438-440 Lily St, San Francisco, CA 94102 — 15.2% Cash-on-Cash

About this property

438-440 Lily St is a fully occupied two-unit multifamily property in San Francisco's 94102 zip code, totaling 1,560 square feet across a 1-bedroom and a 2-bedroom unit.

The duplex sits on a 1,237-square-foot lot and has been non-owner occupied, meaning it comes with an established landlord-tenant history rather than an owner-move-out transition. Both units are described as carrying high ceilings and period architectural details — the kind of bones that hold rental appeal in San Francisco's competitive leasing market without requiring cosmetic overhaul.

The more commercially interesting detail is the rent structure: current tenants are paying below-market rates. That gap between in-place rents and market rents is the value-add thesis here. An investor who manages turnover carefully — whether through natural vacancy or negotiated buyouts — can close that spread over time.

The property has been on the market 20 days, which is unremarkable for a San Francisco multifamily listing. The tax-assessed value sits at $337,749, well below the $650,000 ask, consistent with California's Proposition 13 assessment framework. No price reductions have occurred since listing, and there's no pre-foreclosure or auction flag on the record. Figures exclude depreciation tax benefits, which vary by individual tax situation.

The investment case

At 15.2% cash-on-cash, this property posts the highest return in zip 94102 — 3.4 percentage points above the zip average and 26.2 points above the San Francisco city average of -11.0%.

List Price

$650,000

Monthly Payment (PITI+HOA)

$4,134

Principal & Interest

$3,283

Property Tax

$634

Insurance

$217

HOA

$0

PMI

$0

Est. Monthly Rent

$5,780

Estimated rent based on automated valuation of comparable listings.

Cash-on-Cash Return

15.2%

Cap Rate

10.3%

Monthly Cash Flow

$1,646

Gross Rent Multiplier

9.4

DSCR

1.7

The math starts with a $650,000 purchase price. At 6.49% on a 30-year fixed mortgage with 20% down, principal and interest runs $3,283 per month. Add property tax at $634, insurance at $217, and no HOA or PMI, and the all-in monthly payment lands at $4,134.

Estimated monthly rent is $5,780, producing a monthly cash flow of $1,646 and a net operating income of $5,563. The cap rate of 10.3% is strong in absolute terms and exceptional for San Francisco, where most listings don't generate positive operating income at current prices. The gross rent multiplier of 9.4 means the property pays for itself in under ten years of gross rents — a ratio that's difficult to find anywhere in this city.

The debt service coverage ratio of 1.7 is the risk-management figure worth highlighting. Lenders typically require 1.25; at 1.7, this property has meaningful cushion before debt service becomes a problem. A vacancy period or below-market rent rollover would need to be sustained and deep before cash flow turns negative.

Compared to the weakest deal in San Francisco's top-10 leaderboard — which posts a 7.06% cash-on-cash return — this property clears that bar by more than eight points. That's not a marginal outperformance; it's a different tier of cash-flow quality within the same city.

Annual return outlook

The projected 22.3% five-year total ROI breaks into three components, with cash flow doing most of the work.

Cash flow contributes 15.2% of the 22.3% total — the dominant driver by a wide margin. Mortgage paydown adds 4.3%, a passive equity-building component that compounds quietly as tenants service the debt. Appreciation contributes an estimated 2.8% annually, though that figure carries an important caveat: it's a modeled estimate, not a figure derived from recent transaction data, and San Francisco appreciation has historically been volatile rather than linear.

The structure here is notable because it inverts the typical San Francisco investment logic. Most SF deals are appreciation plays — the city average cash-on-cash of -11.0% means most investors are subsidizing their mortgage in hopes of future price gains. At 438-440 Lily St, the cash flow alone justifies the investment even if appreciation comes in flat. The appreciation and paydown components are upside, not the load-bearing wall.

The below-market rents add an embedded optionality that doesn't show up in the current numbers. If rents are brought to market at turnover, the cash-flow contribution to total ROI increases, potentially pushing the five-year figure above the 22.3% baseline projection.

For a San Francisco multifamily deal, the unusual feature is that the base case doesn't require appreciation to pencil out.

How it compares to nearby for-sale listings

Five active for-sale listings in zip 94102 provide pricing context, with a comp median of $899,000 — 38% above this property's $650,000 ask.

The comp set skews toward condominiums and smaller units, which limits direct apples-to-apples comparison with a freestanding duplex. The nearby listings range from $452,000 to nearly $1.3 million, with the median landing at $899,000. At $650,000 for 1,560 square feet, 438-440 Lily St comes in at roughly $417 per square foot — well below the implied per-square-foot pricing of the condo comps, several of which are priced above $1,000 per square foot on smaller footprints.

That discount reflects the multifamily nature of the asset rather than a distress signal. Occupied income-producing properties in San Francisco trade at different multiples than vacant condos, and the relevant benchmark for this property is its income yield, not its price per square foot relative to residential condos.

The 20-day market time is consistent with the comp set, where listings are moving in the five-to-fourteen day range. Nothing in the days-on-market data suggests a pricing problem or unusual seller urgency. The absence of any price reduction since listing reinforces that read.

Rental demand in this zip

No directly comparable rental listings were identified in zip 94102 for a 3-bedroom multifamily configuration, leaving the $5,780 monthly rent estimate without a local comp anchor.

The absence of rental comps in the immediate zip is a data gap worth taking seriously. The $5,780 figure is an estimate, and without comparable leases to validate it, there's inherent uncertainty in the cash-flow projection. That said, the property is currently occupied — both units have long-term tenants — which means actual in-place rents exist and are presumably below the $5,780 estimate, given the listing's explicit reference to below-market rents.

That creates an interesting dynamic. The investment case at current rents may be more conservative than the $1,646 monthly cash-flow figure suggests, since the estimate likely reflects market rents rather than the rents actually being collected today. Investors should request the current rent roll before underwriting to understand the real day-one cash flow versus the projected stabilized figure.

The flip side: if in-place rents are meaningfully below $5,780, the path to the estimated cash flow involves lease turnover, which in San Francisco carries both regulatory complexity and timeline uncertainty. The value-add story is real, but it's not instantaneous.

Who this property suits + risks to weigh

This property suits a cash-flow-oriented investor comfortable with California landlord-tenant law and the operational work of managing a below-market rent situation toward market rates.

Best fit

An investor who wants positive cash flow from day one in San Francisco — not a speculative appreciation bet — has few options that match this profile. The 15.2% cash-on-cash return and 1.7 DSCR suggest the property can absorb a meaningful rent shortfall or vacancy period without flipping negative. For a 1031 exchange buyer rotating out of a higher-maintenance asset, or an out-of-state investor seeking SF exposure without the typical negative-carry structure, the numbers are compelling.

The below-market rents also suit a patient, long-term holder. San Francisco's tenant protections make rapid rent normalization difficult, but they also create stability — long-term tenants rarely leave voluntarily, which keeps vacancy near zero even as market rents drift upward.

Risks to weigh

The rent estimate lacks local comp support, which is the single largest underwriting risk. If the $5,780 figure overstates achievable market rent, the cash-flow picture compresses. The current in-place rents are unknown from public data alone — that's due-diligence homework, not a reason to pass, but it's not optional.

San Francisco's rent control and just-cause eviction rules apply to both units, which constrains the speed and method of rent increases. The value-add thesis depends on natural turnover or negotiated exits, neither of which can be scheduled. The estimated 2.8% annual appreciation is a modeled figure, not a guarantee, and SF values have experienced significant drawdowns in prior cycles.

The lot size of 1,237 square feet leaves no meaningful development optionality. This is a hold-and-operate asset, not a land play.