Anybody there investing in San Diego? Should I go somewhere else?
Real Estate Agent · San Diego / CA · Member since 2020 · 49 posts · 20 votes
Anybody there investing in San Diego? Should I go somewhere else?
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Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 31k+ posts · 20k+ votes
6yOriginally posted by @Rodrigo Serzedello:
I'm new in the real estate and I have never done it before, but got around 200k to start investing and generating some monthly cashflow. I've been learning that over here (SD) is terrible to get some cashflow but its great with appreciation, I want both! lol....
Any recommendations of out of state to invest? Should I go for a turnkey investment since I've never done before?
Thanks!
So folks stay home. Others look to the cheaper turnkey markets as the prices are so much cheaper than coastal markets like San Diego. Many cheaper turnkey markets available. Cleveland is the one I am most familiar with and it's also very popular with investors across the USA so I figured you'd get some value out of reading The Ultimate Guide to Grading Cleveland Neighborhoods. I also have similar guides that you may want to look over for Kansas City, Missouri. & Birmingham, Alabama.
In addition there are tons of other turnkey markets out there besides those listed above. Many of these markets are very well represented by sellers & turnkey operators here on BiggerPockets. In no particular order I have listed some of the most popular markets for out of state investors
- Cincinnati, Ohio
- Dayton, Ohio
- Toledo, Ohio
- Youngstown, Ohio
- Cincinnati, Ohio
- Memphis, Tennessee
- Saint Louis, Missouri
- Indianapolis, Indiana
- Detroit, Michigan
- Erie, Pennsylvania
- Louisville, Kentucky
- Milwaukee, Wisconsin
- Jackson, Mississippi
Each of these markets is popular with turnkey investors because of the low barrier to entry, high rental demand & high rent to price ratio. I recommend setting up keyword alerts for each area as they are discussed in the forums daily with advertisements posted in the BiggerPockets marketplace hourly.
One thing to note when looking at the individual markets, you can make or lose money in any market. Don't think that one particular out of state market will shoot you to success or abject failure. It's not really that complicated to buy out of state. It only becomes complicated when investors try to over complicate or over think everything. Whenever you are buying a property out of state you should do a few things to ensure it's as smooth as possible.
- Don't buy in the roughest neighborhood in the urban core. Pick a solid B-Class suburban area. Perhaps a nice 1950's built bungalow.
- Always hire a 3rd party property inspector to give you an unbiased feel for the home. The reports are 40-90 pages long and go through the entire house in great detail.
- Get an appraisal. If your using financing the bank requires this. This is good. The bank isn't going to let you blow their money. They have more skin in the game then you do.
- Make sure you get clear title. If using a lender this is a non issue. They will make you do this. It's those maniacs that buy homes cash via quit claim deed off of craigslist that really get screwed.
- Make sure your property manager is a licensed real estate brokerage.
- Google Clayton Morris scam and/or Morris Invest scam for a cautionary tale of what not to do when buying turnkey real estate
- Understand you can not eliminate all risk, only mitigate it. If you are risk averse, real estate, (especially out of state) is not for you.
39 Replies
- Specialist · Paradise Valley, AZ · Member since 2018 · 3k+ posts · 2k+ votes6y
Originally posted by @Rodrigo Serzedello:
I'm new in the real estate and I have never done it before, but got around 200k to start investing and generating some monthly cashflow. I've been learning that over here (SD) is terrible to get some cashflow but its great with appreciation, I want both! lol....
Any recommendations of out of state to invest? Should I go for a turnkey investment since I've never done before?
Thanks!You should sit with someone actually making a living on cash flow if your goal is cash flow. The Turnkeys I sell to people from the OC, LA and SD are all cash flow investors. Your stated amount to invest would be enough for 3 Turnkeys in the Phoenix AZ area where I am. I always meet with potential investors to help them with the ins and outs of each type of investing. There is nothing like having all your questions answered and being prepared when taking the first steps.
Here is some basic information on what to look for
3 Ways to Wealth in Real Estate – Fix & Flip, Buy & Hold, Turnkey (Cash flow) – Here’s How
- Real Estate Agent · San Diego / CA · Member since 2020 · 49 posts · 20 votes6y
Interesting Mike, I was actually looking at some properties in AZ online right now! Im really laser focus in cash flow and of course, a moderate appreciation as well.
- Real Estate Agent · San Diego, CA · Member since 2018 · 144 posts · 145 votes6y
@Rodrigo Serzedello
While you're in SD I'd say house hack. If you want to put all/most of your $$ to buying cashflow I'd recommend doing an FHA(VA loan) if you can here to start building appreciation. I invest out of state in Missouri. I love KC, Springfield, and a few other smaller pockets. Sounds like you're doing your research! For SD, I'd look toward West Chula Vista. Huge changes coming. It's going to be an mad house in 5-10 years in a good way. If you have any questions feel free to hit me up!
- Real Estate Agent · San Diego / CA · Member since 2020 · 49 posts · 20 votes6y
Thanks a lot for your inputs Donald! I will look around West Chula Vista for sure!
As far as San Diego, thats exactly what are my goals, house hacking! - 6yTwana RasoulBusiness MemberReal Estate Agent · San Diego, CA · Member since 2017 · 1k+ posts · 1k+ votes
@Rodrigo Serzedello highly recommend hour first property be a house hack locally, easy way to get into investing and then you can have some experience and comfort to invest further, including out of state. Our next house hack meetup is in a week. Feel free to come check it out. You can find it on here or meetup site. Pm me if you want link.
Best of luck
Compass5122 Reviews - Real Estate Agent · San Diego / CA · Member since 2020 · 49 posts · 20 votes6y
@Twana Rasoul Thank you! I will def try to attend yes! Lets connect!
Depends on your goals! I'm in LA and I've always gone the turnkey route for my out-of-state properties. They aren't perfect, or 100% hands-off, but in comparison with having to manage everything myself, I stick with the turnkeys. If you decide to go that route and need any help, reach out anytime.
- Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 31k+ posts · 20k+ votes6y
Originally posted by @Rodrigo Serzedello:
I'm new in the real estate and I have never done it before, but got around 200k to start investing and generating some monthly cashflow. I've been learning that over here (SD) is terrible to get some cashflow but its great with appreciation, I want both! lol....
Any recommendations of out of state to invest? Should I go for a turnkey investment since I've never done before?
Thanks!So folks stay home. Others look to the cheaper turnkey markets as the prices are so much cheaper than coastal markets like San Diego. Many cheaper turnkey markets available. Cleveland is the one I am most familiar with and it's also very popular with investors across the USA so I figured you'd get some value out of reading The Ultimate Guide to Grading Cleveland Neighborhoods. I also have similar guides that you may want to look over for Kansas City, Missouri. & Birmingham, Alabama.
In addition there are tons of other turnkey markets out there besides those listed above. Many of these markets are very well represented by sellers & turnkey operators here on BiggerPockets. In no particular order I have listed some of the most popular markets for out of state investors
- Cincinnati, Ohio
- Dayton, Ohio
- Toledo, Ohio
- Youngstown, Ohio
- Cincinnati, Ohio
- Memphis, Tennessee
- Saint Louis, Missouri
- Indianapolis, Indiana
- Detroit, Michigan
- Erie, Pennsylvania
- Louisville, Kentucky
- Milwaukee, Wisconsin
- Jackson, Mississippi
Each of these markets is popular with turnkey investors because of the low barrier to entry, high rental demand & high rent to price ratio. I recommend setting up keyword alerts for each area as they are discussed in the forums daily with advertisements posted in the BiggerPockets marketplace hourly.
One thing to note when looking at the individual markets, you can make or lose money in any market. Don't think that one particular out of state market will shoot you to success or abject failure. It's not really that complicated to buy out of state. It only becomes complicated when investors try to over complicate or over think everything. Whenever you are buying a property out of state you should do a few things to ensure it's as smooth as possible.
- Don't buy in the roughest neighborhood in the urban core. Pick a solid B-Class suburban area. Perhaps a nice 1950's built bungalow.
- Always hire a 3rd party property inspector to give you an unbiased feel for the home. The reports are 40-90 pages long and go through the entire house in great detail.
- Get an appraisal. If your using financing the bank requires this. This is good. The bank isn't going to let you blow their money. They have more skin in the game then you do.
- Make sure you get clear title. If using a lender this is a non issue. They will make you do this. It's those maniacs that buy homes cash via quit claim deed off of craigslist that really get screwed.
- Make sure your property manager is a licensed real estate brokerage.
- Google Clayton Morris scam and/or Morris Invest scam for a cautionary tale of what not to do when buying turnkey real estate
- Understand you can not eliminate all risk, only mitigate it. If you are risk averse, real estate, (especially out of state) is not for you.
Originally posted by @Rodrigo Serzedello:
I'm new in the real estate and I have never done it before, but got around 200k to start investing and generating some monthly cashflow. I've been learning that over here (SD) is terrible to get some cashflow but its great with appreciation, I want both! lol....
Any recommendations of out of state to invest? Should I go for a turnkey investment since I've never done before?
Thanks!I've been on bigger pockets for years, and I don't think I've EVER seen someone on here that is a multifamily buyer in San Diego. Maybe some people who've bought a few condos, or a 1-4 unit 'house hack' But never multifamily.
(it could be I just missed them but...)- Real Estate Agent · San Diego / CA · Member since 2020 · 49 posts · 20 votes6y
@Cody L. coming from a San Diego investor that statement has a lot of credibility!
Do you invest outside of SD? @Ali Boone, just added you! Would love to chat with you about your turnKey experiences.
@James Wise thanks for your inputs brother!
Originally posted by @Rodrigo Serzedello:
@Cody L. coming from a San Diego investor that statement has a lot of credibility!
Do you invest outside of SD? @Ali Boone, just added you! Would love to chat with you about your turnKey experiences.
@James Wise thanks for your inputs brother!
Reach out anytime!
- Equity Raiser and Turnkey Provider · Cleveland, OH · Member since 2016 · 4k+ posts · 1k+ votes6y
Originally posted by @Rodrigo Serzedello:
I'm new in the real estate and I have never done it before, but got around 200k to start investing and generating some monthly cashflow. I've been learning that over here (SD) is terrible to get some cashflow but its great with appreciation, I want both! lol....
Any recommendations of out of state to invest? Should I go for a turnkey investment since I've never done before?
Thanks!I would look into the Midwest where prices are lower and you can get more for your money!
I will be closing on a triplex in Ocean Beach this week and am planning to rehab all three units within the next 2 months. San Diego is more of an appreciation play and will require a higher % down payment in order to cash flow. We'll be doing a reverse 1031 exchange out of a SFR in Austin, Tx to fund the purchase. High property taxes, and managing remote are two primary reasons for moving back to CA. After renovations, I may end up renting one of the units short term to improve on cash flow. I also own a single family rental home (3/2) in Lemon Grove, which has been a great rental market over the last several years. Feel free to reach out anytime. Good luck!
Originally posted by @Rodrigo Serzedello:
I'm new in the real estate and I have never done it before, but got around 200k to start investing and generating some monthly cashflow. I've been learning that over here (SD) is terrible to get some cashflow but its great with appreciation, I want both! lol....
Any recommendations of out of state to invest? Should I go for a turnkey investment since I've never done before?
Thanks!>I've been learning that over here (SD) is terrible to get some cashflow but its great with appreciation, I want both! lol....
The initial cash flow in San Diego is poor but the actual cash flow is outstanding. The actual cash flow is the cash flow achieved over the hold period. It is not defined by the cash flow at purchase.Before the end of this month we will be sending out two rent increases. Each increase will be $150/month. Even with these rent increases, both tenants will be paying below market rent (they are good tenants so I am fine having their rent a little below market rent). They are not able to leave to obtain a similar unit at a better price. I expect our units will average over $150/month rent increase this year as the rent increases going out this month are on some of our lowest rent units. I suspect our Pt Loma units will each be having their rent raised at least $200/month.
Be leery of believing the initial cash flow has much correlation to actual cash flow over the hold period. I am confident that San Diego’s cash flow exceeds the zero appreciation Midwest markets over moderately long hold durations. Of course the zero appreciation Midwest markets have the better initial cash flow.
By the way all of our rentals are past the 1% rule ratio (2 units are currently not rented due to fire but they will be beyond the 1% ratio when they are rented) and some have passed the 2% rule and one STR RE is over a 4% ratio (2 units purchased $375k, rent ~$16k/month). That is San Diego cash flow.Good luck
Originally posted by @Anthony Saheed:
Originally posted by @Rodrigo Serzedello:
I'm new in the real estate and I have never done it before, but got around 200k to start investing and generating some monthly cashflow. I've been learning that over here (SD) is terrible to get some cashflow but its great with appreciation, I want both! lol....
Any recommendations of out of state to invest? Should I go for a turnkey investment since I've never done before?
Thanks!
Are you aware that you could make a life time passive income of about 15% - 25% ROI monthly by investing in properties in Dubai ?I offer both purchasing and property management here in Dubai.
Hit me up
Funny. On a question about wraps, I sent a link to an article that discusses them in detail. It was removed for 'self promotion' (wasn't my article and I or the link wasn't selling or even offering anything).
Yet this guy can spam in a "Should I invest in San Diego" with a "Invest with me passive in Dubai". That seems to be the spammiest thing you can do. So why wasn't IT removed?
Oh yeah. He's 'pro'. I'm not. Pay-To-Spam. RIght on BPOriginally posted by @Rodrigo Serzedello:
@Cody L. coming from a San Diego investor that statement has a lot of credibility!
Do you invest outside of SD? @Ali Boone, just added you! Would love to chat with you about your turnKey experiences.
@James Wise thanks for your inputs brother!
Do *I* invest outside of San Diego? Yes. Per my profile, I invest in Houston TX (it's the only place I invest actually)
@Ali Boone : I am a fellow SoCal resident..but a newbie. Would love to connect with you to gain some advice
Originally posted by @Eric Martel:
@Dan H. Can you confirm something because these numbers are unbelievable? You purchased a duplex for $375k and you are getting $16k in rents? In SF Bay Area you can buy a $1M house and rent it out for $5K.
Yes, but I did not buy it today. My point was to show the power of rent appreciation over time. Also be leery of comparing STR ratio to LTR ratio. STR are a lot more work or you pay a decent PM quite a bit to do much of the work for you.
I would say the percent ratio you referenced is about average SFR LTR ratio in San Diego at purchase. Average duplex might be 0.6% ratio at purchase (so only slightly better than what you indicate for a duplex).
Question for you is how much do you think that San Fran duplex that rents for $5k cost in 2011? How about in 2000?
The duplex STR I referenced was purchased in 1999 for $375k. We were one of the early adopters to STR (in 1999, long before AirBnB) which was our value add on that purchase. Today rents average ~$16k/month (STR). Virtually all the units in the vicinity (Mission Beach) are also STR (wish we could have bought more at the time - we sold our only rental at that time to be able to purchase this RE (only local investment RE that we have ever sold but it was necessary).
That has been our best RE. But we have an LTR quad that gets $13k/month that was purchased for $775k (using a refi from the duplex STR from above as we had total household income of ~$40k at the time). So the rent appreciation works for LTRs also but not as extreme (but LTRs require less work or less PM fees than STRs).
Leverage and appreciation (both rent and property) are powerful wealth builders.Good luck
My wife and I just closed on a duplex in Imperial Beach. We used a VA Loan and are househacking, but it would cash flow even if we didn't. Because we are saving about $1,450 a month our cash on cash is 174%. BUT even if we didn't live in one side and used it only as an investment property it would still have a cash flow of $750/mo ($325/door) and a 6% cash in cash. But I've been studying the IB markets for months. Good deals don't stay on the market for long here and we offered 7k above asking price the first day it was on the market. The only way it worked was that we already knew what was a good deal and what the rent would be.
You can find good deals here, but it just takes more work and being willing to pull the trigger quickly.
- Rental Property Investor · Fort Lauderdale, FL · Member since 2015 · 64 posts · 38 votes6y
@Dan H. Thank you for clarifying. That makes a lot more sense. Unfortunately I can't turn back time and buy property at 1999 prices. For properties I already own I also look at the return on equity as a key metric. You want to make sure you optimize that return as well. For example if you have $1M in equity in a house in San Francisco. The rent is $60k a year and NOI is 36k. Then you ROE is 3.6%. I can easily reposition or leverage that $1M and make more than 3.6%.
Originally posted by @Eric Martel:
@Dan H. Thank you for clarifying. That makes a lot more sense. Unfortunately I can't turn back time and buy property at 1999 prices. For properties I already own I also look at the return on equity as a key metric. You want to make sure you optimize that return as well. For example if you have $1M in equity in a house in San Francisco. The rent is $60k a year and NOI is 36k. Then you ROE is 3.6%. I can easily reposition or leverage that $1M and make more than 3.6%.
>I can easily reposition or leverage that $1M and make more than 3.6%.
You could but why do you think growth stocks like Amazon, Uber, etc that have little/no profit have been such good investments? Its the growth.
The RE growth is compounded with leverage. 80% LTV with modest 4% property appreciation (which is low for San Fran) is 20% return from the property appreciation. Assuming that the rent also has 4% appreciation (which is also below historical averages for San Fran) that produces a magnitude more than 4% growth to the cash flow (I would expect 4% increase in rent to produce at least 20% increase to cash flow in the early years when cash flow is minimized). So 40% return annual from the appreciation (rent and property) added to the 3.6% plus from cash flow (which I personally think is optimistic for the first year without a value add - think most will have negative cash flow the year of purchase without a value add), plus the equity paydown that is paid via the tenants' rent. I suspect most San Fran residential RE investors that have a 80% LTV have achieved better than 40%/year return on average.
We specialize in value adds. Most of our RE have had all the investment extracted and therefore is on infinite return.
Your method of evaluation is similar to those who would choose to purchase income stocks. Nothing wrong with that. It is likely a less volatile path. But the better returns (but likely more volatile) have been in the growth stocks.
Both paths can work but here is my issue with the people from San Fran or coastal So Cal going the RE cash flow route. Their chosen route is likely because they believe the appreciation route is too risky. But OOS rentals are full of risks. Everything from rents and property values that decline in inflation adjusted dollars, to issues of building/maintaining trusted teams, to expertise that allows one to know their given market, etc.
Case Shiller lists San Fran as having produced the best return on buy and hold residential RE for this century. LA and San Diego round out the top 3. Notice they are all high appreciation (similar to a growth stock) areas.
Good luck
- Rental Property Investor · Fort Lauderdale, FL · Member since 2015 · 64 posts · 38 votes6y
@Dan H. Let's help our friend @Rodrigo Serzedello who is looking to invest $200k today to get monthly cashflow today. I look for markets who are landlord friendly, with moderate growth so that the prices are not over inflated, with business diversification. Then look at data online to identify markets where the median price is near the 1% median monthly rent (the 1% rule). Finally you may to acquire multiple units with that $200k to minimize risks so that if one tenant leaves you still have some cash coming. For example, that $200k could put a down payment on 10 turnkey rentals sold in the $90k price range with a $900 rent and $250 net cash flow each property. Another option could be to buy 4 turnkey rentals in the $250k price range renting $2,000 cash flowing $500 per property. There are a number of markets where this works. I have a database of 400 markets with these metrics all compiled. If you are interested send me some specific markets you are interested in I would be happy to share with you.
- Investor · Las Vegas, NV · Member since 2019 · 499 posts · 259 votes6y
@Rodrigo Serzedello
SD is a tough market to cash flow in. The benefit of investing locally is well you can check up on it anytime you want. But if you're concerned about returns, you're going to get higher returns investing OOS. You're dollars will get you multiple properties vs just the 1 you get in SD. Hope that makes sense. I invest in turnkeys as well so feel free to ask me questions!
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