I live in San Diego. The property prices are sky rocket high but still people are buying? Is this a good time to invest. I’m thinking to buy and hold the property. Any advice will be very much appreciated.
Buying in San Diego right now requires either a value add play or a long term outlook.
Retail purchases with high LTV loans are cash flow negative. Due to high rents, the 50% rule is conservative, but you want cash flow projections to be conservative. How bad is the cash flow? If I project with the 50% rule, many San Diego markets have initial negative cash flow of 50% of the rent. As stated I do believe 50% rule is conservative, but I want cash flow projections to be conservative.
I looked at 2 properties last week and was prepared to offer on one (someone beat me to it). The one that I was going to offer on had a current rent projection ratio of 0.45% of purchase price. This would be so cash flow negative that it would likely loose far over $1K/month (probably over $2K/month). I had a value add in mind that probably would project it to a 0.75% property and slight initial positive cash.
I suspect that the purchaser either was going to owner occupy it or had a similar value add in mind.
San Diego always has and is likely to continue to have strong appreciation. This means both property and rent appreciation. A long term hold will benefit from both and is likely to out product most markets. The question is how long will it take? I suspect it is likely to take at least 5 years for this market to produce a better return than less inflated markets.
Full transparency I'm an agent in SD. Primarily work VA and investing.
I always tell clients in the situation to not try to time the market. It’s a dangerous game. However my insight is this - We are about to move into the hot season for SD real estate so sooner is better than later. -SD market will go down when people want to stop living here. -And you only lose when you sell. Meaning if the market did work against you at first after your purchase, as long as you keep it rented ect you’ll be fine until it recovers or goes up. Which it always does.
All the best,
@Vick Sal you can house hack among the nicest areas in San Diego and have Payments that will be less than paying rent in not so great areas. Feel free to reach out if you have any questions or want to see how you can House hack like so many others locally even in this extremely hot market.
Do what works for you for the long haul and you won’t have to worry about the macro as much.
Best of luck!
@Dan Heuschele appreciate for your reply
Appreciate for your reply
Hi @Vick Sal , if you need help finding your next investment, please let me know. My brokerage does single family up to 4 unit properties, and we work strictly with investors who are looking to fix and flip or fix and hold.
I am interested. Writetovkbatyahoo.com
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