and commercial properties throughout San Francisco.

We also work with owners and investors elsewhere in the Bay Area.

The market changes from neighborhood to neighborhood and property to property. The starting point is the same: understand the asset, understand the income, and understand how today’s buyers are likely to value it.