Areas for STR in San Diego -- looking for properties

[Javier Mendez]

Hi everyone,

I'm considering an investment property in San Diego and would appreciate any help. Considering a single family home I can Airbnb and use as a vacation home when I go visit family in the area. Budget I'm considering is <700K -- credit report and downpayment should be no problem. This would be a long term buy and hold for me. I'm not located in the area but I have family in the area that could help with rehab, if necessary -- closer to move-in ready would be ideal but not a deal breaker if its in a solid location. I'm not necessarily looking for a high ROI property since I'm banking on appreciation and plan to frequent the area to visit my folk. Location is really important to me though.

My main question is any recommendations on locations I should be looking at? I really like the golden hill/south park area due to its proximity to downtown and being so central (assuming its great for ABNB). Would love to hear some opinions on other areas to consider. 

Lastly, whats the market feel from local investors/agents? Are we in a seller's market? I'm not in a rush to be a buyer and have patience for a good value property. 

[Kenneth Donaghy]

@Javier Mendez Good post. The South Park / Golden Hill area is a great area with good community. Finding a good SFR under 700K that fits your expectations could be challenging. It is a Seller's market, with properties appreciating quickly. As well, there is a lot of speculation on how, when, and where the STR regulations will take place, something to keep a strong eye on.

[Dan H.]

The city council for the 2nd time in 5 years has passed anti STR regulations.

The first time they passed rules that banned STRs of less than 60 days unless owner occupied.  A petition gathering occurred to put it on the ballot.   Once the signatures were gather to qualify for the ballot, the council rescinded the ban (which had not gone into affect). 

About a week ago the city council approved (has further process to be passed) a plan to limit STRs.   The proposal was for a lottery.  No one knows if this will end up ever going into effect. 

We have had our STRs since 1999 trying to abide by all rules, pay all required fees, etc We use profession PM to help ensure that unruly guest are dealt with swiftly and to help ensure that we are following the rules. With the rules as currently proposed, we could end up not selected in the lottery and no longer have STRs (note our units were STR before AirBnB or VRBO). If there are STR rule limitation, I would like to see the rules reward those that have been following the current rules and have not had many noise complaints, etc.

There is also an anti STR sentiment at the state level.

I recommend against considering an STR in city of San Diego or coastal San Diego county unless the numbers also work as an LTR and you are fine being forced to have the LTR rather than STR.

There is a very good chance STR will be further regulated in San Diego. If not by this proposal, by a subsequent proposal.

Note: this proposal to further limit STRs comes after many STR owners took a beating in 2020. STRs were forbidden from sometime in March to some point in June and again from prior to Thanksgiving through to 2021. Our rents for 2020 were down just over $60k compared to 2019. This regulation is hitting STR owners when they may already be hurting financially. I am not against further STR regulations, but I think 1) it should address it going forward and not eliminate long time, non-problem STRs 2) the timing is horrendous. An owner chose to not place their unit into the LTR market when shut down to as COVID starts to diminish have the STR prohibited because you were not selected in the lottery. By the way if our units are not selected in the lottery, one will be our second residence and hopefully, due to owner occupied, no lottery is required for 2nd to be an STR. so instead of 2 units being STR Only one will be as a big reason we are STR is so we can use/stay at our property when we want.

Good luck 

[Mark Frattini]

@Javier Mendez

Look into the Imperial Beach area, Oceanside & areas a bit further East of downtown. The neighborhoods of Golden Hill and South Park are going to be tough to find a detached SFH <$700k. Have you considered a condo? San Diego has recently seen a significant increase in values along with a decrease in inventory. We are still in a strong sellers market.

As Dan mentioned, finding a property that will work also as a long term rental is a good idea. You never know what the city will decide on regarding short term rentals.

[Rob C.]

I can vouch for Oceanside given that I live there close to the beach. Lots of exciting transformation and development here in the downtown Oceanside area over the past decade, and seems poised to continue. There are a couple condo complexes in this area that permit vacation rentals including the one I am in. I used to AirBnB my condo on occasion when I would go out of town, and was impressed with the rents I was able to command (especially in the summertime, which is gangbusters).

Oceanside is in the county of San Diego, but it’s outside the *city* of San Diego so it is fortunately not subject to the previously mentioned regulation as I understand it. There was some proposed state legislation from assemblywoman Tasha Boerner Horvath at one point that would have posed a threat to STRs in coastal San Diego *county*, but my understanding is there was question around the constitutionality of a state bill being targeted toward only a small part of the state. Last I read it didn’t gain much momentum and was therefore dropped. @Dan H. - I’m wondering if that’s what you were referring to in your post when you were suggesting against coastal San Diego county. Do you know of any news I don’t? 

My impression from attending a few city council meetings here in Oside is that the city of Oceanside wants to work with STR landlords because the TOT taxes are a big source of tax revenue here.

@Dan H.

[Bernardo Mazon]

I'd be happy to talk about property in Chula Vista, minutes away from downtown by the freeway. 

[Javier Mendez]

Wow, amazing replies everyone, appreciate the community! Some high level question for all, whats the gold standard on getting STR comps on nightly rate and vacancy rate? Use AirDNA data or manually go into Airbnb to get prices and availability calendar. I tried the latter but wasn't getting much feedback on availability. Appreciate any links to other posts explaining methodologies. I realize my budget would be mainly driven by this calculation. I don't think I can justify a 1mil investment home but 700K +/- 50-100k won't be the end of the world if the numbers make sense.

Second question, if I need to pivot into a LTR, should I try putting a bigger weight on school ratings? 

@Kenneth Donaghyappreciate the response! I grew up in the golden hill area many years ago and love how much its progressed. What are your thoughts on the grant hill/Sherman Heights/Logan Heights areas nowadays? I remember how bad some of these neighborhoods where a long time ago but they just seem to be in ideal locations --curious if there's pockets of areas I should be looking at or whether I should avoid at all costs.  

@Dan H.very informational! I had no idea San diego was so anti-STR. What's the best way to keep up on these policies for someone living in the bay area?

@Mark Frattini great suggestion on Imperial beach, hadn't thought about it. Don't know that area much but are there specific areas you recommend I consider or stay away from? Do you see imperial beach as a good area where both STR & LTR could work. I'm not a big fan of Condos to be honest -- Don't like the thought of a lifetime of HOAs. I think It would have to be in a very prime spot (beach front) for me to consider it but perhaps I should get more educated.

@Rob C.amazing feedback, just the type I was looking for! Oceanside is the area that seems very interesting to me but I know very little about. What are your thoughts on property more inland ? Do you think paying a bit more premium for staying west of the 5 is worth it for the area? If not, any feedback on neighborhoods east of the 5 would be greatly appreciated. 

@Bernardo Mazon what areas of Chula Vista are you looking at?

[Twana Rasoul]

@Javier Mendez STR is a great strategy but I would not recommend on buying a property assuming you will get STR revenue. I'd run my numbers using long term rents in case you are no longer able to use your property as a short term rental, which gives you an alternative way out and not just banking on higher short term rates.

That said, I would recommend that you consider buying a duplex, although it would be higher purchase price most likely, but your numbers will look better initially. You can start by doing STR in one unit and long term rental on second unit until you see how it pans out. you can then always have both be STR and you will likely do much better than a single family home and even going the long term rental route you'll likely do better with the 2 units over the SFR

[Dan H.]

Link to article on the latest proposed regulation from the City of San Diego. It has further process to become "passed", but it indicates the mindset of the current city council. For at least 5 years the city council has been moving towards limiting STRs in San Diego city. Much of coastal San Diego not in the city has also been working towards increased STR regulation. Fortunately, the coastal commission has been STR advocates but have taken a position that is a compromise from the various city's desires. For example, Del Mar passed a regulation that banned STRs in residential areas, but the Coastal Commission ruled the ban was too harsh and indicated Del Mar could not make such a stringent ban. Unfortunately, the compromise limited STRs to 100 days per year which is too few to make the STR a viable option (the costs of the Del Mar properties would necessitate too high STR rent if only rented 100 days).

San Diego vacation rentals: City council approves cap on short-term rentals (fox5sandiego.com)

The writing is on the wall that STRs are likely to have further limits in San Diego City and coastal San Diego going forward. Therefore, make sure that any RE investment has a plan B in case the STR regulations make the STR option not profitable. In general, it is good to have multiple options, but this is especially true if the primary option is to STR the property in San Diego city (and possibly coastal San Diego).

Good Luck

[Rob C.]

thanks for the elaboration @Dan H.. I wasn't tuned into the Del Mar situation. Interesting decision there to limit it to 100 days. Seems like if you're going to invest down in this area with STR intentions you better try to get a sense of the city's tolerance for STRs, whichever city that may be in the county. I don't think that just goes for coastal areas. Intuitively speaking, I would think inland areas might push against STRs harder than coastal areas because they tend to be made up more of the bedroom communities where neighbors don't take kindly to the idea of short term guests looking for a party pad. And that might be a reason I would favor west of 5, or even west of coast highway, @Javier Mendez. The main reason I purchased here was because of the upside potential from all the growth and development in the downtown area. It’s been a tourist destination for a while, but I think it will continue to garner more and more attention from out of towners. It’s definitely much pricier though, no doubt about that. It all comes down to numbers and I don’t have any sense personally how well a more inland STR would pencil. You should take a look and compare. Also be aware that immediately east of the 5 is a very different neighborhood than west. I wouldn’t buy an STR there. Not saying it’s a bad place to invest. Over the long term it could be a good appreciation play. But just know not to use comps on the opposite side of the freeway no matter how close they seem. 

[Bernardo Mazon]

Javier, 

Northwestern Chula Vista (around downtown) and Bonita.

[Maxwell Ventura]

@Javier Mendez

An SFR under $700k in Golden Hill and especially South Park will be almost impossible. If you scoot slightly south on the other side of the 94 you can definitely find something in Sherman Heights / Grant Hill / Logan Heights. The strip of Logan Ave is turning over nicely right now w/ restaurants and bars. Also consider Chula Vista, specifically 91910. The 3rd Ave Village is also populating w/ restaurants and bars, plus you have the Chula Vista Bayfront Project. Lastly, I'd consider trying to find something in Talmadge but that could also be tough at the $700k price point.

[Bryan Lajoie]

Good discussion!  @Javier Mendez did you end up finding a SD STR?

I've been looking into imperial beach some. Not many properties zoned for STR use, but the are are some. Anyone in the know on the latest bayside landing happenings? I know STRs are possible there but the ‘permanent' residents seems to be throwing a fit and trying everything in their power to block. Any estimate of current % of units being rented ?

[Nicholas Ardakani]

Anyone doing medium term furnished rentals in San Diego? Interested in which areas (downtown vs closer to University of San Diego) are worth pursuing.