What is the current San Francisco apartment cap rate?
A cap rate is annual net operating income divided by price, before financing. Use the following evidence to choose and question comparables, then reconstruct the income a buyer can collect.
- Q3 2026 published cap
- 5.43%
- Quarterly change
- -3 bps
- Annual change
- -58 bps
One series, two comparison periods
| Q3 2025 | Q2 2026 | Q3 2026 |
|---|---|---|
| 6.01% | 5.46% | 5.43% |
Caravelli’s cap calculation uses 48 of 61 Q3 sales with reported income. Its methodology uses simple averages, and portfolio transactions affect the mix. That transparency is useful, but it does not normalize every seller’s NOI to a buyer’s expenses. Caravelli Group: San Francisco apartment sales Q3 2026.
Is this also the cap rate for office, retail, industrial or a single-family rental?
No. These apartment observations cannot price a different asset class. Office and retail leases involve different rollover, tenant-credit and capital obligations; industrial comparables have their own location and lease economics. Single-family rent/home-value indexes do not measure a matched property’s NOI.
For a house or duplex, use the single-family rental calculator with its actual rent and expenses. For broader regional comparisons, use our California cap-rate report.
What local news changes the San Francisco outlook?
The reported events below are evidence. Their underwriting implications and our base case are RentalCalcs’ conditional interpretation, not publisher forecasts or a property appraisal.
The AI rent story does not transfer automatically to occupied units
Reported: The San Francisco Standard’s August reporting describes sharp growth in advertised rents for available apartments alongside an AI-related economic revival, while noting limited broad-based technology employment growth. The San Francisco Standard: AI, the economy and asking rents.
Our assessment: For underwriting, split vacant units available to lease from occupied units governed by existing contracts and applicable rules. A faster asking-rent market can improve the first group without immediately changing the second. The pace and cost of lawful turnover determine how much of the headline becomes NOI.
Our position
Our base case is selective city apartment pricing strength, constrained by the difference between new-lease asking rents and income a buyer can actually collect. AI-related demand can support leasing, but paying for immediate mark-to-market on an occupied, regulated rent roll is a different and much weaker thesis.
What would change our view: Persistent asking-rent strength without corresponding collections would weaken the income case. A shift in buyer financing, more difficult property operations or wider comparable sale caps would weaken the pricing case. Portfolio and district composition also change the reported city average.
San Francisco submarkets: what changes the underwriting?
Use these distinctions to build a comparable set. Where a matching neighborhood cap sample is unavailable, the analysis remains qualitative; no rate is manufactured from a county rent index.
Marina / Pacific Heights / Cow Hollow: a small premium sample
Evidence: Caravelli’s District 7 reports a 4.35% average cap and four total sales in Q3 2026. The district-specific count with reported caps is not supplied. Caravelli Group: San Francisco apartment sales Q3 2026; California BOE: change in ownership and reassessment.
District 7 has only four total sales, with an undisclosed cap-reporting subset. A low published mean can reflect the particular vacancies, condition and size that traded. Match the subject to the comparable income basis before interpreting a district premium as a reason to accept less current yield. A seller tax bill and deferred work can further separate the buyer return from a reported cap.
RentalCalcs interpretation: The premium may reflect the assets that traded as much as location. Four sales cannot establish a universal required return or support importing the average into a building with a different rent roll and capital plan.
What would change the view: Several matched standalone sales with reconciled current income and priced work would strengthen the premium case. One renovated or vacant sale with pro forma income would not establish the occupied subject's value.
Before bidding: Match size, vacancy at sale and condition. Investigate why a comparable’s income yield is lower before paying the same multiple.
SOMA / Inner Mission: a higher cap does not prove an easy turnaround
Evidence: Caravelli’s District 9 reports a 6.77% average cap across a group with six total sales; these are combined publisher districts, not separate neighborhood estimates. Caravelli Group: San Francisco apartment sales Q3 2026; Apartment List: San Francisco October 2026 rent report.
The publisher combines neighborhoods in District 9, including mixed-use assets. Commercial lease risk, collections and vacant residential units can change both the numerator and price. Reconstruct apartment and commercial income separately; a district cap gap alone cannot demonstrate convergence or justify spending on a speculative rent roll.
RentalCalcs interpretation: The gap from District 7 is a reason to investigate operating and transaction differences. It is not evidence that the investor can buy the same risk at a higher yield or count on convergence.
What would change the view: Executed leases, clean collections and matched sale NOI would support higher achievable income. Unleased commercial space, seller adjustments or unfunded work would weaken the turnaround even at a higher reported yield.
Before bidding: Review mixed-use income, vacancy, collection history and capital needs separately. Confirm the comparable’s income basis and whether vacant units changed its economics.
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Tenderloin / Downtown: portfolio economics require care
Evidence: The city report identifies portfolio transactions that affect the quarter’s composition. Caravelli Group: San Francisco apartment sales Q3 2026.
Three portfolios account for eleven buildings and about 28% of the quarter's dollar volume. The report labels allocated building prices. A standalone purchase does not automatically receive package pricing, financing or operating efficiencies; small-unit composition also affects price per door. Build the property's own cost and collection budget before importing an allocated cap.
RentalCalcs interpretation: An allocated building price in a multi-property purchase may reflect package economics. A standalone buyer cannot assume the same management efficiencies, financing or allocation. Reconstruct the subject’s operations before treating a portfolio cap as its comparable.
What would change the view: A documented allocation supported by standalone comparables and audited expenses would improve comparability. A package discount without building-level income would leave the subject valuation unresolved.
Before bidding: Ask whether the recorded price was allocated and whether income included commercial space, subsidies or unusual vacancy.
Richmond / Sunset: an occupied rent roll is a separate asset from a vacant unit
Evidence: The city sales report and local rent news measure transactions and advertised available units, respectively; neither determines a particular tenant’s lawful increase. Apartment List: San Francisco October 2026 rent report; Apartment List: rent estimate methodology; San Francisco Rent Board; The San Francisco Standard: AI, the economy and asking rents.
The city's rising new-lease estimate describes a different income opportunity from occupied contracts. Inventory each unit's actual rent and lawful timing, then fund work and downtime before new income. The hypothetical reset share below illustrates limited capture, not permission to raise rents. Current official rate pages could not be inspected beyond verification, so no exact allowance or eligibility is asserted.
RentalCalcs interpretation: For an occupied small building, turnover timing can matter more than the citywide asking-rent growth rate. An upside schedule that assumes all units reset together confuses the market opportunity with legally and operationally achievable income.
What would change the view: Documented lawful changes followed by collected rents would support the income bridge. A whole-building percentage uplift, unsupported vacancy assumptions or costs arriving before rent would weaken it.
Before bidding: Model each unit’s contract rent, permissible adjustment and documented vacancy plan; include downtime and work before crediting new-lease rents.
Coverage, disagreements and the next evidence request
Caravelli measures closed city sales, while Apartment List estimates current new-lease rents using a recent-mover anchor and same-unit listing changes. These are complementary perspectives, not two independent estimates of apartment cap rates. The sales average compresses within a changing cohort; portfolios and missing income matter. New-lease growth can help an available unit before it helps an occupied building. A buyer must show which units can lawfully capture additional income and fund the work and downtime before crediting it.
Outlook and conditions: Selective pricing strength remains plausible if new leases turn into durable collections and comparable sales sustain their yields. The AI explanation in August reporting is attributed economic interpretation, not an automatic rent-roll forecast. Strong asking growth can coexist with slow occupied-income growth and rising owner costs. Neither compression nor immediate whole-building rent resets belong in the base cash budget without property evidence.
On narrow screens, swipe tables sideways to read all columns.
| Measure / period | Result | Limit |
|---|---|---|
| Income-reporting share of sale cohort Q3 2026; report updated October 10 | 48 of 61 sales | Simple-average reported caps. Thirteen sales lack income data; district cap counts and normalized buyer expenses remain unknown. Portfolio buildings are included. |
| City new-lease median estimate September 2026 in the October report | $3,878; +1.1% monthly; +25.7% annually | City, not metro. ACS recent-mover anchor extrapolated with matched listing data; not occupied contract rent or verified receipts. Do not apply this increase to every unit. |
| Earlier local rent headline August 3 local reporting | 14% between March and July | Attributed available-apartment/new-lease context, not an annual change or separate cap sample. It is not directly comparable to September year-over-year growth. |
| Place / scope | Evidence | Missing |
|---|---|---|
| City/county apartment and mixed-use sales | Quarterly simple mean, income-reporting denominator and district/size context | Transaction-level normalized NOI, district cap denominators and repeat-property repricing |
| Available city apartments | Current primary new-lease estimate and disclosed model method | Matched subject leases, incentives, actual receipts and unit condition |
| Occupied rent roll | Official Rent Board diligence destination and a unit-level income bridge | Accessible current official rate verification, property coverage, lawful notices and eligibility; no exact allowance adopted |
| Portfolio and mixed-use comparisons | Publisher identifies package allocations and property mix | Standalone allocation rationale, commercial rent obligations and buyer-specific cost savings |
Edition san-francisco-local-2026-10-20-v1; benchmark bound to san-francisco-sales-2026-q3-v1, region san-francisco-city-county. The source ledger below identifies providers and missing sample/NOI fields. A new source retrieval alone is not a new observation or an automatic review.
What would cause compression or expansion here?
Compression means a lower cap and a higher price for unchanged NOI. Expansion means a higher cap and a lower price for unchanged NOI. Income changes can offset or amplify either move. These are conditional cases, with no assigned probabilities or promised cap targets.
Compression case
New demand converts into durable collected income and buyers keep accepting lower yields for comparable buildings.
Watch: Executed new leases, occupancy and closed sales with comparable rent-roll and expense conventions.
Underwrite: Allow compression as an upside sensitivity while keeping occupied-unit income grounded in lawful collection.
Base case: selective strength
Available apartments benefit sooner than occupied regulated units; building condition and rent roll separate outcomes.
Watch: The vacant-unit share, renewal collections and the next city sales cohort.
Underwrite: Value current NOI separately from future stabilized NOI, subtracting the time and cost needed to reach it.
Expansion case
Financing or operating risk rises, or asking-rent momentum fails to become collected income.
Watch: Longer leasing, weaker collections and wider comparable sale caps.
Underwrite: Stress both a slower rent-roll transition and a higher resale cap; do not rely on the AI narrative to fill the gap.
San Francisco: how much of a rent headline reaches the rent roll?
For the same 20-unit acquisition below, what would a hypothetical 10% new-lease increase on only 20% of scheduled rent add?
| Scenario | Annual amount |
|---|---|
| Existing annual scheduled rent | $420,000 |
| 20% resets at 10% higher rent | $428,400 |
| Incorrect: every unit resets at 10% | $462,000 |
The economic value of market rent growth depends on which units can actually capture it. A high advertised rent is not interchangeable with net operating income from an occupied building.
- Identify the local exposureMatch size, vacancy at sale and condition. Investigate why a comparable’s income yield is lower before paying the same multiple.
- Translate it into collected incomeApply the cost or rent change to the affected units and dates. Separate recurring operations from capital work.
- Reprice the riskDivide buyer NOI by a justified cap, then test debt coverage, invested cash and resale sensitivity.
What does a cap-rate change do to value?
Value = annual NOI ÷ (cap rate ÷ 100). The fixed table below uses $180,000 starting NOI and a 5.00% reference entry. It uses the same hypothetical buyer acquisition below; this cap is an assumption, not a recommended bid.
| Exit cap | 0% total NOI growth | 10% total NOI growth | 20% total NOI growth |
|---|---|---|---|
| 4.50% | +11.1% | +22.2% | +33.3% |
| 5.00% | 0.0% | +10.0% | +20.0% |
| 5.50% | -9.1% | 0.0% | +9.1% |
| 6.00% | -16.7% | -8.3% | 0.0% |
Fixed reference matrix. NOI growth is cumulative, not annual. Starting value is $3,600,000. Excludes selling costs, debt payoff, taxes and interim cash flow. The editable tool begins with the same acquisition where a reconciled local budget is shown; its results update only after Calculate.
Hypothetical assumptions. NOI change is cumulative over your chosen holding period, not an annual growth rate. Results exclude debt, sale costs, taxes and interim cash flow.
Starting value $3,600,000
Exit value $3,000,000 (-16.7%)
$180,000 starting NOI at 5% → $180,000 exit NOI at 6%. NOI must change by 20.0% to preserve starting value at this exit cap rate.
A coherent acquisition: cap rate is not cash-on-cash return
Illustrative 20-unit acquisition: $3,600,000 price and $1,750 monthly rent per unit. Every budget input is a hypothetical assumption, not a property quote or local average. This assumed occupied rent roll and 5% entry are hypothetical, not a current market-rent quote or a bid at Caravelli's 5.43% mean. The gross reset illustration is upside only, excluded from base NOI. A recurring $10,000 cost miss reduces normalized annual NOI to $170,000; at a 6% exit, gross value is about $2.83 million before sale costs and payoff.
| Income or expense | Amount | Treatment |
|---|---|---|
| Scheduled income | $420,000 | 20 × $1,750 × 12 |
| Vacancy / collection loss | -$21,000 | 5% combined allowance; avoid double-counting concessions |
| Effective income | $399,000 | Before recurring expenses |
| Buyer property taxes | $45,000 | Hypothetical; obtain actual reassessment and parcel charges |
| Commercial insurance | $22,000 | Hypothetical; quote coverage, exclusions and deductibles |
| Management | $19,950 | 5% of effective income |
| Recurring repairs | $45,000 | Initial work is separate from recurring NOI |
| Owner utilities | $45,000 | Reconcile lease services, meters and reimbursements |
| Service contracts | $30,000 | Verify building-level obligations |
| Administration | $12,050 | Hypothetical recurring cost |
| Total recurring expenses | $219,000 | Sum of the recurring cost rows |
| Net operating income | $180,000 | Effective income minus recurring costs; before debt |
| Replacement reserve | $15,000 | Below NOI in this example |
| Annual debt service | $136,527 | $1,800,000 loan; assumed 6.5%; 30-year monthly amortization |
| Cash after debt and reserve | $28,473 | Before income tax and distributions |
Buyer cost checks: California BOE guidance explains change-of-ownership reassessment and exceptions. Obtain actual assessor treatment and parcel charges; seller taxes and a universal percentage do not establish the buyer bill.
Keep recurring repairs in NOI, annual reserves below NOI and initial work in invested cash. Obtain unit contracts, coverage records, notices, service bills, insurance and a funded work calendar. Future eligible new-lease rent arrives only after its actual costs and lawful timing.
The 50.0% loan-to-price assumption is not a lender offer. Down payment $1,800,000 + closing costs $108,000 + initial work $180,000 = $2,088,000 invested cash.
| Metric | Result |
|---|---|
| Going-in cap | 5.00% |
| DSCR before / after reserves | 1.32× / 1.21× |
| Debt yield before reserves | 10.00% |
| Cash-on-cash after debt and reserves | 1.36% |
Initial capital work is separate from recurring repairs. NOI divided by price plus initial work gives 4.76% yield on cost, excluding closing costs. It is a different denominator from going-in cap.
Original buyer-cost stress: An additional $10,000 recurring annual cost reduces NOI to $170,000, cash after debt/reserves to $18,473, and gross value by $200,000 at the same 5.00% cap. Reclassifying recurring costs as capital work would conceal this loss.
Including price, closing and initial work, total acquisition cost is $3,888,000 and unlevered NOI yield on that cost is 4.63%. No initial reserve deposit is assumed; add any required lender deposit to cash invested. Future carrying costs and overruns increase the cost basis.
Combined downside: after the hypothetical $10,000 recurring cost miss, NOI is $170,000. At a 6% exit, gross value is $2,833,333. This combines lower NOI and a wider cap; it excludes selling costs, loan payoff, taxes and interim cash flows.
What to verify before buying in San Francisco
- Check the Rent Board’s current guidance and the property’s coverage before modeling increases, banked adjustments or turnover.
- Keep seller NOI, buyer-adjusted going-in NOI and future stabilized NOI in separate columns.
- Treat mixed-use commercial income and allocated portfolio prices explicitly; do not blend them silently into apartment comparisons.
California reassessment can change the buyer’s tax expense. Use the Board of Equalization’s change-in-ownership guidance and the local assessor to confirm treatment and exceptions; do not substitute the seller’s bill or a blanket statewide percentage.
Why a rent/home-value ratio is not a cap rate
A county rent index and home-value index describe different samples and may have different observation dates. Their ratio is a broad gross screen, before operating costs. It is neither a matched apartment sale yield nor evidence of neighborhood cap compression. Use dated apartment research and property-level NOI tests instead.
A free deal-review worksheet
Record the subject’s address and municipality, each comparable’s date and income basis, collected rent, losses, buyer expenses, debt quote and capital needs. Then write the evidence that would make you reject your preferred outlook.
Open the printable San Francisco underwriting worksheet. It works without an account. Entries remain only in the open page; print or save a completed PDF before closing. Fields do not calculate automatically.
The calculator opens separately. Assumptions entered above are not transferred. Core analysis is free; optional paid workflows are described in the tool.
What is a good cap rate in San Francisco?
One that is supported by comparable sales and produces a durable return after your actual costs, debt and capital work. A higher headline rate can compensate for weaker collections or more work. A lower rate requires more confidence in the income and resale assumptions. Start with buyer NOI, then test the local downside described here.
Sources, methods and what this report cannot establish
Sources rechecked October 20, 2026. Observation periods differ from publication and review dates. Brokerage sources have a commercial context; multiple publishers using CoStar are not independent samples. The local-news interpretation is ours. We have not audited individual transaction NOI or assigned a market cap to every neighborhood.
- Caravelli Group: San Francisco apartment sales Q3 2026
Published October 7, 2026; closed sales July 1–September 30, 2026, with prior-period comparisons.
MLS, public records and Caravelli database; 5+ unit apartment and mixed-use buildings; simple averages. 48 cap observations / 61 total sales. District cap counts and NOI normalization undisclosed; portfolio mix affects results. Brokerage commercial context.
- The San Francisco Standard: AI, the economy and asking rents
August 3, 2026; reporting on available-apartment rents and local economic conditions.
Local reporting, including city economic analysis. Asking rents are not occupied-tenant collections; AI attribution is not a property forecast.
- San Francisco Rent Board
Current official guidance; verify the applicable rent-increase period.
Official diligence destination. Current rate and announcement pages returned robot verification on October20; exact rate, banked increase and property coverage not independently confirmed. No blanket permission to reset occupied rents. Refresh current official guidance and tenancy documents before use.
- Apartment List: San Francisco October 2026 rent report
October edition reporting September 2026; accessed/reviewed October 20
Primary commercial marketplace city new-lease median estimate. ACS recent-mover anchor plus matched listing changes; not a census of signed leases or sitting-tenant collections. Distinct operating perspective from MLS/public-record/broker sales, not cap corroboration. Refresh monthly edition/correction.
- Apartment List: rent estimate methodology
Method paper accessed/reviewed October 20, 2026
Describes new-lease target, ACS anchoring, same-unit matching and inferred final available listing price. Model inputs are not proof of any subject's executed lease, lawful increase or receipts. Read alongside the current city report; refresh method revisions.
- California BOE: change in ownership and reassessment
Official guidance accessed/reviewed October 20; reused batch retrieval
Assessor-specific treatment and exceptions. Not a property tax or insurance quote. Refresh transfer structure or assessor determination.
Refresh triggers: the next quarterly market report; revisions to a sale cohort; actual openings or delays in discussed projects; material changes in local rules, financing or property expenses. Update the analysis and comparisons together, rather than changing only the date.
Spot a source correction or geography error? Contact RentalCalcs with the report section and supporting document.