After visiting over 60 countries, San Francisco is by far the best city int he world to buy real estate as an investment.
Not only is San Francisco one of the cheapest international cities in the world, it is also one of the fastest growing with the highest concentration of big money jobs in the world.
Unlike other expensive cities in the world, San Francisco has a plethora of large companies that pay premium salaries that justify the city's real estate prices. Companies such as: Google, Facebook, Apple, Twitter, Square, Pinterest, Salesforce, Zoom, eBay, Yelp, Clorox, Chevron, and many more companies.
Cost Of Living Index By Cities
As you can see from the chart below, San Francisco was nowhere to be found in terms of the most expensive cities in 2018. Well actually, I did find San Francisco rank at a lowly #34 after looking hard enough.
Fast forward five years, and San Francisco has moved up the ranks. According to the Economist's EIU Worldwide Cost of Living report, San Francisco is now the 8th most expensive city worldwide. Seoul and Osaka dropped off the top 10 ranking, Sydney joined, and the rest of the cities (NYC, LA, Zurich, Paris, Geneva, Copenhagen, Tel Aviv, Singapore, and HK) shuffled around a bit but remain in the top 10.
Meanwhile, San Francisco has one of the largest concentration of multiple six-figure jobs thanks to massive tech companies.
You would think that with amazing weather, world class universities in Berkeley and Stanford, huge companies all around and nation-leading low unemployment, San Francisco would be way more expensive than cities like New York City.
But, San Francisco still hasn't been fully discovered by international money looking for attractive real estate price opportunities. Although, it's certainly not a secret anymore how incredible San Francisco really is.
Further reading: Why Living In San Francisco Is Better Than New York
The Definition Of An International City
An international city is a city where there are large amounts of foreign office hubs, foreign visitors, wealthier immigrants, and foreign property owners.
An easy way to think about an international city is to ask yourself whether you'd consider vacationing there. New Delhi? Absolutely. Karachi or Chicago? Not so much.
An international city is headquarters to major worldwide companies such as Facebook and Apple.
I challenge you to name a single worldwide company based in Vancouver. Yet even Amsterdam, there it is cold for 5 months a year has a median house price that is even more costly than San Francisco's.
San Francisco Is The Best City For Real Estate
It's a mystery with so many high paying jobs in San Francisco, why it is still so cheap with money so fluid.
Maybe people are afraid of large earthquakes, which happen once every 40+ years. I would rather chance having a large earthquake than having hurricanes or tornadoes every single year.
Or maybe people believe SF is so expensive because the media has successfully scared away people at the margin. For 13 years, I had no idea there were homes with ocean views in San Francisco for so cheap until I decided to actually go look.
But San Francisco is so much cheaper in comparison. You can buy a panoramic ocean view, 2,000 square foot, single family home for less than $2 million and still earn the same income.
If you want to buy a 2,000 square foot panoramic water view condo in New York City, the price would easily cost $4 million, or $2,000 per square foot.The same goes for buying ocean view property anywhere else in the world.
Post-COVID, foreigners are looking to buy up U.S. real estate. And one of the main cities the Chinese are buying real estate in is San Francisco.
The Best Place To Buy In San Francisco
By far, the best neighborhood to buy property in San Francisco is Golden Gate Heights. GGH has wonderful single family homes with ocean views. If you can find panoramic ocean views, even better.
GGH is situated roughly 5.5 miles west of downtown San Francisco, where all the major SF-based companies are located. However, GGH is also extremely convenient to all the major companies located south of San Francisco due to easy access to the Highway 1 and 280 freeway.
If you want peace and quiet, a family friend neighborhood, ocean views, massive property price appreciation potential, and convenience, Golden Gate Heights is the best place for international and domestic home buyers.
In addition, San Francisco is undervalued in terms of rent and property prices compared to other major cities in America and around the world. All you have to do is spend hours pounding the pavement and searching online to realize the truth.
The key is to buy your slice of heaven before everybody locally and internationally find out. This is why I'm buying in Golden Gate Heights right now before the world figures out what a great opportunity GGH is. Being able to buy single-family homes with panoramic ocean views for less than $1,100/sqft is a steal!
Large Incomes In San Francisco
The income levels in the San Francisco Bay Area are supportive of San Francisco property prices, unlike many other major international cities. Even with migration to lower cost areas of the country, I think there's first going to be migration to less dense parts of San Francisco first in order to get more space and privacy.
If you want to invest in international real estate, San Francisco is the city to be for the long-term. With new IPOs from Uber, Lyft, Airbnb and more, the area will simply be awash in even more cash and attract even more people.
Invest In Private Real Estate
For those people who want to take advantage of other parts of America, where valuations are cheaper and cap rates are higher take a look at Fundrise and CrowdStreet, two of the largest real estate crowdsourcing companies today. Both are free to sign up and explore.
There are “new” San Franciscos popping up around the country in places like Austin, Houston, and Salt Lake City where valuations are lower than San Francisco and net rental yields are higher.
Fundrise is great because of their private real estate funds. They provide diversified exposure across many properties. Fundrise started in 2012 and now manages over $3.5 billion in assets and has over 350,000 investors.
CrowdStreet is great because they focus on real estate opportunities in 18-hour cities, where valuations are lower and growth rates are higher. I think investing in places like Charleston, SC and Memphis, TN are attractive, especially if there's a great migration shift towards lower cost areas of the country due to the rise of remote work.
About the Author:
Sam worked in finance for 13 years. He received his undergraduate degree in Economics from The College of William & Mary and got his MBA from UC Berkeley. In 2012, Sam was able to retire at the age of 34 largely due to his investments that now generate roughly $250,000 a year in passive income.
He spends time playing tennis, taking care of his family, and writing online to help others achieve financial freedom too.
Sam started Financial Samurai in 2009 and has grown it to be one of the largest independently owned personal finance sites in the world. Join 60,000+ others and sign up for his free private newsletter here.