How to Buy Your First Investment Property in Daly City

I get this question a lot, usually over coffee or at the end of a showing: "Is Daly City a good place to buy my first investment property?"

My answer is always the same. It can be, but only if you go in with the right strategy. I've been selling homes across the Bay Area since 2017, and the investors who do well here aren't the ones chasing a quick Airbnb win. They know the local rules, they run conservative numbers, and they have a clear plan for how the property makes them money.

So here's the process I walk my investor clients through, step by step.

Step 1: Decide what kind of return you're after

Before we look at a single listing, I want to know what "return" means to you. There are three main paths:

• Cash flow: rent covers your mortgage, taxes, and expenses, with money left over each month
• Appreciation: you hold for the long term and build equity as the property gains value
• House hacking: you live in part of the home and rent out the rest to offset your costs

This matters a lot in Daly City. Home prices are high compared to rents, so getting cash flow right away is hard. Most of my successful investor clients here lean on appreciation, house hacking, or a mix of both.

Step 2: Run the numbers before you fall in love with a house

This is the part people skip, and it's the most important one.

Here's a quick snapshot. Zillow puts the typical Daly City home value at about $1,137,000 as of July 2026, up 2.4% over the past year (Zillow Home Value Index). Zillow's rental data shows a typical 3-bedroom renting for around $4,800/month (Zillow Rental Market Trends).

Now let's play it out with a hypothetical example:

• Purchase price: $1,137,000
• 25% down: about $284,000
• Loan: about $853,000 at an illustrative 6.5% rate, 30 years = roughly $5,390/month principal and interest
• Property tax (around 1.25%, the Daly City median effective rate per Ownwell): about $1,185/month
• Insurance, maintenance, and vacancy reserves: easily $500+/month

That's roughly $7,000/month in costs against $4,800 in rent. On paper, that's negative cash flow.

I'm not showing you this to scare you off. I want you to see the real picture, because a lot of online advice is built around cheaper markets. In Daly City, the math usually works when you:

• Put more money down
• Add rental income with an ADU or in-law unit
• Live in part of the property yourself
• Plan to hold long enough for appreciation and rent growth to catch up

Investment property tip: Always calculate your cash-on-cash return (yearly cash flow divided by the cash you put in) and your cap rate (net operating income divided by purchase price). Your lender and I can help you stress-test at different rates and rents.

Step 3: Understand the Airbnb rules (this one surprises people)

If your plan is to buy a Daly City house and run it full-time as an Airbnb, stop here. The city doesn't allow that.

Under Daly City's Short-Term Rental rules:

• Short-term rentals must be in the host's primary residence, meaning you live there at least 265 days a year
• Unhosted stays (you're not on-site) are capped at 100 days per year
• Hosted stays (you're on-site) have no day limit
• You need a business license and a Short-Term Rental Permit, both of which are renewed every year, and you pay the transient occupancy tax

So Airbnb can work in Daly City, but as a house hack in the home you live in, not as a standalone investment. I'd much rather you know that before you buy than after.

Step 4: Know the rental laws for long-term tenants

Daly City doesn't have its own rent control ordinance (RentCheckMe), but California's statewide Tenant Protection Act (AB 1482) applies to many rentals (California Legislative Information). Here's what it means in plain terms:

• Annual rent increases on covered units are capped at 5% plus local CPI, never more than 10%
• After a tenant has been there 12 months, you generally need cause to end the tenancy
• Some single-family homes and condos can be exempt, but only if the owner isn't a corporation or REIT and the tenant gets a specific written exemption notice. Skip the notice, and the exemption doesn't apply (BH Real Estate Law)

This is where many new landlords make mistakes. Get the notice language right from day one, and talk to a real estate attorney if you're unsure. Local rules can also change, so it's worth checking with the city before you sign a lease.

Step 5: Look for ADU potential

This is one of my favorite strategies in Daly City. Many of our homes, especially classic Westlake-style houses, have a ground floor that can be converted into a separate living space. The city's own guide says that "the typical configuration of many Daly City houses lends itself to the construction of an accessory dwelling unit (ADU) in the lower level" (Daly City ADU Guide).

A few things to know:

• California's AB 976 permanently stops cities from requiring owner-occupancy on standard ADUs (Junior ADUs have different rules)
• Daly City's older handout still mentions owner-occupancy, so always confirm current requirements with the Planning Division at (650) 991-8033
• Cities can require ADUs to be rented for terms longer than 30 days, so plan on long-term tenants, not Airbnb guests

When I tour properties with investors, I'm always checking for a separate entrance, ceiling height, and how easy it would be to add a bathroom downstairs. That's where a lot of the long-term value is.

Step 6: Get your financing lined up early

Investment property loans work differently from primary home loans. Expect:

• A larger down payment (typically 15 to 25% or more, depending on the loan) (Lower)
• Slightly higher rates than a primary residence loan
• Lenders are asking for cash reserves

If you're buying your first property and plan to live in part of it, owner-occupied financing can open up lower down payment options. That's one more reason house hacking is such a popular first move here.

Step 7: Build your team and plan your exit

Before you close, have these people in your corner:

• An agent who knows investor math and local rules
• A lender who works with investors
• A CPA who can walk you through depreciation, 1031 exchanges, and how rental income is taxed
• A property manager, or at least a plan for how you'll handle tenants and repairs

And think about the end game. Are you holding for 10 years? Planning to refinance? Trading up through a 1031 exchange later? Knowing your exit shapes what you buy today.

My honest take

Real estate investing in Daly City rewards patience and good planning. You're buying into a stable Bay Area market right next to San Francisco, with strong rental demand and real ADU upside. It's not a get-rich-quick market, and I think that's a good thing. The investors I've seen do well here bought smart, held on, and let time do most of the work.

Ready to run the numbers on your first investment property?

If you're thinking about buying your first rental, house hacking, or adding an ADU, let's sit down together. I'll walk you through real numbers on real Daly City properties so you know exactly what you're getting into.

Reach out to me directly to book your investor consultation:

Email: [email protected]

Phone: 415.480.7738

This post is for general educational purposes only and isn't legal, tax, or financial advice. Market data and local rules change, so please confirm the current requirements with the City of Daly City and consult a licensed attorney, CPA, or lender before making investment decisions.