Why is the cost of renting private rooms in San Francisco Bay Area so cheap?

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pax4235
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Why is the cost of renting private rooms in San Francisco Bay Area so cheap?

Post by pax4235 » Thu Jun 14, 2018 4:44 pm

I am looking at moving to new cities for jobs and looking at Bay Area vs LA vs Houston. I am also a budding real estate investor looking to buy properties in California and Texas to rent out to tenants or do AirBnb. I am surprised to find that the cost of renting a private room in an shared apartment/house is most expensive in LA and almost the same in the San Francisco Bay Area vs Houston! There are many private rooms for rent at $500-$700/mo in both the San Francisco Bay Area and Houston, TX but private rooms are $1000+/mo in Los Angeles.

I was able to do this analysis using Craigslist (Housing --> Rooms and Shares) and limiting the price per month to $700.

Here are my questions:

1. Why are rooms so cheap in the Bay Area and especially when compared to Houston (both areas have many available rooms for rent at $500-$700/mo)? I thought demand was sky high and supply was limited in the Bay Area?

2. Is there limited competition for individual private rooms in general and in the SF Bay Area?

3. Why are the rents not $1000+/mo for private rooms in the SF Bay Area like in many parts of Los Angeles?

4. Why is the cost for renting a private room pretty much the same in the San Francisco Bay Area vs Houston, TX?

5. Another question I have is: Why do people working in the SF Bay Area making 100-200k+ not rent rooms and instead choose to buy a RV/truck to live in? I don't get it... Do they not know rooms are available for less than $700/mo?

http://www.businessinsider.com/google-e ... ot-2015-10

$650 Nice Room in Sunnyvale
https://sfbay.craigslist.org/sby/roo/d/ ... 51138.html

$625 / 113ft2 - Private Room. For Commuter, Professional, or Student (Cupertino)
https://sfbay.craigslist.org/sby/roo/d/ ... 21807.html

$750 Fremont Hub area
https://sfbay.craigslist.org/eby/roo/d/ ... 49555.html

$700 cozy one bedroom, shared bathroom. Great for college student (San Francisco)
https://sfbay.craigslist.org/sfc/roo/d/ ... 07259.html

freebeer
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Re: Why is the cost of renting private rooms in San Francisco Bay Area so cheap?

Post by freebeer » Thu Jun 14, 2018 4:56 pm

A hypothesis: more renters/owners in the SF Bay Area are familiar with and open to the "sharing economy" and thus the supply of private rooms is higher than in LA. After all, AirBnB started in SF, also Uber, etc. If in fact a higher % of household units offer up such rooms, then that increased supply could result in a lower price even if the base rent/purchase price of the home/apartment is higher.

tananaev
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Re: Why is the cost of renting private rooms in San Francisco Bay Area so cheap?

Post by tananaev » Thu Jun 14, 2018 5:45 pm

What you found is absolutely lowest available prices, probably in inconvenient locations or just bad neighbourhoods. Prices for room in good location in San Francisco can easily be $2000+. Average prices in the area are well above $1000.

HornedToad
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Re: Why is the cost of renting private rooms in San Francisco Bay Area so cheap?

Post by HornedToad » Thu Jun 14, 2018 5:52 pm

freebeer wrote:
Thu Jun 14, 2018 4:56 pm
A hypothesis: more renters/owners in the SF Bay Area are familiar with and open to the "sharing economy" and thus the supply of private rooms is higher than in LA. After all, AirBnB started in SF, also Uber, etc. If in fact a higher % of household units offer up such rooms, then that increased supply could result in a lower price even if the base rent/purchase price of the home/apartment is higher.
Honestly it could be anything :)

Counter-hypothesis: Bay Area housing is so crazy expensive that homeowners want the extra income to help pay for their mortgage and are more willing to sacrifice a room for it. Alternatively, demand could be higher in LA due to all the starving artists/actors/etc willing to do anything for their dreams....

WhiteMaxima
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Re: Why is the cost of renting private rooms in San Francisco Bay Area so cheap?

Post by WhiteMaxima » Thu Jun 14, 2018 5:57 pm

The reason is house in SF is so expensive so that the owner would sacrifice privacy in return to cover some of the expense. In the middle of US, not many people would like to let a room. People want their space. In SF, it is too expensive to own your own space. You have to let part of it. There are many competitation. So the price is lower sort of. I see a SFH have three or more different household.
Last edited by WhiteMaxima on Thu Jun 14, 2018 6:09 pm, edited 1 time in total.

inbox788
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Re: Why is the cost of renting private rooms in San Francisco Bay Area so cheap?

Post by inbox788 » Thu Jun 14, 2018 6:05 pm

Are you comparing equivalent rooms? Location? Price/sq. ft.?

ktd
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Re: Why is the cost of renting private rooms in San Francisco Bay Area so cheap?

Post by ktd » Thu Jun 14, 2018 6:08 pm

WhiteMaxima wrote:
Thu Jun 14, 2018 5:57 pm
The reason is house in SF is so expensive so that the owner would sacrifice privacy in return to cover some of the expense. In the middle of US, not many people would like to let a room. People want their space. In SF, it is too expensive to own your own space. You have to let part of it. There are many competitation. So the price is lower sort of.
You nailed it. In SF, a lot of people have to do that to be able to pay the mortgage.

WhiteMaxima
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Re: Why is the cost of renting private rooms in San Francisco Bay Area so cheap?

Post by WhiteMaxima » Thu Jun 14, 2018 6:18 pm

You have to share kitchen and living room. Sort TV series Friends kind of living.

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capitalG
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Re: Why is the cost of renting private rooms in San Francisco Bay Area so cheap?

Post by capitalG » Thu Jun 14, 2018 11:46 pm

Note that LA/Houston are cities and SF Bay Area is a region (city + outlying suburbs) - I am positive you can find some nice <$700 rooms for rent in the various suburbs outside of Houston/LA, likely much nicer than the links you included!

capH
pax4235 wrote:
Thu Jun 14, 2018 4:44 pm
I am looking at moving to new cities for jobs and looking at Bay Area vs LA vs Houston. I am also a budding real estate investor looking to buy properties in California and Texas to rent out to tenants or do AirBnb. I am surprised to find that the cost of renting a private room in an shared apartment/house is most expensive in LA and almost the same in the San Francisco Bay Area vs Houston! There are many private rooms for rent at $500-$700/mo in both the San Francisco Bay Area and Houston, TX but private rooms are $1000+/mo in Los Angeles.

I was able to do this analysis using Craigslist (Housing --> Rooms and Shares) and limiting the price per month to $700.

Here are my questions:

1. Why are rooms so cheap in the Bay Area and especially when compared to Houston (both areas have many available rooms for rent at $500-$700/mo)? I thought demand was sky high and supply was limited in the Bay Area?

2. Is there limited competition for individual private rooms in general and in the SF Bay Area?

3. Why are the rents not $1000+/mo for private rooms in the SF Bay Area like in many parts of Los Angeles?

4. Why is the cost for renting a private room pretty much the same in the San Francisco Bay Area vs Houston, TX?

5. Another question I have is: Why do people working in the SF Bay Area making 100-200k+ not rent rooms and instead choose to buy a RV/truck to live in? I don't get it... Do they not know rooms are available for less than $700/mo?

http://www.businessinsider.com/google-e ... ot-2015-10

$650 Nice Room in Sunnyvale
https://sfbay.craigslist.org/sby/roo/d/ ... 51138.html

$625 / 113ft2 - Private Room. For Commuter, Professional, or Student (Cupertino)
https://sfbay.craigslist.org/sby/roo/d/ ... 21807.html

$750 Fremont Hub area
https://sfbay.craigslist.org/eby/roo/d/ ... 49555.html

$700 cozy one bedroom, shared bathroom. Great for college student (San Francisco)
https://sfbay.craigslist.org/sfc/roo/d/ ... 07259.html

pax4235
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Re: Why is the cost of renting private rooms in San Francisco Bay Area so cheap?

Post by pax4235 » Thu Jun 14, 2018 11:52 pm

capitalG wrote:
Thu Jun 14, 2018 11:46 pm
Note that LA/Houston are cities and SF Bay Area is a region (city + outlying suburbs) - I am positive you can find some nice <$700 rooms for rent in the various suburbs outside of Houston/LA, likely much nicer than the links you included!

capH
The areas that I posted though are in some of the wealthiest parts of the SF Bay Area with some of the best school districts in the nation (Fremont, Cupertino, San Francisco, Sunnyvale). They are close to so many major companies in the SF Bay Area and many of the best schools and businesses in the world. My original post was saying why you can find private rooms for so cheap ($500-700 or just less than $1000) in these areas, especially when compared to similar areas in LA and Houston.

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Re: Why is the cost of renting private rooms in San Francisco Bay Area so cheap?

Post by boglerdude » Thu Jun 14, 2018 11:59 pm

When Bogleheads talk about LA they mean West LA. There's tons of cheap housing surrounding downtown.

pascal
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Re: Why is the cost of renting private rooms in San Francisco Bay Area so cheap?

Post by pascal » Fri Jun 15, 2018 12:01 am

You are kidding right? I would not take up residence in any of those rooms. They are cheap for a reason.
"Never underestimate the ability of a bad situation to get worse...rapidly." Ninegrams

pax4235
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Re: Why is the cost of renting private rooms in San Francisco Bay Area so cheap?

Post by pax4235 » Fri Jun 15, 2018 12:05 am

pascal wrote:
Fri Jun 15, 2018 12:01 am
You are kidding right? I would not take up residence in any of those rooms. They are cheap for a reason.
Are they worse than living in the back of a truck or RV like people are doing right now or living 2-hour drive away during traffic? That's part of my question as well.

pascal
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Re: Why is the cost of renting private rooms in San Francisco Bay Area so cheap?

Post by pascal » Fri Jun 15, 2018 1:02 am

People do those drives because they have a family living that far away and don’t consider the 2 hour away job as permanent.

People who currently live ay the back of their cars or trucks can not afford the room rent.
"Never underestimate the ability of a bad situation to get worse...rapidly." Ninegrams

madbrain
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Re: Why is the cost of renting private rooms in San Francisco Bay Area so cheap?

Post by madbrain » Fri Jun 15, 2018 1:38 am

pax4235 wrote:
Thu Jun 14, 2018 4:44 pm
5. Another question I have is: Why do people working in the SF Bay Area making 100-200k+ not rent rooms and instead choose to buy a RV/truck to live in? I don't get it... Do they not know rooms are available for less than $700/mo?
Is this is a serious question ? I don't know anyone who would be willing to go to such lengths to save money. Only on Bogleheads would someone dream of this. Does one really need to spell it out ?

I'm one of those in the $100-200k income range. I live in a 4700 sq ft home, with great views of the entire bay area, dual air conditioners and heaters, home theater, a hot tub, a 9ft grand piano, 8ft harpsichord, sauna. Was lucky enough to buy the mansion foreclosed during the financial crisis. Our mortgage P&I is $1500/month.

This is actually only a 4 bedroom - there are many rooms that have dedicated purposes other than bedrooms (adds up to 17 rooms). We have considered renting out 2 of the 4 bedrooms. We live in a very nice neighborhood, but it is not central to anything. And 1-2 miles down the road at ground level, in the not-so-nice neighborhood, there are rooms available in the $300 - $500 range. Collecting that amount of money would not be worth it to us. Having roommates means extra costs in terms of utilities, lost privacy, possible extra damage to the home, and reduced ability to have guests when we want to .

It's all about supply and demand. If we could rent each of the 2 free rooms out for $1000 each, yes, we would do it. But at $300 - $500 each, it just doesn't make sense. I got laid off a month ago, and I'm still not actively advertising either room for rent. I don't think the situation will last for too much longer, though. But if it does, I probably would move to a lower COLA and retire instead, rather than have roommates.

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celia
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Re: Why is the cost of renting private rooms in San Francisco Bay Area so cheap?

Post by celia » Fri Jun 15, 2018 2:00 am

First, your sample size seems to be very small (especially if you self-select to look at properties under $700/mo). And you likely aren't familiar with the neighborhoods. So your comparisons are not comparing the same thing.


The #1 reason why rent is less expensive in San Francisco is because they have extensive rent control. Once you occupy a rental, the rent is fixed until you move, then the landlord might be able to increase it. So in an apartment building, everyone is paying different rents depending on when they moved in. This is very problematic when you want to upgrade a unit/apartment or turn a multi-room house that is being used as an apartment into your own residence where you occupy all of it yourself. You can't just kick a tenant out. They have lots of laws/restrictions to protect the tenant.

San Francisco also has a program for buying houses that lower-income individuals must qualify for, then enter a lottery. The program is called Below Market Rate (BMR). A developer who is building multiple units in a condo complex must set a certain number of them aside for people to buy at a lower price, that is controlled by the city. From my understanding of the program, it is like the city owns part of the unit, since when you sell, they control how much you can sell it for since it needs to be sold to another BMR-qualified buyer.

There are many more people looking for housing than what is available. And there are many groups (non-profits?) that fight for the rights of the low income population. This issue also seems to be on the ballot in every election in one form or another. Relatives there often say they have 3 times the propositions to vote on than the rest of California because of the active initiative process there (ie, SF voters collect enough signatures of voters to force something to be put on the ballot).

For example, in the recent elections, these are the propositions that were unique to San Francisco. Two have to do with increasing the tax on commercial rents and one was about having the city defend tenants in eviction lawsuits.

IMO, nothing seems to be controlled by normal supply-and-demand economics there. Rather, it is controlled by politics.

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Re: Why is the cost of renting private rooms in San Francisco Bay Area so cheap?

Post by MossySF » Fri Jun 15, 2018 2:05 am

There's a lot of tech companies that offer everything at work -- in order to make you stay at work longer and do more work for free. You can eat, shower, exercise, get your clothes laundered and so on all on the company campus. I bet a lot of single techies who work in this situation probably only rent rooms for a place to sleep on the weekends.

madbrain
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Re: Why is the cost of renting private rooms in San Francisco Bay Area so cheap?

Post by madbrain » Fri Jun 15, 2018 2:54 am

MossySF wrote:
Fri Jun 15, 2018 2:05 am
There's a lot of tech companies that offer everything at work -- in order to make you stay at work longer and do more work for free. You can eat, shower, exercise, get your clothes laundered and so on all on the company campus. I bet a lot of single techies who work in this situation probably only rent rooms for a place to sleep on the weekends.
Sleep is not just for weekends. Tech companies don't provide a place to sleep on weeknights either.
A few companies have onsite medical or dental, but they are really fairly limited and, depending on your choice of insurer, may not be available at all. I think it's wrong to assume that all techies have no life and no personal belongings they would need space for. That may be the case for some, but hardly for everyone.

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Re: Why is the cost of renting private rooms in San Francisco Bay Area so cheap?

Post by madbrain » Fri Jun 15, 2018 3:21 am

celia wrote:
Fri Jun 15, 2018 2:00 am
IMO, nothing seems to be controlled by normal supply-and-demand economics there. Rather, it is controlled by politics.
That may partially be true of San Francisco, but not so much for the rest of the bay area. Also, I have never heard that rent control ever applied to subletting, ie. individual rooms. I don't think this the rent control really has to with anything with regard to rooms for rents. It just creates a disincentive for renters to move, just like Prop 13 does for homeowners - except that one is statewide.

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capitalG
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Re: Why is the cost of renting private rooms in San Francisco Bay Area so cheap?

Post by capitalG » Fri Jun 15, 2018 9:24 am

I can't tell if this is a serious thread or not. These may be desirable suburbs but deciding whether living in a RV or tiny dingy room to afford living thereis a personal choice - I could save a lot of money if I eat ramen every meal but I choose not to, some people may choose otherwise based on circumstance or life priorities.

capG
pax4235 wrote:
Thu Jun 14, 2018 11:52 pm
capitalG wrote:
Thu Jun 14, 2018 11:46 pm
Note that LA/Houston are cities and SF Bay Area is a region (city + outlying suburbs) - I am positive you can find some nice <$700 rooms for rent in the various suburbs outside of Houston/LA, likely much nicer than the links you included!

capH
The areas that I posted though are in some of the wealthiest parts of the SF Bay Area with some of the best school districts in the nation (Fremont, Cupertino, San Francisco, Sunnyvale). They are close to so many major companies in the SF Bay Area and many of the best schools and businesses in the world. My original post was saying why you can find private rooms for so cheap ($500-700 or just less than $1000) in these areas, especially when compared to similar areas in LA and Houston.

mountain-lion
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Re: Why is the cost of renting private rooms in San Francisco Bay Area so cheap?

Post by mountain-lion » Fri Jun 15, 2018 11:32 am

pax4235 wrote:
Thu Jun 14, 2018 11:52 pm
The areas that I posted though are in some of the wealthiest parts of the SF Bay Area with some of the best school districts in the nation (Fremont, Cupertino, San Francisco, Sunnyvale).
Around the bay area, of those school districts, only Cupertino and maybe Fremont is really considered at the top. Yes, they are very good--no doubt. But if you are gunning for "top schools", then you need Palo Alto or Menlo Park.

Not to bring down those schools districts at all--most school districts would trade places in a heart beat, but if you want to talk about "most desirable in the Bay Area", then you can't mention San Francisco in the next breath.

mountain-lion
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Re: Why is the cost of renting private rooms in San Francisco Bay Area so cheap?

Post by mountain-lion » Fri Jun 15, 2018 1:04 pm

From yesterday's San Jose Mercury News:

Nation’s top three most expensive places for renters: all in Bay Area

https://www.mercurynews.com/2018/06/14/ ... -bay-area/

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unclescrooge
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Re: Why is the cost of renting private rooms in San Francisco Bay Area so cheap?

Post by unclescrooge » Fri Jun 15, 2018 1:32 pm

pax4235 wrote:
Thu Jun 14, 2018 4:44 pm
I am looking at moving to new cities for jobs and looking at Bay Area vs LA vs Houston. I am also a budding real estate investor looking to buy properties in California and Texas to rent out to tenants or do AirBnb. I am surprised to find that the cost of renting a private room in an shared apartment/house is most expensive in LA and almost the same in the San Francisco Bay Area vs Houston! There are many private rooms for rent at $500-$700/mo in both the San Francisco Bay Area and Houston, TX but private rooms are $1000+/mo in Los Angeles.

I was able to do this analysis using Craigslist (Housing --> Rooms and Shares) and limiting the price per month to $700.

Here are my questions:

1. Why are rooms so cheap in the Bay Area and especially when compared to Houston (both areas have many available rooms for rent at $500-$700/mo)? I thought demand was sky high and supply was limited in the Bay Area?

2. Is there limited competition for individual private rooms in general and in the SF Bay Area?

3. Why are the rents not $1000+/mo for private rooms in the SF Bay Area like in many parts of Los Angeles?

4. Why is the cost for renting a private room pretty much the same in the San Francisco Bay Area vs Houston, TX?

5. Another question I have is: Why do people working in the SF Bay Area making 100-200k+ not rent rooms and instead choose to buy a RV/truck to live in? I don't get it... Do they not know rooms are available for less than $700/mo?

http://www.businessinsider.com/google-e ... ot-2015-10

$650 Nice Room in Sunnyvale
https://sfbay.craigslist.org/sby/roo/d/ ... 51138.html

$625 / 113ft2 - Private Room. For Commuter, Professional, or Student (Cupertino)
https://sfbay.craigslist.org/sby/roo/d/ ... 21807.html

$750 Fremont Hub area
https://sfbay.craigslist.org/eby/roo/d/ ... 49555.html

$700 cozy one bedroom, shared bathroom. Great for college student (San Francisco)
https://sfbay.craigslist.org/sfc/roo/d/ ... 07259.html
The first 3 links are not in SF. They are an hour or more away, in the suburbs.
They are also small rooms. There a little demand for that type of room in those neighborhoods, and this is reflected in the price.

Don't know about the 4th link, but it's probably the same.

barreg
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Re: Why is the cost of renting private rooms in San Francisco Bay Area so cheap?

Post by barreg » Fri Jun 15, 2018 1:36 pm

The 4th link is just barely inside San Francisco and not exactly in a desireable area

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Hawaiishrimp
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Re: Why is the cost of renting private rooms in San Francisco Bay Area so cheap?

Post by Hawaiishrimp » Fri Jun 22, 2018 5:39 pm

Because the room sucks. It's that simple.
I save and invest my money, so money can make money for me, so I don't have to make money eventually.

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Rob5TCP
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Re: Why is the cost of renting private rooms in San Francisco Bay Area so cheap?

Post by Rob5TCP » Fri Jun 22, 2018 7:17 pm

Craigslist has a reputation (at least in NY) of fraudulent listings.
The ones that really seem to be good to be true; frequently are.

SheReadsHere719
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Re: Why is the cost of renting private rooms in San Francisco Bay Area so cheap?

Post by SheReadsHere719 » Sat Jun 23, 2018 4:03 pm

celia wrote:
Fri Jun 15, 2018 2:00 am
The #1 reason why rent is less expensive in San Francisco is because they have extensive rent control. Once you occupy a rental, the rent is fixed until you move, then the landlord might be able to increase it. So in an apartment building, everyone is paying different rents depending on when they moved in. This is very problematic when you want to upgrade a unit/apartment or turn a multi-room house that is being used as an apartment into your own residence where you occupy all of it yourself. You can't just kick a tenant out. They have lots of laws/restrictions to protect the tenant.
+1 this is so key to understanding the rental market in SF.

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