Newbie wanting to house hack in San Diego, CA
Member since 2020 路 7 posts 路 5 votes
Newbie wanting to house hack in San Diego, CA
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Dan H.Pro Member
Investor 路 Poway, CA 路 Member since 2015 路 7k+ posts 路 8k+ votesOriginally posted by @Paris Ambush:
@Frank Hinck interesting, care to elaborate why?
I suspect he has read it somewhere and never been a LL in San Diego.
I have been doing this a while in San Diego. My experience is with the vacancy rate so low, good, screened tenants typically pay their rent and take care of the place. This is because if they do not, it will be very difficult for them to rent a nice place. It is the power of vacancy rates below 3%.
Our tenant criteria does not allow an eviction. If you have been evicted ever, you cannot rent our units. If any of your LL in the last 5 years have anything negative to say about you, you cannot rent our units. Basically, we only rent to ideal tenants.
I have lost a total of less than one month of rent from non payment between all of our LTR units. We have had rentals for over 2 decades.
Screen well and San Diego is an easy place to be a LL. It has one of the lowest eviction rates anywhere. This is mostly due to the consequences to the tenant of being evicted.
now for the bad, previous to a year ago I could get rid of any tenant simply by raising rents above market rent. It results in them giving notice and ensures no blow back. A year ago, state wide rent control was passed for multi unit. This makes the increase rent not an option to get rid of less than ideal tenants. The same rent control rules also make it so that it is much harder to get rid of an undesired tenant via other means. Prior to the rent control rule, a tenant on month to month the LL could provide notice at any time. This is no longer the case. This only applies to multi unit; it does not apply to SFH.
Set your bar high for tenants and there should not be any issues.
Good luck
14 Replies
- New to Real Estate 路 San Diego 路 Member since 2019 路 45 posts 路 12 votes5y
@Paris Ambush
I have met some people in local Meetups who are doing a house hack. I would assume it鈥檚 doable specially here.
I am considering moving out of my Condo to a house hack property too. I haven鈥檛 really started the researching locations for it yet. I am also not sure how the demographics will change with Covid. Will the suburban zip codes start seeing more professionals moving there?
- Real Estate Agent 路 San Diego, CA 路 Member since 2016 路 308 posts 路 173 votes5y
House Hacking in SD is one of the best strategies for a first time investor. By going owner occupied you'll be able to come in w/ little to 0 money down and the return on your money will be quite large. Fascinating to see the expected returns on a spreadsheet when factoring in cashflow (although sometimes negative initially), principal paydown, appreciation, and tax savings.
Plenty of neighborhoods all throughout the county where this is effective. Most 2-4 units are sprinkled in or around the metro area. Happy to discuss further.
We're also having a REI meetup at our downtown office on November 5th. You're welcome to come through.
Hope this helps.
- Member since 2020 路 7 posts 路 5 votes5y
@Maxwell Ventura thanks! Will definitely reach out for more info.
- Real Estate Broker 路 San Diego, CA 路 Member since 2016 路 355 posts 路 195 votes5y
@Paris Ambush, I usually tell my house hacking clients here in SD, first step know your Budget, and your loan amount. Second, based on your budget, know what location and lifestyle you would like. If you would like to live there, so will others, therefore you will find tenants and/or roommates, and it will be in an area that appreciates because people desire to live there. It all starts with you budget ;)
- Rental Property Investor 路 Minneapolis, MN 路 Member since 2020 路 540 posts 路 285 votes5y
@Paris Ambush
California is a tough state to LL in, especially for a first time investor / LL.
- Member since 2020 路 7 posts 路 5 votes5y
@Frank Hinck interesting, care to elaborate why?
- 5yTwana RasoulBusiness MemberReal Estate Agent 路 San Diego, CA 路 Member since 2017 路 1k+ posts 路 1k+ votes
@Paris Ambush
House hacking is great. I house hack here myself. House hacking a multifamily is the the best way to go if your budget can handle it. You can qualify for a higher loan on a multi family vs a single family due to rental income. For a duplex you find decent opportunities in the 600k-800k ish range depending on what areas you are comfortable with. A duplex is a great idea if you want to have the option of going fha and putting on 3.5% down. Lots of great neighborhoods available throughout central San Diego for multifamily house hacking
Compass5122 Reviews - 5yDan H.Pro MemberInvestor 路 Poway, CA 路 Member since 2015 路 7k+ posts 路 8k+ votes
Originally posted by @Paris Ambush:
@Frank Hinck interesting, care to elaborate why?
I suspect he has read it somewhere and never been a LL in San Diego.
I have been doing this a while in San Diego. My experience is with the vacancy rate so low, good, screened tenants typically pay their rent and take care of the place. This is because if they do not, it will be very difficult for them to rent a nice place. It is the power of vacancy rates below 3%.
Our tenant criteria does not allow an eviction. If you have been evicted ever, you cannot rent our units. If any of your LL in the last 5 years have anything negative to say about you, you cannot rent our units. Basically, we only rent to ideal tenants.
I have lost a total of less than one month of rent from non payment between all of our LTR units. We have had rentals for over 2 decades.Screen well and San Diego is an easy place to be a LL. It has one of the lowest eviction rates anywhere. This is mostly due to the consequences to the tenant of being evicted.
now for the bad, previous to a year ago I could get rid of any tenant simply by raising rents above market rent. It results in them giving notice and ensures no blow back. A year ago, state wide rent control was passed for multi unit. This makes the increase rent not an option to get rid of less than ideal tenants. The same rent control rules also make it so that it is much harder to get rid of an undesired tenant via other means. Prior to the rent control rule, a tenant on month to month the LL could provide notice at any time. This is no longer the case. This only applies to multi unit; it does not apply to SFH.Set your bar high for tenants and there should not be any issues.
Good luck
- Member since 2020 路 7 posts 路 5 votes5y
@Dan Heuschele thanks so much for your awesome insight into LL in SD, this helps much! I also agree that proper tenant screening can alleviate most serious issues, but was concerned about being able to take action for exceptional cases (unruly behavior, sudden disregard for house rules, etc.).
- Member since 2020 路 20 posts 路 6 votes5y
Originally posted by @Twana Rasoul:
@Paris Ambush
House hacking is great. I house hack here myself. House hacking a multifamily is the the best way to go if your budget can handle it. You can qualify for a higher loan on a multi family vs a single family due to rental income. For a duplex you find decent opportunities in the 600k-800k ish range depending on what areas you are comfortable with. A duplex is a great idea if you want to have the option of going fha and putting on 3.5% down. Lots of great neighborhoods available throughout central San Diego for multifamily house hacking
Factoring in rental income to qualify for a higher loan amount 馃. Good point and thanks for the reminder!馃榿
But on that note - there鈥檚 a little dance that needs to happen when purchasing a property and showing proof on rental income, right?
- New to Real Estate 路 San Diego 路 Member since 2019 路 45 posts 路 12 votes5y
Originally posted by @Long G. Tran:Originally posted by @Twana Rasoul:
@Paris Ambush
Factoring in rental income to qualify for a higher loan amount 馃. Good point and thanks for the reminder!馃榿But on that note - there鈥檚 a little dance that needs to happen when purchasing a property and showing proof on rental income, right?
That is interesting, having a little dance at the time of applying for a loan to show proof of income.
2 questions
Q1. Will having existing tenants in the duplex/fourplex save the investor from having to show the proof?
Q2. For an owner occupied duplex/tri/fourplex, will that be subject to rent control? if you need to increase rents on existing tenants who happen to be way under market? - Member since 2020 路 20 posts 路 6 votes5y
@Manraj Singh I'll leave that for the pros to answer. @Maxwell Ventura @Twana Rasoul @Dan H. @Kenneth Donaghy
- 5yTwana RasoulBusiness MemberReal Estate Agent 路 San Diego, CA 路 Member since 2017 路 1k+ posts 路 1k+ votes
@Manraj Singh for multi unit they will use existing rents/a portion of and for vacant units the rents will be taken from what the appraiser says the market rates should be.
Compass5122 Reviews - 5yDan H.Pro MemberInvestor 路 Poway, CA 路 Member since 2015 路 7k+ posts 路 8k+ votes
Originally posted by @Manraj Singh:
Originally posted by @Long G. Tran:Originally posted by @Twana Rasoul:
@Paris Ambush
Factoring in rental income to qualify for a higher loan amount 馃. Good point and thanks for the reminder!馃榿But on that note - there鈥檚 a little dance that needs to happen when purchasing a property and showing proof on rental income, right?
That is interesting, having a little dance at the time of applying for a loan to show proof of income.
2 questions
Q1. Will having existing tenants in the duplex/fourplex save the investor from having to show the proof?
Q2. For an owner occupied duplex/tri/fourplex, will that be subject to rent control? if you need to increase rents on existing tenants who happen to be way under market?Q1: You may have to show proof of rental amount, but it should be easy. Get an estoppel prior to purchase signed by the tenants and the seller. It should state rents, Security deposit, and appliance ownership at a minimum. This should suffice for proof of rent.
Q2: In general duplex to quad older than 15 years old are rent controlled. For duplex, the rules are a bit complicated for owner occupied. if the property is owner occupied when the other tenant is placed, the unit is exempt for rent control. Owner occupying after other tenant is placed is rent controlled. However, bumping a tenant for owner and some family members to occupy is allowed as long as notice was provided that the owner wanted to maintain this right (text to use is in the bill). I am unsure what happens if you provided the notice at this time, as it has been ~1 year since the state wide rent control started to apply. The LL who knew what they were doing, provided the rent control or not rent controlled notice to each tenant (text to use is in the bill). For those that rent control applied, the LL provided notice that they were maintaining their right to have owner and/or family move into the unit. It is my view this right to move in can be used to get a duplex exempt from rent control. Move into one unit, then move into other unit, then rent first unit. It may not be the spirit of what was desired, but I see nothing that prevents it. To CYA, maybe have a rationale for the 2nd move. For example, move into the smaller unit. Then move into the larger unit. If questioned (unlikely), the reason you moved is you realized you needed more space. Note this owner occupied hack only applies to duplexes. Reference AB-1482.
Good luck
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