Hello from San Diego, California
Indianapolis, IN · Member since 2014 · 13 posts · 9 votes
Greeting fellow BPs.
My name is Tommy Nguyen from San Diego, CA. Have been a long time lurker here but finally decided to post and participate.
A little bit about myself. Currently working as an engineer in a biotech company. I want to start investing in real estate as an exit strategy of the rat race (Rich Dad Poor Dad reference). After 4-5 months discussing with my wife, we want to start with a small multifamily in San Diego area where we can live in one unit and rent the other(s).
I'd love to network with other investors in the area to learn more about RE investing in general and learn more from your insights on San Diego market specifically. I don't know what I can offer in return but I definitely have the energy and appetite to learn the rope of RE investing and will definitely give back in one way or another.
I'm looking forward to hear from y'all.
I have a real example that is unfortunately for is not a 7 digit profit but is a 6 digit profit.
I purchased a SFR in 1992 near the market high at $167k. In depreciated into the low $140k. Today the SFR is worth ~$530k (it has not been appraised in a while). I realize inflation has changed the value of the dollars ($530k is worth a lot less than $530k was worth in 1992).
The point however is that a peak that resulted in close to 20% decline in value today looks like a bargain. If we are at a peak and decline (know one knows) I have a lot of confidence that in the long term the price will not only rebound but increase. Why do I have this confidence? 1) it always has. In the last 50 years there has been many years were values have declined but they have always rebound and increased. 2) supply n demand: San Diego has best climate in continental US and compares with the other best climates in the world. We have good jobs/economy. It is a very desirable location to live. As for supply it is constrained on west by ocean, on the south by Mexico, on the north by Camp Pendleton, and on the East by a quickly harsh climate.
The only people who have lost money in financed buy n hold residential real estate in San Diego in last 50 years are those that sold at the wrong time. Maybe they were over leveraged or could not stomach a decline. Maybe being a landlord was not something they wanted to do. Note purchasing at an unoptimal time such as my 1992 purchase would not result in loss and in fact if financed at 90% LTV (easy to do for owner occupied but in reality I put 20% down) would have cost maybe $20k (20% likely cost ~$36k). That $20k would have resulted in well over $450k of equity. I pulled out my equity in 2002 and in 2010 so my initial investment is no longer in that RE and the equity has been leveraged for other investments (those two refinances were used exclusively for other buy n hold RE investments but my more recent refinances have not yet been placed into RE investments).
So historically San Diego has always appreciated long term. San Diego is a very desirable locale with limited supply. The appreciation is significant when financed with high LTV. The rents appreciate with the value. The equity from appreciation and principle buy down can be leveraged (typically through refi or something like a HELOC) for further investments.
Good luck.
If you're in CA, you may want to check out realwealthnetwork.com for lots of FREE education resources, including two podcasts:
Real Estate News for Investors with Kathy Fettke
The Real Wealth Show with Kathy Fettke
Tommy, I would love to help you find a multi family in San Diego, feel free to PM me with your criteria.
Another North county member here it seems like there are so many of us I am going to try to start meeting some members we should some meet others and realitors and get some ideas!
Hi Tommy - multifamily properties that cash flow are difficult to find in a decent area anywhere between LA - SD County, but if you buy with cash, you may be able to get a discount on the price. You can then apply for a loan within the first 6 months - this is known as the fannie mae delayed financing exception. There's some other criteria that needs to be met but I have several investing clients that do this as their common practice. They want an 8% annual return (so the rents received should be at least 8% of the purchase price) to justify their investment. That along with the potential for appreciation puts you in a good position for your investment to grow.
Hey Tommy! Welcome to BP...or, welcome tot he forums since you've been lurking :) I'm up in LA and also started with Rich Dad Poor Dad. I used to be an engineer too! Aerospace.
As far as San Diego, you won't find cash flow there unfortunately. Same thing with LA. Happy to talk through numbers anytime or more on how to figure it all out. I've always bought out-of-state because of it.
@Tommy Nguyen most investors will look in the lower income areas of LA (there happens to be a large amount of multiunits there) but over the past few years investors have bought up all the CA real estate and driven the prices up, so a lot of investors are looking to the Midwest or east coast for investment opportunity. The problem you have there is you don't have the same upside appreciation as you do in the CA market, especially since you start at a lower price point (so 10% on 300k property is only 30k vs. 10% on 600k property). It's tough right now without having a large amount of capital to put down and also rehab the property. But there is still plenty of opportunity in states like Connecticut, Oklahoma, iowa, Illinois and Indiana for example. If you can find a steal or a desperate seller in CA, go for it!
We've been fortunate to do very well with rentals here in Tulsa area. I've also helped two investors from San Diego buy and manage properties here. Their ROI is so much better here and their cost of entry is so much lower.
For those that believe there are not properties that cash flow in San Diego they are mistaken as I see properties on MLS that cash flow on a regular basis and then there are off market properties. The trick is to know where to look.
Be patient. Learn what to look for. Get confident in your knowledge and jump at the opportunities.
Good luck.
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Wishing you the best!
Thanks for all the warm welcome, fellas.
@Dan H. what's your strategy in getting cashflow in San Diego? Do you need large capital to start? I'd love to hear your trick in knowing where to look. Please PM me.
@Ali Boone from all the podcasts that featuring "how to invest in hot RE markets" - ie, Bay Area, SoCal, NYC - i've heard on BP, most investors would suggest to invests in out of state market. I'd love to hear more on that.
Welcome Tommy, our SD community is growing
@John Kunick are you a turnkey provider? I am interested in how you helped them invest in Tulsa.
Greeting fellow BPs.
My name is Tommy Nguyen from San Diego, CA. Have been a long time lurker here but finally decided to post and participate.
A little bit about myself. Currently working as an engineer in a biotech company. I want to start investing in real estate as an exit strategy of the rat race (Rich Dad Poor Dad reference). After 4-5 months discussing with my wife, we want to start with a small multifamily in San Diego area where we can live in one unit and rent the other(s).
I'd love to network with other investors in the area to learn more about RE investing in general and learn more from your insights on San Diego market specifically. I don't know what I can offer in return but I definitely have the energy and appetite to learn the rope of RE investing and will definitely give back in one way or another.
I'm looking forward to hear from y'all.
Hello and welcome! What sort of markets are you looking into? Best of luck to you!
Dan, .... What kind of rental returns are you seeing with your multifamily units? I'm really interested to know more so I can make a better informed decision when I buy a new property this summer.
There are caveats that I will mention at the end.
Rent - PITI is $566/unit.
Rent - PITI + principle buy down is $732/unit.
I do not concentrate on actual cash flow as much as anticipated cash flow. This is because actual cash flow could be fine until some huge cap expense such as foundation and sill plate issues at same time $28k (my largest single cap expense so far).
So my projected cash flow is
$566 - $80 (vacancy: 5% of rent which has been close to accurate if including rehab vacancy time) - $270 (cap expense: $250 attached, $300 detached) = $220/unit.
If including principle pay down $220 + $166 = $388/unit.
Caveat: I try to have properties close to 70% LTV. However for various reason some properties are lower than 70% LTV. I have one duplex that due to interest on original loan is at ~45% LTV. Typically the lower your LTV the better your cash flow (if not it is not a good rental). So my cash flow is elevated due to some properties not being that close to 70% LTV with the 45% LTV significantly helping the cash flow (both units are rented below market but rent is $3200 and PITI is $1407)
One other item about large cap expenses: see if it is covered by your insurance before taking on the expense. I have had slab leaks that we have covered. However we had a slab leak that was significantly more costly than normal for a couple of reasons (the manifold would have required destroying a bathroom that had been rehabbed about 1 year previously so it was cheaper to replumb the entire duplex. It ended up being covered by our insurance.
Good luck.
Dan thanks for the reply for us to read as a newbie that post will take me a few times to read and understand. Where do you recommend one looking for rentals have it to macula Murietta what would you say thanks for the insight looking to get into rentals.
I should have subtracted off another $100/unit for maintenance/misc items. This is fairly close to accurate as the handyman is typically between $50 to $70 unit month and then there are times I need to hire the specialist labor (HVAC, certain plumbing, certain electrical).
Therefore after subtracting the $100 I forgot to subtract off: $120/unit or $288 unit if including principle pay down.
Nick Kravchuk Thanks. i'll get you the criteria tonight
Bruce M. BPis just a place with overwhelming resources. I mostly listen to the podcast. Will surf the forum for information though
Brian Kostrinsky from my searches and using the BP calculators to work on the number, i can't figure out a way to cashflow in San Diego county market, even in Lemon Grove, Chula Vista, or National City. Maybe i'm not looking hard enough. Love to hear opinions from fellow investors, agent, lender operating in SD.
A general question here, if there's no cashflow in a very hot market, what do most investors look for in such markets?
In many hot markets some investors look for possible value add opportunities. Many look to flip first as the main play. You might want to partner up for that. For any buy and hold stuff, that is more of a long term play and there could be less initial cash flow and perhaps more cash flow in the future as the rents rise, repositioned, redev etc. This is where some vision (bigger picture) could come in.
To say there is no cash flow in a hot market is nonsense. There is actually much more cash flow available over the lifetime in many cases. Cheaper is not always better for Rei. Many want hot not cold for maxium profits. Hot is easier to grow cash flow, gain equity, add value, rent, sell, refi, exit etc... and basically a more valuable investment thus the higher prices. To say it is much harder to get initial cash flow in a hot market that would be 100% correct. Greater investments are not always the easier initial investment.
Let's put it this way, whatever cash flow you get, if it does not grow will lose 50% of its value due to inflation in 20 years. Not to mention the liabilities, management cost, taxes, repairs etc always rising will eat away at it even more to the point many eventually just walk/sell and take their losses that is unless that cash flow and equity grow too. Rei is considered high risk for many reasons.
Now this is when you find out any initial cash flow may have very little to do with total profits in the bigger pockets picture. San Diego is #3 in the nation for total profits ( cash flow + equity) since 2000. LA and SF are # 1 and 2. If you want a valuable long term real estate investment SD is still very solid. If you just want initial cash flow, a subway sandwich place could be much better for that.
Good luck with your search!
Maybe a Santee townhouse with hoa is not the best retail buy today but let's say Swanny is wrong on his peak prediction and it goes up 10% by the end of summer, that's another 28k equity this year. Or near $2200 a month in non cash flow. He did nothing for that except buy and hold and rent to one person I assume. You can do the math but even Swanny's one little townhouse in SD made a small fortune. It had little to do with comparing to any other working staffed commercial investments. It had everything to do with local supply and demand. No one I know thinks SD's REI ultimate future is not bright. Some would say that is some serious speculation to think opposite.