Beach property in Imperial Beach/San Diego County

Buying & Selling Real Estate
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Beach property in Imperial Beach/San Diego County

Alexis DePalmo
Investor · San Diego, CA · Member since 2017 · 6 posts · 0 votes

Hello BP members! Looking for some sage advice. I have a SFH in the most southern beach community in California, Imperial Beach. I lost my butt in the downfall of the market and this property was last one standing. I was able to get a loan mod and it has been a tax buffer over the last couple of years, we loose money on capital expenditures. The loan mod is subject to current interest rates in 2019, currently at 3.65 making 200 over monthly on rent. I'm VERY NEW to BP and now I'm on fire to invest again and looking forward to setting goals (I was demoralized not long ago). I'm looking into holding onto this property and refinancing. Anyone have any different ideas? Who would sell? and why? Thank you so much BP community for inspiring me to reset my real estate goals.

Breakdown-

I owe 398

Rent at 1900 (could rent for 2200)

Could sell for 525 to 550

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  • Justin R.
    Developer · San Diego, CA · Member since 2015 · 1k+ posts · 1k+ votes
    9y

    @Alexis DePalmo You've got about $100k sitting in this property ($525k - $398k - sales costs).  Let's say you demand a 10% return on that capital.  That means you need to be reliably growing that capital $10k every year.

    So, does this property do that?  Or, would you be better off putting the capital to work elsewhere?

    Let's assume that your tenants will pay $6000 towards the principal in the next year.  That means you need free cash flow from your rental income of $4000 for the year (or $330 each month) to make up the rest.  From your post, I'll guess your real free cash flow is about -$300/m.

    That means the only way this makes sense is if you want to rely on appreciation to make up the difference.  That's a personal call that smart people can argue about.  But, if the market rises 2% per year, your total potential return would be about 12.9% on your capital.

    Add in some tax benefits, subtract the hassle of managing a property, add in the excitement of rolling the dice with your capital... the magnitude of each is all dependent on you.

    So what's my 'sage' advice?  Investing is a game of alternatives - by themselves, these numbers mean nothing.  It only matters when you look at this investment and compare it to other alternatives available to you.  For me, owning a single family rental locally just isn't the most attractive option for my capital.  What would YOU propose to use the capital for if you sold?  Is that alternative better?

    Barring other info, I would not lock $100k in an SFR like you're describing. So, I would be selling.

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  • Jo-Ann LapinPro Member
    Loan Officer · Tustin, CA · Member since 2015 · 3k+ posts · 713 votes
    9y

    well long term do you think the subject will need further up keep with significant capital spent on it?

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  • Alexis DePalmo
    OP
    Investor · San Diego, CA · Member since 2017 · 6 posts · 0 votes
    9y

    @Justin R. thank you for your response. I need to crunch the numbers more. I'm currently weighing all the options and especially what a different investments would look like?!  I'm very apprehensive on buying outside of California. I'm not comfortable with my skills as an investor, yet.  If anything I need to research other investments which I'm actively doing.  Thanks again! 

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  • Alexis DePalmo
    OP
    Investor · San Diego, CA · Member since 2017 · 6 posts · 0 votes
    9y

    @Jo-Ann Lapin I know that it will need future keep up.  Not a new roof but plumbing has been problematic and I can foresee other issues. It was built in 1958.

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  • Willie Brown
    Investor · Imperial Beach, CA · Member since 2017 · 25 posts · 21 votes
    6y

    I'd recommend selling this property now with a 1031 exchange or just take profits here. Time for properties that can handle a downturn while not losing too much value in a down turn. 

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  • Dave FosterBusiness Member
    Qualified Intermediary for 1031 Exchanges · St. Petersburg, FL · Member since 2013 · 9k+ posts · 9k+ votes
    6y

    @Alexis DePalmo, It might be possible to refinance to your advantage. But I wouldn't do it to get cash out to reinvest.  A bad rental only gets worse the more debt you pile on it.  But if you could shave some dollars off with a new rate that might help.

    Another option would be to repurpose - If it's close to the beach convert it into a short term rental.  Or sell and 1031.  You'll be wanting to find better cash flow and that can be tough in CA.  A beach location is awesome for appreciation.  But as you know they can also drop quickly as well.

    The 1031 Investor5137 Reviews
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