San Diego (and So Cal) Real Estate

21 Replies | San Diego, California

Hi guys,

I’m looking to make connections and learn as well as contribute with you all on whats out there locally in our markets. Currently I’m looking to leverage equity on my primary residence and put it to work on an investment in north county or any local deal that makes sense. Are any of you all making BRRRRs work, what kind of numbers are your local investments seeing ? ROIs? Cash on Cash returns? Rental cash flows? Are foreclosures even out there at the moment? 

I've been doing mock number analysis on what I'm seeing on the MLS and learning about foreclosures and auctions. It would be awesome to connect with you all to learn and also see how I can add value to any of your endeavors. If you know of any local networking meetings, please let me know.

@Geo Cruz Hey welcome to the BP San Diego community! Are you currently in San Diego? 

As you may or may not know, the real estate market has been red hot here with inventory very low and demand up super high. This has made it competitive and a lot of people are having to pay well over asking in the more attractive areas that would be good for the BRRRR strategy. I personally think the areas near downtown and Balboa Park present the best areas as far as potential growth and appreciation partnered with old homes in the neighborhoods that need work. The city has also been super relaxed on ADU permits and qualifications as of late. If you have a big backyard or garage, you can transform that space to maximize cash flow. But I am not the only one who feels this way, so competition is high. So my hope is that with time, there will be more properties coming on the market, reducing competition and making everything a little more manageable profit-wise for investors.

As far as foreclosures go, I don't think they will be having any auctions in SD until February 2021, but I do see homes go on the foreclosure list. I wouldn't bet on a big foreclosure crisis here though because so many jobs are being created with all of the projects, and, more importantly, San Diego's economy is fueled by lots of essential workers with so many military and medical families. 

There have been a few local meetups, but with COVID not many. I'm hoping those pick up soon as well. I think that covers it! I have done a few deals this year and have plenty of connections. If you want to connect, let me know. I am always looking to meet SD investors.  

Good luck!

I know everyone looks at the SoCal market as being red hot and there not being sufficient inventory, but if you know where to look for redevelopment plays there are quite a few options just sitting on the MLS (I know this for SD and surrounding areas, and suspect it for other areas of SoCal). The small redevelopment options don't interest high net worth earner's looking to invest in rentals, and are too small for bigger redevelopment firms to handle with enough margin for what they like. So for smaller individual investors there are still good buys around, but the problem is usually access to capital.

I can't say these things are 'facts' necessarily, but it is what I see in my W2 job as a land use Civil. It took several years of experience before I was able to understand how these things play out in our market, but now that I have completed 1 duplex and continued to see it in client's projects...the opportunities locally are phenomenal...but the initial barriers to entry are high. 

@Matt Devincenzo

Hi Matt, I have also heard the same about finding the right niche, specially as a new investor. Im learning that all markets will have the right opportunities depending on individual goals. 

Which civil do you work for? Im also in the commercial and multi family development industry on the GC side and understanding the clients goals is always key. I would love to connect and chat more.

I'm new to the area but I'm looking for wholesale opportunities. I've been driving for dollars around National City and see a lot of places that appear to be distressed. With so many military/defense workers (i.e. people with guaranteed income and predictable rotations for vacancy planning), it could be a great neighborhood to tap into that section of the market. It's very close to NBSD and there are plenty of retail/restaurants/etc. nearby, which would make it highly desirable for military renters. Anybody already looking for/doing deals around there? I'd love to brainstorm some ideas!

@Geo Cruz  

I think @Andy Eakes and @Matt Devincenzo hit the nail on the head. With a hot market like we are seeing now, getting creative and adding density where you can has been the name of the game. However, there are definitely still deals out there that fit the more classic fix and flip model where you just make cosmetic updates. To find those deals, you'll have to leverage your connections to get an off market deal or be patient when offering on properties that are on the MLS. Let's connect on this!

@Andy Eakes

Hi Andy, sent you a connect. My wife and I recently moved back to San Diego. I've got a SFR in my home state of South Dakota. Looking to buy my primary residence in San Diego this year. Markets red hot and tough to stomach the prices. Saving grace is the low 30 year fixed rates. Anyways hope to meet you someday

@Eric R. Dehner

Rates are definitely one of the biggest reasons to buy at this time. I remember a couple years ago, people were stoked that anyone would lend them a huge amount of money for a rate below 4% and thought that was borderline stupid! Now imagine today? Money is cheap, use that to your advantage and of course be smart about it. 

Geo,

There are opportunities in every market and a lot of them never make it to the MLS. North County is no exception however there are a lot more opportunities south of the 56.Just depends on your goals...Reach out anytime to discuss details.

Just went into contract on my first rental SFR/ADU deal thanks to the help of many of you guys on this thread. I'll keep you updated with the details soon.

Hey there Geo! I also live in SoCal (LA) and my partners are down in San Marcos. I think you might have a hard time finding deals that make sense, this is unfortunately a challenging market where cash flow is a challenge. We exclusively invest out of state for that reason.

Here's an update on the final numbers for the deal. 

3 bed 2 bath 1530 SF with huge 3 car garage that will be converted to 2x1 ADU

Accepted Offer $550,000 -$10,000 credit at close = $540,000 (listed for $575,000)

P&I - $1,989

Taxes and Insurance $630

Maintenance - $176 (4%)

Vacancy - $133 (3%)

Cap Ex - $67 (2%)

Rent - $2650 + $1900 (after garage to ADU conversion) = $4,550

ARV - $650,000 - $690,000

ADU and House Repair estimate ~ 50-60K. Funded by HELOC on my primary residence.

Any thoughts comments appreciated. This will be a long term hold for us, its our first deal and there is tremendous value on all the knowledge we acquired by the process. We have learned so much on the importance of value add and the intangible benefits that come from taxes. We are exited to repeat and keep the snowball going this year and the years to come. 

Originally posted by @Geo Cruz :

Here's an update on the final numbers for the deal. 

3 bed 2 bath 1530 SF with huge 3 car garage that will be converted to 2x1 ADU

Accepted Offer $550,000 -$10,000 credit at close = $540,000 (listed for $575,000)

P&I - $1,989

Taxes and Insurance $630

Maintenance - $176 (4%)

Vacancy - $133 (3%)

Cap Ex - $67 (2%)

Rent - $2650 + $1900 (after garage to ADU conversion) = $4,550

ARV - $650,000 - $690,000

ADU and House Repair estimate ~ 50-60K. Funded by HELOC on my primary residence.

Any thoughts comments appreciated. This will be a long term hold for us, its our first deal and there is tremendous value on all the knowledge we acquired by the process. We have learned so much on the importance of value add and the intangible benefits that come from taxes. We are exited to repeat and keep the snowball going this year and the years to come. 

Is your ADU cost estimate based on you being a GC and you doing a lot of the work yourself? If not, it is way too low.

Ditto the cap ex. is way too low if it is hands off.  This is especially true because it will be two units with 2 kitchens, 2 water heaters, additional bathrooms, etc.  Two hands off kitchens alone have a hands off cap ex higher than your allocation.  

Appraisals for ADUs are coming in lower than the hands off costs. if you are doing a lot of the work yourself, your ADU may be a value add, but your numbers seem way too optimistic.

$50k to $60k value add cost to add $110k to $150k value is going to be a challenge. Realize the ADU, even with you doing significant work is not going to add significantly more value than the cost (because to add more value than cost is already not easy). Most of the $50k to $60k value add costs will be ADU costs. My view is you will have done quite good to add $100k value.

Good luck

@Dan Heuschele Yes ADU will be a lot of sweat equity and personal involvement. I'm in the industry and feel that cost is aggressive but achievable with heavy involvement on my end. I've gotten quotes from small GCs and have read a few posts of local people converting attached garages and self managing subs directly that end up more or less in this range so I feel it's doable. Now if you're hiring an "ADU contractor" you're looking at double the price.

Cap ex, same concept. The reasoning for the aggressive number is sweat equity from my relationships in the industry and the fact that a few cap ex expenses will be taken care of now, during the renovation (adu will be new, AC equipment is being replaced, water heater is being replaced to tankless) 

I also agree with the appraisal on ADUs hence the aggressive construction target. Nevertheless, since the plan is to hold long term, not too hung up on getting the ARV right away. It would be nice so I can BRRRR the deal but not a must.

I appreciate all your insight so far. It definitely helps me plan better for the next one.