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Buying an Apartment Building in San Francisco: Due Diligence Guide

By Matthew Martinez, Founder, CEO & Managing Broker, Diamond Real Estate Group. California DRE #01869679.

Buying an apartment building in San Francisco starts with one question: which units are under rent control. Under the city’s Rent Ordinance, units first certified for occupancy after June 13, 1979 are exempt from its rent increase limits, so older buildings are generally rent-controlled, and every covered unit, old or new, has just cause eviction protection. Increases on rent-controlled units are generally limited to the Rent Board’s annual allowance, 1.6% from March 1, 2026 through February 28, 2027, which makes in-place rents, not pro forma rents, the basis of value.

Price is only part of the cost. Seismic and balcony retrofit obligations, the city’s tiered transfer tax and two transfer tax measures on the November 3, 2026 ballot all affect what a building is worth to you. This page is the San Francisco section of our multifamily investing guide and is written from the buyer’s side; our San Francisco real estate guide covers the citywide market.

Which units are rent-controlled

Three rules work together:

The 1979 line. The Rent Board says residential units whose first certificate of occupancy was issued after June 13, 1979 are exempt from the Rent Ordinance’s increase limits, provided the space had no residential use before. Units the Rent Board has found to be substantially rehabilitated are also exempt.
Just cause still applies. Since January 20, 2020, those newer units must also follow the Ordinance’s notice rules and need a permitted just cause to end a tenancy, and the annual Rent Board fee applies to them.
State law, Costa-Hawkins. Civil Code section 1954.52 lets an owner set the initial and later rents for units with a certificate of occupancy issued after February 1, 1995, and for units that can be sold separately, such as a condo or a single-family house, with exceptions, including where the prior tenancy was ended by the owner’s notice or a condo has not been sold separately to a bona fide purchaser.

In a typical pre-1979 apartment building, expect the residential units to be under rent control, though units added later can differ. A newer building may be exempt from the increase limits but is still subject to just cause, and units exempt from local rent control may fall under the state cap. Get the certificate of occupancy date from the Department of Building Inspection rather than relying on a listing’s “year built.”

Vacancy decontrol and what a unit is really worth

Costa-Hawkins also allows vacancy decontrol. Under Civil Code section 1954.53, when a tenancy ends, the owner may set the initial rent for the next tenant. The exceptions matter: the right does not apply where the owner ended the prior tenancy by a notice of termination under section 1946.1 or a noticed change in terms under section 827, and different rules apply where the owner has agreed to rent limits with a public agency.

The statute also covers sublets. If the original occupants no longer permanently live in the unit, the owner may raise the rent for a lawful sublessee or assignee who did not live there before January 1, 1996. Whether that applies to a specific unit is a legal question; get advice before you rely on it in a pro forma.

So the rent roll is the value. A building with long-term tenants paying well under market can take years to reach market rents, and nothing guarantees that it will. Underwrite at current rents plus the allowable annual increase, and treat any turnover upside as a bonus.

Buyouts, move-outs and condo conversion

San Francisco regulates tenant buyouts under Rent Ordinance Section 37.9E. Before any buyout discussion, the landlord must give each tenant the Pre-Buyout Negotiations Disclosure Form and file a declaration with the Rent Board. An agreement can be signed no sooner than 30 days after discussions begin, the tenant can cancel within 45 days after signing, and the landlord must file the signed agreement with the Rent Board between 46 and 59 days after signing.

Filed agreements go into a public database at the Rent Board, with tenant names redacted, and the city notes that a buyout agreement may affect a landlord’s ability to convert a building to condominiums. Ask the seller for every buyout, owner move-in and Ellis Act history on the building, and check it against Rent Board records, because that history can limit conversion and resale plans. Our guides to tenancy-in-common ownership and cash for keys agreements go further.

Seismic and balcony obligations

Mandatory soft-story retrofit

The Department of Building Inspection’s program covers wood-frame buildings with three or more stories, or two stories over a basement or underfloor area with any portion above grade, that have five or more residential units, a construction permit applied for before January 1, 1978, and no seismic strengthening. DBI says these buildings are most common in the Mission, Western Addition, Richmond, North Beach and the Marina.

Before you buy a covered building, confirm whether the retrofit was completed and finaled; DBI publishes a soft-story properties list. DBI also notes that seismic retrofit work may be excluded from property tax reassessment, with an exclusion form due to the Assessor within 30 days of completing construction. Our seismic retrofit guide for multifamily owners covers costs and scope.

Balconies, decks and stairs: SB 721 and SB 326

Health and Safety Code section 17973 (SB 721) applies to buildings with three or more multifamily units. Wood-supported balconies, decks, stairways, walkways and similar elements more than six feet above ground had to be inspected by January 1, 2026, and then every six years, by a qualified architect, engineer, contractor or building inspector, covering at least 15% of each type.

Non-emergency repairs need a permit within 120 days of the report and completion within 120 days after that; after 180 days the inspector notifies the city, and penalties of $100 to $500 a day can follow. Reports must be kept for two cycles and given to the buyer at a sale.

Condominiums are excluded from that section and fall under Civil Code section 5551 (SB 326) instead: the association must have a licensed engineer or architect inspect a statistically significant sample of these elements by January 1, 2025 and at least every nine years. If you are buying a TIC or a building you may later convert, know which regime applies. Our SB 721 guide has more.

Transfer tax on an apartment building

San Francisco’s transfer tax applies one rate to the whole price, set by the price tier, per $500 of value:

Price	Rate per $500	Example, on our arithmetic
Over $100 to $250,000	$2.50	—
$250,000 to under $1,000,000	$3.40	—
$1,000,000 to under $5,000,000	$3.75	$3,000,000 building: $22,500
$5,000,000 to under $10,000,000	$11.25	$6,000,000 building: $135,000
$10,000,000 to under $25,000,000	$27.50	$12,000,000 building: $660,000
$25,000,000 or more	$30.00	$30,000,000 building: $1,800,000

The jump at $5,000,000 is steep: on our arithmetic a $4,999,999 sale owes about $37,500 and a $5,000,000 sale owes $112,500. Who pays is set by the purchase contract.

A Transfer Tax Affidavit is required at recording, and any exemption must be documented then. Our San Francisco transfer tax guide covers exemptions and entity transfers.

Two measures pending on November 3, 2026

Proposition I would cut the general transfer tax on the $10 million to under $25 million tier from 5.5% to 2.75% and on the $25 million-plus tier from 6% to 3%, and add a separate House SF tax for affordable housing at those same rates, so the combined rate would stay the same for most transfers. The Controller’s analysis notes a new House SF exemption for certain recently constructed multifamily properties.
Proposition J would end the transfer tax exemption for most foreclosures and deeds in lieu, for transfers on or after March 1, 2027, taxing fair market value instead of the loan balance. Single-family homes, condos and buildings with four or fewer homes would keep the exemption; buildings with five or more homes would not.

Both are pending as of this review. We will update this page once the results are certified.

Document request list for a San Francisco building

Rent roll and leases for every unit, with move-in dates, current rent and the full rent increase history.
Tenant estoppel certificates; see our estoppel certificate guide.
Rent Board records: petitions and decisions for the building, buyout agreements and declarations, and owner move-in or Ellis Act notices.
Certificate of occupancy and permit history, plus the 3R report; compare unit counts and look for unwarranted units.
Soft-story status and, for three or more units, the SB 721 report and any repair permits.
Operating statements: utilities, insurance, Rent Board fees and maintenance, so you can test the net income. Our older-building shared costs workbook helps organize them.
Hazard checks: flood and seismic maps for the parcel; see our San Francisco hazard maps guide.

For the general sequence of an acquisition, from letter of intent to closing, see how to buy an apartment building, and for financing a five-plus unit building, apartment building loans.

This is general information, not legal or tax advice; talk to a San Francisco landlord-tenant attorney or a tax adviser about a specific building.

Questions people ask

Which San Francisco apartments are rent-controlled?

Generally, units whose first certificate of occupancy was issued on or before June 13, 1979. Units first certified after that date are exempt from the Rent Ordinance’s increase limits but still have just cause eviction protection.

How much can rent go up on a rent-controlled SF unit in 2026?

The Rent Board’s annual allowable increase is 1.6% for March 1, 2026 through February 28, 2027, applied to the tenant’s base rent.

Are single-family homes and condos rent-controlled in San Francisco?

Under the state Costa-Hawkins Act, an owner can generally set rents on a unit that can be sold separately, such as a house or condo, with exceptions. Just cause eviction rules can still apply, so check the unit’s history.

Can I raise the rent to market when a tenant moves out?

Usually, under Costa-Hawkins vacancy decontrol, the owner may set the next tenant’s starting rent. That right does not apply if the owner ended the prior tenancy by a termination notice, and some agreements with public agencies limit it.

Which SF buildings need a soft-story retrofit?

Wood-frame buildings of three or more stories, or two over a basement or underfloor area, with five or more residential units and a construction permit applied for before January 1, 1978, that have not been seismically strengthened.

What is the transfer tax on a $3 million apartment building in San Francisco?

On our arithmetic, $22,500, at $3.75 per $500 on the whole price. The rate rises to $11.25 per $500 at $5 million.

What are Props I and J on the November 2026 ballot?

Prop I would split the top two transfer tax tiers into a general tax and a House SF tax with the same combined rate for most transfers. Prop J would end the foreclosure exemption for buildings with five or more homes and commercial property from March 1, 2027. Both were pending as of October 2026.

If you are evaluating a San Francisco building, we can help you assemble the rent roll, Rent Board and retrofit records and test the price against in-place income. Contact us to talk through a specific property. Diamond may refer you to partners we work with, such as lenders or attorneys; you’re free to choose any provider.

Sources & notes

Last reviewed October 2026 by Matthew Martinez.