Should I invest in San Diego, CA?

[Rose Cole]

Hi everyone! I live in San Diego (out east in Ramona), and I'm curious what you all would say about investing here. I'm a newbie, and I keep hearing to invest locally when you first start out.

I also keep hearing how tough the market is here. I need to have at least moderate cash-flow. I'll be doing a 1031 exchange, so I have a big chunk to put down, and was thinking of looking for a 3-4 multi-family. Would you recommend that focus on certain areas on SD, or maybe lookin more at the Inland Empire, like Riverside or Ontario?

Thank you in advance! ~Rose

[Dan H.]

Historically San Diego RE has been a great investment.   However, RE is more challenging than in recent times.

However it is my view there are only a few paths in San Diego RE at this moment 1) patience. I am thinking years of patience. San Diego has historically out performed virtually all other markets. Over the long term I believe this will continue. However, other markets have the same issue contrary to the posts from OOS agents. I am not that patient. 2) value adds. For the most part these require work and have risk but there are few markets that do better than San Diego via value adds. My last purchase is up over $500k above my costs in 2.5 years. 3) alternate rent models (rent by room, STR, MTR). These require work. Pay a pm and the profit is significantly reduced 4) path of progress. It is getting a little late to leverage the Chula Vista bay front development. However Brown Field upgrades is in its infancy.

You can achieve cash flow by minimizing leverage.   However, historically the San Diego return is via appreciation.   Leverage magnifies the return from appreciation.   Lower leverage equates to lower return.   Low leverage is a conservative approach that will be reflected in the returns achieved.

Good luck