24.1% expense ratio
Market Positioning: At $9.95M, this property offers stable market-rate income with embedded rent growth potential. Capital improvements ($500K sprinkler in progress, furnaces 49% complete) enhance value and reduce future buyer capex. Positioned to appeal to income-focused investors seeking clean operations and consistent cash flow in a premier SF micro-studio corridor.
TARGET BUYER PROFILE
Ideal Buyer Type
Market-rate income investors, small institutional funds, 1031 exchange holders, family offices, or real estate operators seeking stabilized cash flow with modest upside in an A-location urban submarket. Primary appeal: steady 6%+ yield, hands-off operations, rent growth optionality.
Stable Cash Flow
100% occupied, $815K GOI. Zero vacancy in 2024. Market-rate leases provide 4–6% annual growth runway.
Capital Current
Roof (2023, 20–25yr warranty). Sprinkler $500K in progress. Furnaces 49% complete. Deferred capex minimal.
Modest Upside
Leases below market. At turnover: $100–150/month rent lift per unit. Annual opportunity: $12–27K NOI growth.
HOW THE PROPERTY VALUES – TWO SCENARIOS
Institutional buyers and lenders use two different lenses to evaluate multifamily properties:(1) your actual operating performance, and (2) conservative underwriting assumptions they apply industry-wide. Both perspectives are valid and inform the $9.95M list price.
Scenario 1: Your Actual Operating Performance
| Metric | Value |
| Gross Operating Income | $815,238 |
| Vacancy Rate (actual) | 0% |
| Expense Ratio (actual) | 24.1% |
| Net Operating Income | $618,324 |
| Cap Rate | Valuation | $/Unit (46) | $/SF |
|---|---|---|---|
| 7.0% | $8.83M | $192k | $383 |
| 6.63% | $9.33M | $203k | $405 |
| 6.25% | $9.89M | $215k | $429 |
Range: $8.8M – $9.9M | Pricing Target: $9.3M – $9.95M
This reflects how your property actually performs. Your 24.1% lean expense ratio, zero vacancy, and $618K NOI justify the $9.95M list price and appeal to income-focused buyers.
Scenario 2: Market Underwriting (Buyer/Lender Assumptions)
| Metric | Value |
| Gross Operating Income | $815,238 |
| Vacancy Rate (standard assumption) | 5% |
| Effective Gross Income | $774,476 |
| Normalized Expense Ratio | 40% (market standard) |
| Net Operating Income | $464,686 |
| Cap Rate | Valuation | $/Unit (46) | $/SF |
|---|---|---|---|
| 7.0% | $6.64M | $144k | $288 |
| 6.63% | $7.01M | $152k | $304 |
| 6.25% | $7.43M | $161k | $322 |
Range: $6.6M – $7.4M | Conservative Floor: ~$7.0M
Lenders and conservative buyers apply this lens to stress-test every property. It establishes a floor valuation but does not reflect your property's actual market value or performance strength. Your real NOI and expense ratio are better.
2024 OPERATING SUMMARY
| Revenue Source | Amount | % of GOI |
|---|---|---|
| Residential Rental (45 studios) | $733,158 | 89.9% |
| Parking (7 spaces) | $10,440 | 1.3% |
| Laundromat Lease | $71,640 | 8.8% |
| Total GOI | $815,238 | 100% |
| Expense Category | Amount | % of GOI |
|---|---|---|
| Utilities | $109,984 | 13.5% |
| Insurance | $42,189 | 5.2% |
| Elevator Maintenance | $32,919 | 4.0% |
| Licenses & Permits | $7,888 | 1.0% |
| Repairs & Supplies | $3,934 | 0.5% |
| Total Expenses | $196,914 | 24.1% |
CAPITAL IMPROVEMENTS & DEFERRED CAPEX PROFILE
| Project | Status | Timeline | Cost / Remaining |
|---|---|---|---|
| Roof (Elastomeric) | ✓ Complete | 2023 (2 yrs) | $0 | 20–25yr warranty |
| Sprinkler System | In Progress | 2025 (current) | $500K | Fire code compliance |
| Gas Furnaces | 49% Complete | Ongoing | ~$80.5K remaining |
MARKET DATA & COMPARABLE SALES
SECTION A — CLOSED SALES (Recent Market Transactions)
Reference: Recent SF downtown studio building sales. Note: Market data varies by source; these reflect available public records.
avg per unit
avg per SF
cap rate range
SECTION B — ACTIVE LISTINGS (Current Inventory)
Current market inventory. Represents asking prices; not evidence of valuation.
Owner-Facing Comp Narrative
Closed sales support pricing in the high-$9M range for well-located, stabilized downtown studio buildings. Active listings show what's currently for sale. 515 O'Farrell commands premium positioning because of: superior in-place NOI ($618K vs. stress-case assumptions), recent major capital work (roof through 2043, sprinkler in progress), lean 24.1% expense ratio, diversified revenue (laundromat), and zero Section 8. At $9.95M, your property is positioned as a capital-current, income-forward asset—not a discount play—and sits competitively within verified closed-sale metrics.
LAUNDROMAT LEASE TERMS
Lease Structure & Revenue
Laundromat income is secured under an existing lease with a third-party operator. The lease conveys with the property; assignment is not required. Full lease terms available on request.
Annual Revenue:$71,640 (8.8% of GOI) | Space: 2,800 SF | Operator: Professional third-party management | Buyer Entry: Turnkey revenue stream
LOCATION & MARKET DYNAMICS
Tenderloin Downtown Micro-Studio Corridor
515 O'Farrell sits in a high-demand, dense, transit-oriented urban submarket with consistent renter demand and stable occupancy history. Walk Score 99 reflects premier urban positioning. BART proximity, downtown employment, tech worker influx, and compact housing adoption drive ongoing demand for well-maintained micro-studio portfolio in this location.
Rent Growth Opportunity: Current leases below market ($1,800–$2,100 range). At turnover: $100–$150/month uplift per unit realistic. 10–15 unit annual turnover = $12–$27K NOI increase within 18 months.
PRICING STRATEGY & RECOMMENDATION
$221k/unit • $431/SF • 6.22% cap
$9.3M midpoint valuation
Why $9.95M Works: This price sits squarely within verified recent closed-sale comps (ranging $259K–$362K per unit), supported by your verified $618K NOI, active capital program, and market-rate rent growth runway. The list creates strong market momentum, appeals to income-focused institutional buyers, and allows room for competitive bidding without underpricing the asset.
FINAL OWNER SUMMARY
Your property's proven operating performance, stabilized tenancy, and substantial recent capital improvements support a $9.95M pricing strategy.
Your actual metrics—24.1% lean expense ratio, zero vacancy in 2024, $618K verified NOI—combined with proactive capex (roof through 2043, $500K sprinkler in progress, furnace upgrades) position 515 O'Farrell as a capital-current, income-forward asset attractive to institutional investors seeking stable cash flow in a prime SF location. While conservative lenders will underwrite with standard assumptions (5% vacancy, 40% normalized expenses), your actual operating track record and capital stewardship clearly differentiate this property from competing inventory in the market.
