San DIego Investments
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Rental Property Investor · San Diego, CA · Member since 2014 · 1k+ posts · 2k+ votes
9yHi @Alissa K.
Just my opinion. I have sold all my pricey San Diego RE, except personal residence. I had 10 rental condos here in the San Diego area and purchased at very low prices comparatively to now values. I purchased them in 2011-2012. The people that have purchased these condos that I sold for double the price I purchased them for bought FHA 3.5 % down, with credit scores in the low 600's and with not much money in the bank. I would not have purchased these condos for this price in 2011-2012, due to not being able to cash flow at these current prices with 25% down like I purchased them originally.
Now they will cash flow if you put 50% down. If that is your plan, then that would be good leveraged debt and add more safety in case we do see this rerun occur again and prices go down 25-50% again. I have lived here in San Diego since 1978 and don't believe my little 3br/1ba 1040 sf house in Mira Mesa in the San Diego area will continue to rise and go to $1,000,000.00 someday. Right now it is at the all time peaks currently about $520,000.00. The only way this could happen would be many more high paying jobs, vastly increasing pay for employees etc... The other way it could happen would be to repeal Dodd Frank and ease the lending standards further. That would be a recipe for disaster.
Swanny
50 Replies
- Real Estate Investor · Encinitas, CA · Member since 2016 · 3k+ posts · 3k+ votes9y
@Alissa S. Okay, you kinda have to start with the "why"? Most of the BP is on the opposite side of the fence. They're in a San Diego-esc market and run to the midwest seeking cash-flow. You're in Minneapolis and looking at San Diego because you're seeking ______. Fill in the blank so we can help :-)
- 9yAlex ShaughnessyPro MemberReal Estate Investor · Spring Valley, CA · Member since 2016 · 288 posts · 98 votes
exactly. piggybacking w/ that previous post, I would think you might say appreciation. Socal is great for appreciation but depending on how you look at it, it appears to be at the top of the cycle. I am from san diego and haven't even thought twice about investing here at this point and time. However, deals are happening in every city and if you connect w/ the right ppl, maybe you can make it happen. I apologize I cannot give much more than that.
- Developer · San Diego, CA · Member since 2015 · 1k+ posts · 1k+ votes9y
@Alissa S. Yes to what @Andrew Johnson said. Most importantly, are you looking to acquire and operate property, to aiming to buy and sell?
In terms of pointers, both strategies are highly, highly competitive in the City areas. Keep in mind that LA is the largest County (per population) in the country, and SD is fifth largest ... together that's 14 million people. Add in Orange County and you're close to 17 million people along the coast. Many of these areas are dominated by a lack of land and inventory. Combine lots of operators with lack of land/inventory and finding good opportunities is the natural outcome. Also makes scaling a challenge.
Personally, I've been buying, developing, and operating for rental, which I'm quite content with as a strategy ... but that's a pretty specific niche.
- San Diego , CA · Member since 2017 · 42 posts · 18 votes9y
I'm in the San Diego market and @Alex Shaughnessy said it pretty well himself. The market here is pretty much at the top of the cycle. I've been leaning more towards scaling my wholesaling business here and partnering up on flips. Eventually (BRRR) buy and hold rentals are what I'd like to transition into but for now, in this competitive market we're focusing on the quicker capital building investment strategies. Overall.. stay educated, stay consistant and be efficient. Those three strategies have proved to result in great success for many investors! Happy investing. Feel free to connect/pm with any questions you may have. The more I help the more I learn, and the more I learn the more I earn. Win win for everyone.
- 9yJordan MoorheadBusiness MemberReal Estate Agent · Austin, TX · Member since 2015 · 5k+ posts · 3k+ votes
@Alissa S. do you already own rentals in Minneapolis? There are still deals here and much better cashflow than San Diego.
The Moorhead Team5140 Reviews - Flipper/Rehabber · San Diego, CA · Member since 2014 · 48 posts · 5 votes9y
Originally posted by @Andrew Johnson:
@Alissa S. Okay, you kinda have to start with the "why"? Most of the BP is on the opposite side of the fence. They're in a San Diego-esc market and run to the midwest seeking cash-flow. You're in Minneapolis and looking at San Diego because you're seeking ______. Fill in the blank so we can help :-)
Andrew, Thank you for your comments! I am looking at new markets. I am moving out of MN and would like to continue to build my business in my new location.
Why would I not do that? I am just looking for seasoned investors in the So Cal market to network with and gain a little insight. When I started my career here in investment real estate, I went to the largest grouping of investors to network and learn about the process where I live. Every state has different regulations, contracts, rental laws, etc. It would be nice to have a group of new friends to bounce ideas off of and learn from.
- Flipper/Rehabber · San Diego, CA · Member since 2014 · 48 posts · 5 votes9y
Originally posted by @Alex Shaughnessy:
exactly. piggybacking w/ that previous post, I would think you might say appreciation. Socal is great for appreciation but depending on how you look at it, it appears to be at the top of the cycle. I am from san diego and haven't even thought twice about investing here at this point and time. However, deals are happening in every city and if you connect w/ the right ppl, maybe you can make it happen. I apologize I cannot give much more than that.
Thanks for the reply! Where are you investing if not in your home town?
- Flipper/Rehabber · San Diego, CA · Member since 2014 · 48 posts · 5 votes9y
Originally posted by @Justin R.:
@Alissa S. Yes to what @Andrew Johnson said. Most importantly, are you looking to acquire and operate property, to aiming to buy and sell?
In terms of pointers, both strategies are highly, highly competitive in the City areas. Keep in mind that LA is the largest County (per population) in the country, and SD is fifth largest ... together that's 14 million people. Add in Orange County and you're close to 17 million people along the coast. Many of these areas are dominated by a lack of land and inventory. Combine lots of operators with lack of land/inventory and finding good opportunities is the natural outcome. Also makes scaling a challenge.
Personally, I've been buying, developing, and operating for rental, which I'm quite content with as a strategy ... but that's a pretty specific niche.
I am not sure what I am looking to do there yet. I am still researching San Diego trends, rental pricing etc. Since there is a lack of land, affordable housing there due to the amount of people, I was thinking rentals is where I would love to be. I am actually leaning more toward commercial rentals, but have just started my quest for knowledge of the areas. That is why I was looking to this group for some help. When you say you buy and develop, are you developing multi family? Are you tearing down existing and building new, or taking old and turning it into a duplex or just buy, fix hold? You mentioned niche, so that has me curious.
I feel as though San Diego has a fluctuating and semi-transient community, and also a long list of probate opportunities, so I am thinking of potentially starting in the wholesale realm and if I can secure some seller financing deals, I will hold them for rentals. I did hear that there was a restriction on rental rates, like the city dictates how much landlords can charge for rent...is that an accurate statement? Just heard that yesterday. Haven't researched yet.
- Flipper/Rehabber · San Diego, CA · Member since 2014 · 48 posts · 5 votes9y
Originally posted by @Account Closed:
I'm in the San Diego market and @Alex Shaughnessy said it pretty well himself. The market here is pretty much at the top of the cycle. I've been leaning more towards scaling my wholesaling business here and partnering up on flips. Eventually (BRRR) buy and hold rentals are what I'd like to transition into but for now, in this competitive market we're focusing on the quicker capital building investment strategies. Overall.. stay educated, stay consistant and be efficient. Those three strategies have proved to result in great success for many investors! Happy investing. Feel free to connect/pm with any questions you may have. The more I help the more I learn, and the more I learn the more I earn. Win win for everyone.
I would love to collaborate with you! I was thinking wholesaling would be a great jumping point. I am doing a lot of that here with partners.
Every market is currently at the top of the cycle. In MN our season change makes the market slow, but the pricing is astronomical for the area. Houses are in the same price brackets and higher then they were in 2005! It has definitely been a strange trend, but deals are harder to acquire because everyone here is frugal and wants to put it on the market to get top dollar, not sell to an investor to get out quickly. We tend to stick to our neighborhoods, and stick with our houses for long periods of time as minnesotans so we are forced to pay more then we would like. All but gone are the days of 65% margins. We are looking at 75%-85% as the lowest numbers. That age old formula of 70%-cost of repairs= buy price has been written in the history books but we wholesalers are gold here. We are doing all the leg work. I hope to start in that arena there as well so I learn more about the market conditions.
- Flipper/Rehabber · San Diego, CA · Member since 2014 · 48 posts · 5 votes9y
Originally posted by @Jordan Moorhead:
@Alissa S. do you already own rentals in Minneapolis? There are still deals here and much better cashflow than San Diego.
Yes I do. I know that Minneapolis is a good area for cashflow. I still find deals, but I want to also invest in the california market. I am also looking into the florida markets. I am broadening my horizons.
- 9yDan H.Pro MemberInvestor · Poway, CA · Member since 2015 · 7k+ posts · 8k+ votes
Those that believe San Diego is at the top of the market are stating a belief that does not match the studies on pricing that I have read. I have seen no published forecasts that state San Diego is at the top of the market. In addition I have been hearing San Diego is at a market high for a couple years. Last year had good appreciation (numbers vary a bit on the source but most indicate slightly more than 10% market appreciation last year). The year before had similar appreciation. I personally think trying to time the RE market is like trying to time the stock market and most people cannot do it consistently. We have made 2 offers in the last 1.5 weeks and are proceeding with 1 of those purchases.
What if we are at the height of the market? Here are some of my thoughts. 1) Rents are likely to continue to appreciate. I base this on the following: every study indicates this, rent appreciation lags property appreciation in every recent cycle, minimum wage is increasing, there continues to be supply/demand issues (my units are being moved into as soon as move-in ready at market rent). 2) I have purchased at near market highs in 1993 and 2004. Both lost value in the short term having depreciated significantly. Today both purchases have significant appreciation and have been good investments with good ROI.
We look for purchases with forced appreciation opportunities. Typically with easy forced appreciation such as rehabs versus more extensive efforts that may result in better ROI.
So I do not fear where we are in the market cycle. However, competition makes finding good cash flow properties challenging. This implies that many San Diego RE investments do not have initial cash flow. Therefore there are challenges investing in San Diego that many other markets do not have.
Good luck
- Sherman Oaks, CA · Member since 2013 · 3k+ posts · 2k+ votes9y
Originally posted by @Alissa S.:
I am interested in transitioning into the so cal market. I wanted to network with other investors about the market in that area! Any pointers, locations to avoid, what strategies are working in that market etc... I am from the Midwest and we are an entirely different market then what is out there.
Talk to me!!! :)
I think you are going about this the right way. As others mentioned SD historically and currently is a very strong REI market (#3 nationally for total profits since 2000). I agree SD closer to the top but that could have much less impact long run. Most past years have been closer to the top or at a top and that is pretty normal for SD as new tops are formed decade after decade.
It is a really awesome city and some say America's finest :) Many start ups are locating there and usually for a host of good reasons. When you look back years from now and examine where you invested in 2017/18...your future kids will thank you.
Record number of tech start-ups launched in San Diego last year.
http://www.sandiegouniontribune.com/business/techn...
Good luck!
- Flipper/Rehabber · San Diego, CA · Member since 2014 · 48 posts · 5 votes9y
Originally posted by @Dan H.:
Those that believe San Diego is at the top of the market are stating a belief that does not match the studies on pricing that I have read. I have seen no published forecasts that state San Diego is at the top of the market. In addition I have been hearing San Diego is at a market high for a couple years. Last year had good appreciation (numbers vary a bit on the source but most indicate slightly more than 10% market appreciation last year). The year before had similar appreciation. I personally think trying to time the RE market is like trying to time the stock market and most people cannot do it consistently. We have made 2 offers in the last 1.5 weeks and are proceeding with 1 of those purchases.
What if we are at the height of the market? Here are some of my thoughts. 1) Rents are likely to continue to appreciate. I base this on the following: every study indicates this, rent appreciation lags property appreciation in every recent cycle, minimum wage is increasing, there continues to be supply/demand issues (my units are being moved into as soon as move-in ready at market rent). 2) I have purchased at near market highs in 1993 and 2004. Both lost value in the short term having depreciated significantly. Today both purchases have significant appreciation and have been good investments with good ROI.
We look for purchases with forced appreciation opportunities. Typically with easy forced appreciation such as rehabs versus more extensive efforts that may result in better ROI.
So I do not fear where we are in the market cycle. However, competition makes finding good cash flow properties challenging. This implies that many San Diego RE investments do not have initial cash flow. Therefore there are challenges investing in San Diego that many other markets do not have.
Good luck
Thank you for this response! I am of the same opinion. All markets are showing significant appreciation and pricing is at a peak.
I am not sure if I mentioned this in previous responses but like with any market, opportunities are always present it is just a matter of structure :)
Have you had experience with rental rate caps? I was speaking with a property manager and they mentioned that the city has a cap of the amount of rent that can be charged... Is that a real thing or is the property manager misinformed?
Since you are a rehabber, what do your typical budgets look like for renovations. I know that each property is different, and has different needs, but I know that where I live, basic cosmetic rehabs with HVAC updates and minor plumbing and electrical can run 50 grand.... What does your typical rehab costs look like?
- 9yAlex ShaughnessyPro MemberReal Estate Investor · Spring Valley, CA · Member since 2016 · 288 posts · 98 votes
@Alissa S. KCMO
- Flipper/Rehabber · San Diego, CA · Member since 2014 · 48 posts · 5 votes9y
Originally posted by @Alex Shaughnessy:
@Alissa S. KCMO
? Kansas City?
- Flipper/Rehabber · San Diego, CA · Member since 2014 · 48 posts · 5 votes9y
Originally posted by @Matt R.:
Originally posted by @Alissa S.:
I am interested in transitioning into the so cal market. I wanted to network with other investors about the market in that area! Any pointers, locations to avoid, what strategies are working in that market etc... I am from the Midwest and we are an entirely different market then what is out there.
Talk to me!!! :)
I think you are going about this the right way. As others mentioned SD historically and currently is a very strong REI market (#3 nationally for total profits since 2000). I agree SD closer to the top but that could have much less impact long run. Most past years have been closer to the top or at a top and that is pretty normal for SD as new tops are formed decade after decade.
It is a really awesome city and some say America's finest :) Many start ups are locating there and usually for a host of good reasons. When you look back years from now and examine where you invested in 2017/18...your future kids will thank you.
Record number of tech start-ups launched in San Diego last year.
http://www.sandiegouniontribune.com/business/techn...
Good luck!
Thank you so much Matt! I appreciate the article! It is nice to know there are many startups there because Angel investing is the progression of what I want to do. I have been learning a lot about that realm recently along with crowd funding options.
I am loving the input here especially from seasoned investors who love the area! I know I will love it as well and want to be will prepared to make the move to invest there.
There is always money to be made, it is just a question of how hard one is willing to work! Would love to network more with you offline! What is your strategy for investment?
- 9yDan H.Pro MemberInvestor · Poway, CA · Member since 2015 · 7k+ posts · 8k+ votes
@Alissa S. There is no where in San Diego county that I am aware of that has rent control. However the STR regulations are currently being negotiated. I would not recommend purchasing in San Diego city with plans to STR until after the regulations are closer to finalized.
Your $50K estimate seems high but I suspect it is because your rehabs are either bigger or more extensive than my rehabs because I would be very surprised if the cost of rehab is less in San Diego than MN. My rehabs are closer to $30K per unit. This typically includes new kitchen, new bathrooms (but hopefully not the baths/showers), new flooring where needed (typically most flooring), removing the ceiling texture, new windows, décor outlets and switches, paint, typically some doors and handsets (both entry doors and/or closet doors) and there always seems to be something unexpected. It does not typically include HVAC/furnace, or much/any exterior. However the flooring we use is not on the cheaper side (composite plank). On our last rehab the flooring was close to $7K (there were stairs and the unit is larger than our usual size unit). Our typical rehabbed unit is 2 BR and 1.5 Ba (we have three 2/1 (soon to be 4 as our current purchase is a 3/1 and 2/1 detached duplex) but we have not rehabbed any of the 2/1). Footage on the rehabbed units varies from ~700' to 1240'.
Good luck.
- Sherman Oaks, CA · Member since 2013 · 3k+ posts · 2k+ votes9y
You are welcome and sure anytime. I am primarily seeking, offering on value add opportunities in the LA area commercial or residential. This could be for long term hold or shorter term hold/flip. I always want to be in the position to sell for more as the next day option. For the last few years this has been a throw a dart deal and I think now a little more vision is required. I did entertain some stuff in Chula Vista as an exercise in research mostly.
You got to love San Diego and I think still underrated for big city combined with quality of life if that is possible but that is from a LALA land perspective I understand. I spent some time there as a young surfer, Mission Hills, Old Town, Mission Beach south jetty and Ocean Beach...and then many jaunts into Baja. The place is rad for that surf stuff all day. IMO the entire place has only one direction it is going and that is going to be most rewarding for many wiser investors I think.
Good luck!
- Rental Property Investor · San Diego, CA · Member since 2014 · 1k+ posts · 2k+ votes9y
Hi @Alissa K.
Just my opinion. I have sold all my pricey San Diego RE, except personal residence. I had 10 rental condos here in the San Diego area and purchased at very low prices comparatively to now values. I purchased them in 2011-2012. The people that have purchased these condos that I sold for double the price I purchased them for bought FHA 3.5 % down, with credit scores in the low 600's and with not much money in the bank. I would not have purchased these condos for this price in 2011-2012, due to not being able to cash flow at these current prices with 25% down like I purchased them originally.
Now they will cash flow if you put 50% down. If that is your plan, then that would be good leveraged debt and add more safety in case we do see this rerun occur again and prices go down 25-50% again. I have lived here in San Diego since 1978 and don't believe my little 3br/1ba 1040 sf house in Mira Mesa in the San Diego area will continue to rise and go to $1,000,000.00 someday. Right now it is at the all time peaks currently about $520,000.00. The only way this could happen would be many more high paying jobs, vastly increasing pay for employees etc... The other way it could happen would be to repeal Dodd Frank and ease the lending standards further. That would be a recipe for disaster.
Swanny
- Sherman Oaks, CA · Member since 2013 · 3k+ posts · 2k+ votes9y
If you are looking for initial cash flow via San Diego condos today that is a harder nut to crack. Flip those fixer condos unless located in another up and coming area is the easier option? Too many condo home owner buyers continue to support higher SD retail prices sub 500k is likely. Figure by 2020ish two minumum wages buyers combined qualify for near 300k with current interest rates.
- Investor · San Diego, CA · Member since 2015 · 77 posts · 42 votes9y
Look at all these San Diegans on here! And such varying opinions of the market here as well. I don't think we have it the top here yet, though we may see some cooling depending where interest rates go. Supply is extremely low (1.5 months for most residential types and prices last I checked), and vacancy for MFUs is also low.
Alissa, feel free to reach out to me at any time with any questions you may have.
- Sherman Oaks, CA · Member since 2013 · 3k+ posts · 2k+ votes9y
Pretty much everything I checked is at multiple decade lows for vacancy in San Diego. That is sub 500k residential or any multis, office, warehouse, industrial, retail, storage, cemetary etc...Perhaps a bigger glut in luxury over 1 mil housing IDK?
- Developer · San Diego, CA · Member since 2015 · 1k+ posts · 1k+ votes9y
Originally posted by @Alissa S.:
I feel as though San Diego has a fluctuating and semi-transient community, and also a long list of probate opportunities, so I am thinking of potentially starting in the wholesale realm and if I can secure some seller financing deals, I will hold them for rentals. I did hear that there was a restriction on rental rates, like the city dictates how much landlords can charge for rent...is that an accurate statement? Just heard that yesterday. Haven't researched yet.
Correct. Either tear down and build ... or repurpose with additional development. I call it a niche because (A) not as many people are doing that and (B) it's not scalable since there's few cases where it makes economic sense relative to other strategies and (C) you need knowledge and contacts that are pretty specialized.
And, no - the City doesn't have rent control and I'm not aware of anywhere in the County where there is. In many ways, it's more landlord friendly than the metro areas elsewhere in the state that people typically point to when they say "California is tenant-friendly." That ignores statewide rules that may be more tenant-friendly than other states.
- Lender · San Clemente, CA · Member since 2017 · 77 posts · 35 votes9y
I was in Minneapolis last year and couldn't believe how cheap housing is, prepare for a shock when you enter San Diego! Living in Orange County, I recently went to a realtor meeting and they were crying about the lack of flip opportunities, all this to say, the "Pros" have been flipping for ten years now and with essentially no foreclosures in San Diego, where are you going to find opportunities? Cap rates are 4-6%; SD is at the top of the market (post recession highs), virtually no vacancy factor in SF, OC, and SD. Trust me, unless you have a ton of money, you can't compete! Some of the most sophisticated investors are in Southern California. Not to mention Chinese money is flowing into the San Gabriel Valley (LA) where they are buying whole blocks sight unseen. I would keep your money parked until the next recession.
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