How should I invest $100,000 in San Diego, CA? (May-2018)

16 Replies

Hello, I'd like advice from experienced investors on how I should invest $100,000 in San Diego, CA.  

1) Should I use it to upgrade my aging, dated, duplex in order to command slightly higher rent?  

2) Or should I use it to try to buy another property in San Diego?  

I honestly wish that I could remodel my hillside, San Diego bay view duplex which I bought in just a couple of years after the crash.  Unfortunately $100,000 does not buy much in San Diego and I do not have a co-signor.  It's very stressful trying to decide what's the best way to invest the small amount of money that I have, especially knowing that the decisions I make will affect how my retirement is supplemented in about 10-12 years.  I need to make the most of this hard-earned money and am open to suggestions.  

Thank you.  

I think it depends on how bad your existing duplex is in need of a rehab.  My own goal is to achieve 100% return on investment on rehab expenses (for every $1 invested in the rehab the value add is $2).  To obtain this, the units typically have to be in very high need of a rehab.  A little out dated will not return 100% unless it also has a lot of damage.  The reason I set the bar at 100% return on investment is because it is work to do a rehab.

Determine what sort of value add you can expect from the rehab and determine the type of rent increase you could expect.  Then determine if that return is worth the effort. 

You also did not indicate if you live in one of the duplex units.  If I chose the rehab route and lived in one of the units, I would live in the unit more in need of a rehab.  I would rehab that unit (the one I live in) and, after rehab, rent it at top of market price because it had just been rehabbed.  I would then move into the other unit and repeat.  Ideally the value add exceeds the cost by a significant amount (our goal is value add is 2 times the cost of the rehab) and results in a significant rent increase.

If the analysis shows that a rehab is not going to add much value add beyond the cost of the rehab I would use the money to purchase a different investment property.  Ideally one with good value add potential.

Rehabs should increase equity beyond the cost of rehab as well as raise the rents collected.  If the rehab accomplishes both of these, your equity increases and it places you in a more favorable situation for that retirement.

Good luck

The simplest way that I would look at it for myself would be to look at my cash on cash return for rehabbing my duplex. An oversimplified example, if I’m putting $25k into my duplex and by doing so I’m able to get an extra $5k a year in total rents then that would be a great return on my money any where, especially in SD real estate.

Originally posted by @Jean Hayes :

Hello, I'd like advice from experienced investors on how I should invest $100,000 in San Diego, CA.  

1) Should I use it to upgrade my aging, dated, duplex in order to command slightly higher rent?  

2) Or should I use it to try to buy another property in San Diego?  

I honestly wish that I could remodel my hillside, San Diego bay view duplex which I bought in just a couple of years after the crash.  Unfortunately $100,000 does not buy much in San Diego and I do not have a co-signor.  It's very stressful trying to decide what's the best way to invest the small amount of money that I have, especially knowing that the decisions I make will affect how my retirement is supplemented in about 10-12 years.  I need to make the most of this hard-earned money and am open to suggestions.  

Thank you.  

 You don't. You invest it in Nevada or Phoenix where you can make some money with it.

@Jean Hayes There are lots of people out there (myself included) who are financing their projects with friends and family dollars - consider mining your network (or growing it) to see who's successfully doing this and consider investing the capital with them.  At 10% return, you're earning an extra ~$1k/m ... compare that to the returns you'd get upgrading your duplex.

Originally posted by @Account Closed :
Originally posted by @Jean Hayes:

Hello, I'd like advice from experienced investors on how I should invest $100,000 in San Diego, CA.  

1) Should I use it to upgrade my aging, dated, duplex in order to command slightly higher rent?  

2) Or should I use it to try to buy another property in San Diego?  

I honestly wish that I could remodel my hillside, San Diego bay view duplex which I bought in just a couple of years after the crash.  Unfortunately $100,000 does not buy much in San Diego and I do not have a co-signor.  It's very stressful trying to decide what's the best way to invest the small amount of money that I have, especially knowing that the decisions I make will affect how my retirement is supplemented in about 10-12 years.  I need to make the most of this hard-earned money and am open to suggestions.  

Thank you.  

 You don't. You invest it in Nevada or Phoenix where you can make some money with it.

 No 💰 to be made in NV. 

Regarding: "No 💰 to be made in NV."

 Interesting to know. I'm making plenty in Phoenix. Perhaps it's because I only do Subject To, Wraps and Lease Options.

@Jean Hayes You're probably not going to squeeze that much out of your duplex by updating it(depends on its condition, of course).  Perhaps use $20K to update it, use the rest to invest somewhere out of state or the Central Valley.  You could also use it as a carrot to raise more money.  Tell family/friends that you have $60K to invest and need another partner to come up with another $60K to get another duplex somewhere.  It's a great way to build your investor list.

@Dan Heuschele Thank you for your advice.  No, I am not currently living in it...for now.  I have the junkiest house on a block of million dollar, San Diego bay and downtown view, hillside homes.  According to my architect/engineers, a proper rehab would probably cost over $200,000.  For these changes/updates, it would probably only add $1.50 per invested dollar, although I'd probably be able to charge $2,300-$2,600 rent for each unit (i.e. adding a bedroom to the current one-bedroom unit), an increase of about $1,000 per month.  

Account Closed  So I've heard about NV and AZ. I looked at multi-units a couple of years ago, but was intimidated about selecting the right neighborhood and managing the property given the distance being based in San Diego.

@Jose Guevarra Unfortunately, my family is not in a position to consider investments. I could check with my friends, although, I think they're in the same predicament especially with young kids. I think I may need to make some new friends who can tolerate some risk. 

Originally posted by @Jean Hayes :

@Justin R.  Thanks Justin. Unfortunately I've been doing this on my own. That's an amazing return without the work and life disruption. How do you know who to trust?

It also doesn't come with the tax advantages of owning the real estate, nor the long term gains that market appreciation has historically delivered.

How would you figure out who to trust to babysit your kids?  Transitive trust (friend-of-a-friend coming with recommendations), history-based trust (you've known them for a long time), or qualifications-based trust (you've seen what they've done and believe they can do it again).

The folks investing with me are all friends, professional colleagues, or acquaintances from church or non-profits we're involved in.  The most successful people generally don't need to advertise what they're doing, so ask around your network.  "I'm looking to lend money to people flipping houses or investing in real estate" will get you plenty of WTF looks, but someone will respond with.  "Oh, yeah. My brother's been doing that for a couple years up in Whatever City.  We invested some money with him last year."

Originally posted by Account Closed:
Originally posted by @Jean Hayes:

Hello, I'd like advice from experienced investors on how I should invest $100,000 in San Diego, CA.  

1) Should I use it to upgrade my aging, dated, duplex in order to command slightly higher rent?  

2) Or should I use it to try to buy another property in San Diego?  

I honestly wish that I could remodel my hillside, San Diego bay view duplex which I bought in just a couple of years after the crash.  Unfortunately $100,000 does not buy much in San Diego and I do not have a co-signor.  It's very stressful trying to decide what's the best way to invest the small amount of money that I have, especially knowing that the decisions I make will affect how my retirement is supplemented in about 10-12 years.  I need to make the most of this hard-earned money and am open to suggestions.  

Thank you.  

 You don't. You invest it in Nevada or Phoenix where you can make some money with it.

 No 💰 to be made in NV. 

Regarding: "No 💰 to be made in NV."

 Interesting to know. I'm making plenty in Phoenix. Perhaps it's because I only do Subject To, Wraps and Lease Options.

 We have made plenty in San Diego with just traditional buy n hold and fairly minor value adds.  Nothing special in what we do.