How is San Luis Obispo for buy and hold investment

Question

I am looking to purchase a 3 bedroom/2 bath single family home in San Luis Obispo and wanted to get feedback on how is this place for investment over long term (buy and hold). also, feedback on how the rental market is and how the property will appreciate. is it easier to rent? is the rent really in the 3.5k range for a 3 bedroom/2 bath 1700 sq. ft newer single family home around 4 miles from cal poly.

Account Closed · Answer

Account Closed "3 bedroom/2 bath 1700 sq. ft newer single family home around 4 miles from cal poly."

Similar house near ASU in Phoenix - maybe $1100 per month. Good appreciation rate and much, much more affordable and it can cash flow. Just sayin'

For you people who invest in California, it reminds me of the question:

"Why do you keep pounding your finger with that sledge hammer"?

Answer, "Because it feels so good when I stop".

Account Closed · Answer

@Edwin Hsu Thanks for the insights but your information about toscano is not correct. They just started selling 2 months ago and have already sold around 25 homes and there is already a long waiting list on some of the desirable lots/plans. They were planning to finish this project by 2020 (total 161 homes) but looking at the pace they are selling , they will be done long before.

also, there is no restriction on renting right away. The homes at toscano are priced at the same price/below compared to  some very old homes in the areas and  this is the reason they are selling so fast. also, lot of upgrades that other builders would charge a premium are already included.

I have cancelled the purchase due to other reasons for but I do feel that this community will do good in the long term.

Account Closed · Answer

@Tom Arena Thanks for your views. I am still not sure if this is an good deal but my logic is based upon

1. Avivo townhomes 1800 sq.ft 3 level townhome selling in mid 600 range. http://avivohomes.com/residences/

2. I am from bay area and hence cashflow here is impossible in good areas and people usually make money through appreciation.

Not sure if the avivo homes area is a better location in San Luis obispo and maybe that is the reason the townhome is almost priced similar to a single family home at Toscano.

I am mostly betting on appreciation. I think if I exclude the principal payment then mortgage interest/taxes/hoa/insuranc/property managemee etc might be same as the rental income.

I am still undecided and do see a risk here but there is another side that says I might make money here in the long term.

Account Closed · Answer

thanks @Jacob James Caballero @Owen Schwaegerle

@Owen Schwaegerle, I am buying a 3 bed/2 bath at the toscano community. http://midlandpacific.com/neighborhoods/toscano (Enantio plan) . how much rent can i get for approx 1650 sq. ft. 3 bed/2 bath brand new home.

How many bedrooms do you have in the house that you are renting for $3500. also the property that I am looking to buy is around 0.7 miles from cemetery. can that affect property/rental values. thanks for the help

Edwin Hsu · Answer

If my understanding is correct, the CC&R's of the Toscano community will not allow you to rent the property out in the first 2 years.  Also, my opinion on SLO is the market is not that hot.  I think Toscano has been on the market for multiple years and it is unfortunate if they still have "new" homes for sale.

San Luis is a great place to live, but you will be taking a sizable gamble if you are looking for future appreciation in the near term.  There seems to be a lack of good jobs in the area and big local employer PG&E is in the process of closing their operations which would further exacerbate the situation.

Ben Tilbury · Answer

@Binod G. I'm very familiar with those homes and they are in a decent area, really there isn't a bad part of SLO but there are more desirable areas depending on whether you want student renters or a family. No the cemetery will not affect the value since it isn't that close but the thing that is closer is the city sewage treatment plant and homeless shelter (google 40 Prado), on a windy day you may get some not so pleasant smells in that direction since the wind blows southeast mostly through the Los Osos Valley wind tunnel. You said you are "betting on appreciation," which will only work if your strategy is long term holding since you'll be buying at the height of the market. Chances are there will be another downturn in the market before you'll see a large increase in appreciation since real estate is a cyclical market and we are due for a shift. Can I ask why you are limiting your search for only new homes?

Leslie Pappas · Answer

As a real estate broker I think it makes sense to deploy your funds elsewhere where you may have better value.  With a lot of markets in CA you get terrific appreciation, but not great cash flow. There is still good money to be made in AZ, FL, GA, TX and other states if you are open to investing out of state.

Tom Arena · Answer

Houses around 1650 sqrft. in that area will rent for $2,800-$3,500 depending on location, neighborhood, and finish. Looking at that development you're probably paying something like $680,000 for the home. That's not a cash return that I would touch, but to each their own. The cemetery in on South Higuera is very low profile and will not likely affect property prices that much with your proximity to the green space, Trader Joes, Vons, and several schools within 5 miles.

Owen Schwaegerle · Answer

Hi @BinodG.! I am also looking to purchase a property in the San Luis Obispo area. If you can afford to buy now, it sure would be nice to lock in the low interest rates. The overall market is strong and seems to be maintaining that strength, so over the long haul it will most likely appreciate. The rental market in San Luis Obispo is hot, like really hot. The vacancy is close to 2%. I live in a house where we are paying $3500/mo. There is a shortage of housing due to the influx of Cal Poly's student population over the past several years (currently over 20K).

It is a great place to live though. You can totally make it work!

Jacob James Caballero · Answer

right now it is a horrible time. We are at a high point in the market. It is a highly desirable area and growing in population. Cal poly is expanding however the market is due for a correction. I would wait until then to buy unless you are ready to hold on for 6 plus years. This area will always go up in value due to population growth and limited space to build.