San Diego, CA · Member since 2016 · 12 posts · 3 votes
550k for a duplex in south Kensington (92116). 2/2 with a studio in the back of the house. Total 1,248 sqf. Seems that the house can rent between $2,200 - $2,500
Studio I am not sure...I'd probably do short term rental. Does this duplex seems over-priced?
Real Estate Agent · San Diego, CA · Member since 2014 · 1k+ posts · 635 votes
10y
Hey @Account Closed
While there is certainly a chance that this won't pencil out, notice that everyone who immediately claimed that it was overpriced resides outside of SD. They will just never learn....LOL
We have a unique market, which has to be approached uniquely as a result. Kensington is a great neighborhood, incredibly strong rental market, and offers a great deal of upside potential. If you'd like to send me the details, I'd be happy to take a look and give you an INFORMED opinion, rather than just writing it off as overpriced without really knowing.
Real Estate Investor · Loma Linda, CA · Member since 2016 · 36 posts · 20 votes
10y
Hi Bianca, if you are buying for cash flow, it is overpriced. At the very least, you should get 1% in rental income, in your case the rents ought be $5500. That is why i do not invest in California because the property values are too high to cash flow. Good luck though
Investor · Napa, CA · Member since 2016 · 100 posts · 53 votes
10y
I agree with Tony -- the 1% is my usual rule. With interest rates lower, you could get a bit more aggressive than that, but it's a good benchmark. The rents you're looking at are less than half of that benchmark so IMO it's over-priced.
Investor · Templeton, CA · Member since 2016 · 60 posts · 21 votes
10y
Based on the information above, I think the property is overpriced. I suggest you look for a property with a better ROI or try to negotiate a better price with the seller.
Real Estate Agent · San Diego, CA · Member since 2014 · 1k+ posts · 635 votes
10y
Hey @Account Closed
While there is certainly a chance that this won't pencil out, notice that everyone who immediately claimed that it was overpriced resides outside of SD. They will just never learn....LOL
We have a unique market, which has to be approached uniquely as a result. Kensington is a great neighborhood, incredibly strong rental market, and offers a great deal of upside potential. If you'd like to send me the details, I'd be happy to take a look and give you an INFORMED opinion, rather than just writing it off as overpriced without really knowing.
Real Estate Investor · Loma Linda, CA · Member since 2016 · 36 posts · 20 votes
10y
@Kevin, While i value your opinion, i respectively disagree. Numbers do not lie. It does not matter where you live-- san diego, san francisco or cleveland: cash flow rules everyday. Unless of course you are playing the speculation game- appreciation which i do not play. If you buy right, it does not matter what happens after that. If property appreciates, then that is the icing on the cake.
Real Estate Agent · San Diego, CA · Member since 2014 · 121 posts · 111 votes
10y
I second @Kevin Fox, San Diego is a unique market. Buying for cash flow in San Diego is generally not going to happen, that's already well known and understood. Unless you come in with a great loan like VA that allows you to put nothing down and get a low interest rate. I bought a fully rehabbed duplex in Logan Heights (aka the ghetto) for $480k last year which I am house hacking and I absolutely do not feel like I overpaid, because I Iive in San Diego, that's the market here. If you're going to buy out here you have to play the long game, you don't lose until you sell, that's why real estate is so great, even if the market tanks you still have a hard asset to collect money from (because rents do not go down) and you have tenants to pay your mortgage while building equity and historically San Diego has been a great appreciation market, so of course one shouldn't speculate, but let's be honest, Real Estate is inherently an appreciating asset by it's very nature.
Rental Property Investor · San Francisco, CA · Member since 2015 · 78 posts · 30 votes
10y
Hey Bianca -
Nice work on coming across the deal!
Regarding your question and voicing my opinion here. The deal looks similar to the returns we're seeing in the Bay Area but with that said, being "overpriced" really depends on your criteria.
Once you determine whether you're buying for cash flow or appreciation, you could then also look at comps to see what the property is worth in comparision to properties around it. If comps are going for cheaper, then it's overpriced!
Speaking about purchasing - it really depends on what you're looking for specifically!
@Kevin, While i value your opinion, i respectively disagree. Numbers do not lie. It does not matter where you live-- san diego, san francisco or cleveland: cash flow rules everyday. Unless of course you are playing the speculation game- appreciation which i do not play. If you buy right, it does not matter what happens after that. If property appreciates, then that is the icing on the cake.
Cash Flow is nice, but if you are really about returns, whether they're rental income or market appreciation, you need both cash flow and appreciation.
A savvy investor sees opportunities for forced appreciation, a growing/recovering market (market appreciation), and cash flow.
If CF=dividend, and Market appreciation=stock price...wouldn't you want both?
Why settle for just CF when you can get both?
Buying in San Diego is buying a blue-chip stock. There is NEVER a good price when overpaying, that is just praying for appreciation that you can hold before you're insolvent.
If CF is king, then happily snatch up the B/C props in Buffalo, Cleveland, and Indy. Wish you the best of success, and I'm sure you, like many others will find it.
Fremont, CA · Member since 2015 · 289 posts · 63 votes
10y
I don't want to drive to conclusion. but what is overpriced mean that you can get property cheaper than this ? In this area in this time ?
It is costly. You are paying premium for every dollar of rent you are getting. Why because there is much more people to buy. So the prices are going up. But property prices are increasing so the rents but ratio .5 or so percent remain same.
Here is the Fremont if you would have rented a condo in 2012 for 1400 you could have bought same for 270 k now it increased to 2500 and the price is around 470k.
I think you can relate same thing with most of the healthy market. I hope it helps
Developer · San Diego, CA · Member since 2015 · 1k+ posts · 1k+ votes
10y
@Account Closed That sounds about right for a small house with a granny flat in that area - I wouldn't say it's overpriced. That's in line with what the market's paying.
Is it a good way to invest YOUR money? I don't know - depends on your alternatives. It's not a good investment for MY money, and my alternatives include small multi's that we've been buying over the past 6 years in SD.
San Diego, CA · Member since 2016 · 12 posts · 3 votes
10y
Well....I was overbid even though I offered full price. But after reading all these replies I am glad I didn't get that house.
There is this two detached houses in one lot in La Mesa. One is 3/2 and the other.... 2/1...seller keep dropping the price for lack of interests and is now down to for 560k. I called a property manager who said the main house could rent for approximate $2,100 and the studio for $1,000. Based on the replies I don't think this would be a good investment either. But would appreciate your thoughts on it.
Also if the asking price is 560k and they haven't got any offer....how much would you offer?
Real Estate Investor · Loma Linda, CA · Member since 2016 · 36 posts · 20 votes
10y
@Bianca, I would recommend that you listen to as many bigger pockets podcasts as you can about people who have created great wealth with real estate investing. No one invests for appreciation. Brandon has weekly webinars that you can learn a lot. Also use the property calculators. If today was 2009, i would have told you buy as much property in San Diego as you can. Also, be careful with advice from real estate agents locally as some of them, not all, just want to sell. You need investor minded realtor. https://www.biggerpockets.com/webinar
Investor · Orange County, CA · Member since 2015 · 2k+ posts · 3k+ votes
10y
What are the comps? That is how you value residential real estate and determine if it is over-priced or not. That is how appraisers do it, that is how banks do it, that is how you should do it; not by listening to out of state bozos that know nothing about the market and try to value residential real estate via price to rent ratio or CAP rates that have absolutely nothing to do with the value.
Investor · Cleveland, OH · Member since 2015 · 6k+ posts · 2k+ votes
10y
In order to get ahead of the pack (ie. obtain "bigger pockets" more quickly), a better question would be: Is this Duplex UNDER priced (because unless it is, why be interested)?! Cheers...
Investor · Bethel, AK · Member since 2013 · 1k+ posts · 852 votes
10y
Bianca Bourbon You have started a discussion I have seen on here many times. The best way I know to put it is while cash flow pays the bills while appreciation (forced or otherwise) builds wealth. Which do you want? What are your risk tolerances? I bought a house at the right time and in 2 years it went up 40k. The guy I sold too ( my son) has owned it 3 years and it's gone up another 40-60k. That's way more than any cash flow could ever be. Some people look at cash flow as the renter giving you back your own money (down payment) a little at a time. I look at the person paying me rent as a place holder. He's allowing me to keep the property at little to no expense to me. If I can add a garage or do some landscaping or have some appreciation to up the value while he's paying the expenses that's a bonus. Otherwise he's just living in my $150 thousand dollar house while I get 3-4 hundred dollars a month of my own money back. Remember if I sell I gotta pay sale costs too. He's gotta pay that expense plus my buying cost plus my down payment all before he's giving me any profit dollars. So I ask again what do you want and what's your risk tolerance?? RR
Ben Biggs What are your thoughts about Logan Heights growth? Do you get any cash flow? Or are you breaking even?
I see a few Quadplexes in that area and looking at the map it's not too far from North Park, City Heights, Petco Park. All about 20 minutes away. I posted a discussion on Gentrification and I was speaking about parts of North Park, Normal Heights,City Heights, Logan Heights.
A lot of Heights.... Seems to be following a track record. I am trying to research history growth of these neighborhoods and zoning maps.
Logan Heights is ranging 400k-mid 500k for Quadplexes and other Multifamily homes according to Loopnet and Sandicormls.
Your House hacking in this neighborhood and how is it going? What is your net income? Are you able to get market value rent and a little more through creativity?
What kind of tenants do you have? College students, military, etc?
Investor · Poway, CA · Member since 2015 · 7k+ posts · 8k+ votes
10y
First, my view is that the initial property is not over priced but as an investor I would look for better. However I suspect if you purchased it you would not regretting it a year from now.
Second those that advocate cash flow over appreciation are simply unaware of San Diego property value history. Historically San Diego has out performed virtually every other US market for RE ROI for buy n hold investors. This is fact and can be looked up. This better historical RE ROI is for durations as short as 5 years and as long as 50 years (probably longer).
I have purchased properties at 0 cash flow upon purchase that have made close to $100k/year and now cash flow. I would not expect close to this return on a property purchased today but the cash flow rules investors would have passed on these properties in 2012/2013 because of the lack of cash flow.
So you can ignore history and look for cash flow and invest in an areas like Cleavland or Tenessee or you can recognize the unique market of coastal So Cal. Historically San Diego RE ROI has been much higher than those better cash flow locales (verifiable fact). I see nothing that indicates that the San Diego market going forward will be different than history indicates (but history does show RE cycles so you need to know you can weather a down cycle).
Real Estate Investor · Rancho Santa Fe , CA · Member since 2016 · 323 posts · 107 votes
10y
I Live in San Diego and invest Here At out of the State, Is that overprice quick answer for the midwest super overprice, for san diego About To hit the spot, will i buy It no, why even do San Diego Is unique and has diferrent Returns, that other people dont understand such as Tenant stability, future value and safety. So give or take more Return on your Money might mean more headache else where
Thanks for asking, I love Logan Heights! Barrio Logan to the south has exploded (they have their own sign now), golden hill is creeping down from the north, and downtown is creeping by way of east village. That whole 5/15/94 triangle is going to be completely different in 5-10 years depending on where you look. Those are the places you want to get into in my opinion if you want to be at the forefront of the market. The vacancy rate in San Diego is somewhere around 3%, the city is growing like crazy, there are already massive developments planned on the east end of east village which will just continue to expand east. My duplex was a flip, so it's fully renovated with brand new everything. I'm getting on the high side of market rents for my upstairs unit (700 sq. ft, 2/2, $1500/month) and I'm living in the downstairs which is the unit with the yard and garage so it will rent for even more. If i rented out both units I will get ~ $300 a month in cash flow, which is great for this area. But I have a super low interest VA loan so my mortgage is cheaper than most. PM me if you have any more questions!
@Kevin, While i value your opinion, i respectively disagree. Numbers do not lie. It does not matter where you live-- san diego, san francisco or cleveland: cash flow rules everyday. Unless of course you are playing the speculation game- appreciation which i do not play. If you buy right, it does not matter what happens after that. If property appreciates, then that is the icing on the cake.
Cash Flow is nice, but if you are really about returns, whether they're rental income or market appreciation, you need both cash flow and appreciation.
A savvy investor sees opportunities for forced appreciation, a growing/recovering market (market appreciation), and cash flow.
If CF=dividend, and Market appreciation=stock price...wouldn't you want both?
Why settle for just CF when you can get both?
Buying in San Diego is buying a blue-chip stock. There is NEVER a good price when overpaying, that is just praying for appreciation that you can hold before you're insolvent.
If CF is king, then happily snatch up the B/C props in Buffalo, Cleveland, and Indy. Wish you the best of success, and I'm sure you, like many others will find it.
But primary markets are a different beast.
I know I heard all of this before somewhere...HAHA Nice to know you are paying attention :)
Real Estate Investor · Loma Linda, CA · Member since 2016 · 36 posts · 20 votes
10y
@Ben Leybovich, thanks for the input. Appreciation is nice, but i am not a psychic and i don't know what the market will do tomorrow, I know people in California who lost millions in 2007-2008 speculating in California. Cash flow is my lifetime friend, he never disappoints. Really love all your biggerpockets podcast interviews.
@Ben Leybovich, thanks for the input. Appreciation is nice, but i am not a psychic and i don't know what the market will do tomorrow, I know people in California who lost millions in 2007-2008 speculating in California. Cash flow is my lifetime friend, he never disappoints. Really love all your biggerpockets podcast interviews.
Good - and now that you understand this, Tony, all that's left is to figure out how to control appreciation, and only buy those assets whereby you can do that :)