Buy and Hold in Temecula? 2-3 years.

14 Replies | San Diego, California

Hey BP,

As a SoCal resident, I'm considering my first RE investment to be somewhat local. With CA continuously realizing decent appreciation, I'm juggling the idea of invest here first before starting off out of state. Ideally I buy and hold for a few years, get rent to cover monthly costs, then 1031 out of state. 

This would help:

1) roll my capital into a larger amount

2) gain experience buying

3) gain experience being a landlord

Anyone else have experience in Murrieta or Temecula area?? 

Buy and hold is an option. AirBnb is another with Temecula's winery scene. 

Thanks in advance. Let's connect!

Hey @Saumon E.

Great Idea! I have sold many homes up in Temecula/Murrieta area and am a big fan. 

I would say it's a no brainer to grab something up there for the right price, when I have clients that want to buy there every time they are thrilled about their decision. It's a fantastic area for rentals as well, as a good portion of the military who work down in San Diego rent and buy up there due to the proximity to great  schools, shopping and larger homes for less money. 

The only thing I would say about your strategy is that I would encourage you to try and keep your initial purchase here in SoCal and get creative about a new purchase somewhere else or in less expensive areas of San Diego. Me personally I'm all about doors and at the end of a 10 year investment cycle owning as many as possible. 

hope that helps! 

-Ben Biggs

I would just first make sure your numbers are going to work out. If your goal with the Temecula property is to have your mortgage covered by the rents, make sure that's actually going to happen. It might also be worth reaching out to some professionals out there, either property managers or agents with renting experience, and ask how the rentability is out there. My impression is that more people tend to own their homes out there because they are more affordable. If that's the case, what does that leave for a renter's pool?

The other thing to consider is that if you have a mortgage on the property, you aren't going to pay down any of the equity in it for the first few years because most of your payment will go to interest. So just take those numbers into consideration as well.

Would you be comfortable with this plan if home values stayed flat and or went down? 

Originally posted by @Saumon E. :

@Tim Gordon Over what period of time? Short term? Because with low to no cash flow potential, I think appreciation would be the main goal for this kind of area. What's on your mind?

Over the period of time you intend to own it. Buying a rental property with no to low cash flow potential that only works if the market goes up sounds risky. 

Prices go up, down and stay flat. To plan for only one of those outcomes being good for your investment should be examined if it’s a wise decision. 

@Tim G. Sure - agreed! As someone who is just starting his investing career, I considered Temecula as a possibility given the lower price points and potential for appreciation, but it sounds like positive cash flow in the current market anywhere in San Diego with a ~20% down payment is slim to none. What are your thoughts on that as a local investor? Does this mean only flips make sense in this market?

I'm not sure what makes sense in this market currently. Instead of flipping a property I am selling it as-is to a another investor who is more aggressive and hopeful for the future values. My math based on current exit prices made it more profitable to sell to a flipper than flip myself. That seems crazy but the numbers don't lie. 

This is an ultra competitive market that requires understanding a market and its niches expertly. Then finding creative ways to execute those plans with precision. Each person has a different set of cards to play, whether its cash, credit, elbow grease, inside information etc.. All I can suggest is looking at what you have at your disposal and how to leverage it safely to your advantage in a specific market. That is how I've found success as a small fish in Socal. 

I'm an agent in Temecula. I know the market here pretty well. I have a few investors with hold properties. We always look for a 5% return value on their cash purchases. For picking up properties holding a loan, I'm sure it's most likely tougher to acquire properties that make sense for monthly cash flow, but would work for the equity builds. Our market pricing has come down and will continue to come down these last couple months of the year (as they always do), before rising again in the early spring months. There are still good prices up here, especially compared to other areas.  

As for careful. I found out a couple months ago, when researching for another investor, for properties within the city limits, the city does not allow for short term rentals. My understanding from my call to the city is, the property has to be a minimum of 60,000 SF. They did tell me that properties out in wine country have been allowed, but you have to contact them with the address for confirmation. I've heard the city is going through some additional "research" on this subject, as there have been many requests, but for now... it's still not allowed. 

Feel free to contact me if you have questions. I can do my best to answer.

Originally posted by @Bradley Kirschbaum :

@Tim Gordon Did you buy said property knowing you'd be selling it to a flipper, or did it become a considered option after purchase?

 My plan was to hold and see what I could do with the place. I took it subject to with only $30k out of pocket. A year went by, my monthly cash flow was low $1900 mortgage, tax, insurance / $2300 rent with $150k in equity so I chose to sell it. 

My plan if I were to sell was to fix it up, or do an addition and then sell to better fit into the comps in the area. But my math showed I'd only make $10k more doing the addition than selling to this buyer. So I chose to take my money and run.