Cash Flow areas in San Diego?

[Forrest Baker]

New to REI and looking to purchase multi-family doublex or similar apartment as my first purchase.

Doing some basic cash flow calcs, it seems most areas in San Diego are very challenging to maintain positive cash flow with the high price points of the inventory.

Are there any neighborhoods or areas you've had good cash flow in? Any areas you see as opportunities?

[Dan H.]

I agree with @Danielle Wolter that retail purchases today, after projecting realistic expenses, are cash flow negative.  However, historically rent appreciation results in good actual achieved cash flow over any long term hold period (as Danielle indicated her property is cash flow positive due to rent appreciation).

So here are some options:

1. Look for below retail purchase.  This is challenging because there is a lot of competition and some of that competition has large marketing budget and a lot of contacts.  We find this the most difficult of the options.
2. Realize that it will be initially cash flow negative and plan accordingly.  Make sure you have the reserves to handle worse case type scenarios over the short term and that this is a long term game.  In the long term, San Diego has always appreciated (over the long term) significantly more than inflation.
3. Look for value add properties that you can BRRRR. Note, after the refinance, it will be cash flow negative (assuming high LTV) but this is much easier to deal with if you have added tens of thousands of dollars (and sometimes $100K+) of value. A good value add can cover a lot of negative cash flow for a long time.

We have used value adds (option 3) and market appreciation (option 2) a lot.  We have purchased some properties noticeably below retail but never enough below retail that it would suffice as the entire source of return.  The competition for below retail property is tough, smart, and often has money to spend on marketing.

Good luck