Living in San Diego and trying to invest in our-of-state MF

34 Replies

I need advice. We’re thinking about three 3 options currently and we’re currently renting for 1900 a month. The long term goal is to build financial freedom. We have no kids at the moment but we might try in the next year or 2. We saved some decent cash to be able to put down 20% for a nice single house in San Diego. That’s when we start having different ideas as follows:

1. Should we buy a house with at least 4 BR and rent out at least one room. This way we will reduce our renting expenses. Save that cash to then start investing later.

2. Buy a small condo in SD and Airbnb that property. This means we keep renting.

3. Keep renting and invest in multi family properties out of state. Thinking about either Wichita, KS or Dallas TX. Mainly because we lived in both cities and still have connections there. Also, are MF properties in those 2 cities attractive?

4. The issue with both options 2 and 3 is that, this means we would be able to a house for ourselves in the next 5 years. We’re worried that prices in SD will keep raising.

So we need some advices on what to do. Your contributions will be greatly appreciated.

@Michael Ndjondo makadi I'm only qualified to speak to your San Diego options. I'm helping people househack 3+ bedrooms STR & Condos, and rent out the spare rooms, STR or LTR. Different neighborhoods, different price points, and lifestyles will impact what opportunity is best for you. To better serve you, a quick phone call would be better and faster. I will PM you my contact. Best!

@Michael Ndjondo makadi

I started with option 1. It works well when you are young but I would not recommend it once you have kids. Also the cash flow situation in San Diego makes this an appreciation play rather than a cash flow play.

item 2 has a lot of risk. Around 2 years ago San Diego council passed anti STR regulations. A petition was submitted with the require signatures to put the item on the ballot. The council rescinded the regulations. It would seem all is fine for now but the state also has a large anti STR contingency. I suspect it is more likely that the state pass anti STR regulations than it is for the city of San Diego. if that were not enough risk, the condo HOA could change the policy regarding STR at any time. Even if it were not a condo, I view the risk as too high but with it being a condo the risk is higher. A retail purchased condo as a LTR is negative cash flow.

Item 3 has all the risk of OOS and in practice the OOS cash flow does not hit projections.  Especially for newbies, that is a tough challenge.

I propose a variant of item #1. Look for a detached duplex to house hack one unit. This eliminates the issue with having someone that is not family share your living space (or your space all together which is why I recommend this form of hack be a detached duplex). Similar to a detached duplex would be a RE with an detached ADU. Same thing, just a more recent option.

Good luck

I'm in a VERY similar situation so I've been putting a lot of thought into this as well. Pretty much the only exception is I'm looking at property in Missouri. I know there are a few duplexes up towards oceanside that could cashflow and Chula Vista is a pretty good spot to invest for long term right now as well. Of course it's going to boil down to what you end up making your higher priority, but I would go with getting a home base for you and your family. Plus with rent control coming up you may want to look into how that would affect renting your units our here as well. I have a video I put up about it as well as the bill itself on my facebook if you're curious. 

Kind Regards,

Donald Appleberry.

@Michael Ndjondo makadi if your partner is cool with it, do option 1. I think there is a nice benefit to beginners to have their investment properties close to them for the early stages. Not to mention you can get a primary residence loan at a lower interest rate. I agree that option 2 is too risky because of HOAs and changing CA policy volatility against STR and the like. Option 3 can probably work too, just make sure you pay a lot of attention to creating a good team and comprehensive property vetting system. Option 3 can work out well in the long term as well because it is very scalable.

@Michael Ndjondo makadi you should rent as long as you can and use the money you would otherwise spend on ownership to invest and let your investments pay for your home down the road. Also the market is at a peak right now especially in SoCal. I would wait for a correction to buy a permanent residence.

Multifamily is a great way to go. If you are familiar with DFW that’s a great area. I don’t know the Witchita market but it would easy for you to research since you know the area.

@Michael Blank have you ever considered investing in the DFW market (likely 15-20% down) and then buying a primary in San Diego with little down (ex. 3% down)? Yes the mortgage would be much higher on your SD property but you would be obtaining two houses or potentially multiple units if you go MFH in the DFW market. I'm not sure of your financial position but it could be something to consider. You could definitely AirBnB a room in SD too - kinda the sweet spot of renting out a room and airbnb'ing a condo.

@Dan Heuschele thanks for your contribution. I’ve been thinking about duplexes here locally but so far I’ve not seen any good deal on a one where I can see us living in it. They seem to be overpriced, however I keep my eye out for a good deal. As for investing out of state, I will only invest if numbers work.

@Greg Dickerson thanks for your reply. Rent until RE investment grows to produce enough cash flow to a residence would be my ideal option. The only concern is the rate at which rent grows here combined with the fact that we will need to rent a bigger place sooner than later. Hence this idea of maybe buying to reduce our rental expenses.

@Michael Ndjondo makadi if you want financial freedom you need assets that generate cash flow which means you need to seriously explore option 3. Why would you want to tie up capital to earn 0% or less return on a monthly basis with buying a house?

I don’t mean to be a drag on this thread but see you have been on the site since 2017 and we are in late Nov. and you are still on the forums kicking Wichita around and the idea of getting started? This isn’t personal to you, but to anyone sitting on the fence thinking about getting into RE this long... it’s too long. 

Last week I bought a 2 bed 1 bath sfh for under 10k in a C area at a public auction (I know it’s a C area because I typically buy D’s), the county appraisal was 20k higher than what I bought the house for (less than 10k!) So, I wholesaled it, never done that before, instant cash to keep buying more rentals. I’ve only been at this three years and have ownership in a handful of rentals. I don’t have a third eye. Get in or keeping watching others find deals. Best of luck to you.

PS we spoke roughly two years ago by email, you never followed my advice then. I was willing to be a resource. Hard to want to get excited for your question now. I’ll pass.

@Michael Ndjondo makadi buy a duplex in San Diego and move into one of the units and the unit that you live in make sure your portion of the mortgage is less than $1,900 and that if you decide to move out after a year or so, the property rents should be able to sustain itself without you sinking more money into it each month. This approach is definitely doable in San Diego, even in a nice neighborhood. With a duplex you have different options of fha to 20% conventional to a few lower down payment options. With 3-4 units you won’t have many options in San Diego. Best of luck and feel free to pm with any questions.

@Danny Randazzo . If I was still single, I’d have gone all for investing. However at a stage of my life where I’m thinking about starting a family. Hence, we’ll dinner than later need a bigger place for ourselves. The rise in renting price in SD is one reason why buying something is being considered as an option.

@Jonathan R. I flew back and forth in wichita between 2017- 2018 and could not find a good deal. My realtor and I decided to wait out and try back a year later. Hence I’m back trying to finally start my journey. But this time, I’m looking at three options not only the wichita market.

@Michael Ndjondo makadi

I won’t buy ANYTHING when unemployment is 3% and interest rate is 3%..... period....

I would buy when unemployment is 5%+....

Take this from someone who has done it several times - buying from a owner for half of that owner paid for 5-7 years ago, and who is sitting on $4.5M today from buying low....

Originally posted by @Diane G. :

@Michael Ndjondo makadi

I won’t buy ANYTHING when unemployment is 3% and interest rate is 3%..... period....

I would buy when unemployment is 5%+....

Take this from someone who has done it several times - buying from a owner for half of that owner paid for 5-7 years ago, and who is sitting on $4.5M today from buying low....

I agree in not getting too crazy at this point in the market cycle but there is definitely nothing wrong in still investing in the right deals. And nobody can really time the market anyway. And IMO anyone betting to hit the jackpot on another "Great Recession" in the next few years will end up being a bit disappointed. Those market conditions (hyper inflated house values with loans being handed like candy to people who couldnt possibly afford them) do not exist to have that level of magnitude of decline in home values.