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Ali K.
  • Rental Property Investor
  • Minneapolis, MN
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New to San Diego, should I buy or rent?

Ali K.
  • Rental Property Investor
  • Minneapolis, MN
Posted Oct 6 2022, 18:01

Hello BP,

My family is moving to San Diego temporarily (say one year) with a prospect for us to permanently reside in Southern California. I have a descent cash-flowing rental portfolio in Minneapolis that I self manage, along with my primary and a full time but flexible job that allows me to travel back and forth. We need a place to live in San Diego and my question is:

Should I sell (one or two) rental property in Minneapolis and use the equity to buy a primary in San Diego or should I just rent in San Diego? Some +/- arguments:

+ diversification over cash flowing and appreciating assets

+ building sweat equity in my next primary in San Diego

+ tax advantages on a larger primary

+ taking advantage of the cool market, that’s selling low and buying low (please comment on this)

+ having fewer properties to manage (yeah managing duplexes is not my favorite)

- high interest rates

- high price to rent ratio in San Diego

- giving up cash flowing assets

- unnecessary transactions costs

Other arguments are welcome.

Neighborhood suggestions are welcome for descent but not super expensive houses (say A- quality) with good access to downtown.

Thanks for your comments!

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Dan Heuschele
  • Investor
  • Poway, CA
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Dan Heuschele
  • Investor
  • Poway, CA
Replied Oct 6 2022, 19:50

Historically long holds have always done well.  However, initial positive cash flow properties when properly allocating for all expenses is a challenge.  The cash flow typically results from rent increases. 

If you are going to do a value add such as combining house hack with BRRRR, I would not hesitate to buy if you have confidence you can perform on the value add. Warning, refi appraisals in San Diego are very conservative.

However if you were intending to purchase a property without a value add I would rent if your hold was less than 5 years, buy if your hold was more than 10 years.  5 to 10 years in recent times would have done great as a purchase but there are times in the past where it would have been better to rent.  You have the buying and selling costs, the typically initial negative cash flow (that takes time to turn positive), and the cost of money (finances put in the house are unavailable for other investments).  

Everyone has different items they value in neighborhoods.  

Some of my favorite neighborhoods: Encinitas: beach with casual flair and without heavy party action.  Poway (where I live): great community and schools.  Community has quite a few events.  Carlsbad: I do not like it as much as Encinitas but it is similar.  Rancho Bernardo: like poway but not quite.  

My recommendation for areas that I believe are most likely to have appreciation better than other San Diego areas (these are not A- areas, probably b to c areas): West Chula Vista: one of few areas where close to water is cheaper than east. Has approved large redevelopment project at the bay.  Imperial Beach: cheapest beach area in the US for many hundreds of miles.  Has had recurring sewage issues with Mexico that have never been closer to being resolved (but still has a ways to go).  

Other areas to mention for having certain vibe

Party action: mission beach, pacific beach, lesser oceanside, down town area especially near the ball field (Petco park)

Liberal (think Berkeley): ocean beach

More high society: Rancho Santa Fe, La Jolla, Del Mar, Coronado, pt Loma 

Rural/country: Julian, Ramona, lakeside, jamul
touristy: Julian, La Jolla

City action: hillcrest, golden hill, bankers hill, north park, South Park

Military: oceanside, imperial beach
gay scene: hillcrest

best schools are usually consider Carmel valley, poway, north county beach areas

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Twana Rasoul
  • Real Estate Agent
  • San Diego, CA
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Twana Rasoul
  • Real Estate Agent
  • San Diego, CA
Replied Oct 6 2022, 23:10

@Ali K. Depends on quite a few factors but San Diego is always a good option for a long term buy and hold...if only holding for a few years, better to rent.  Also, how much equity you have in the out of state properties, how much in capital gains liability would you have? Is there enough capital gains to warrant a 1031 tax deferred exchange?  Of course 1031s are done from one investment property into another, not owner occupied.

I personally sold off mid-west cash flowing investments in the past year or so and purchased more multi-family properties in the San Diego market.  Depending on your specific factors, it may or may not be right for you.

  • Real Estate Agent California (#02026495)

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Mark Frattini
  • Real Estate Agent
  • San Diego, CA
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Mark Frattini
  • Real Estate Agent
  • San Diego, CA
Replied Oct 7 2022, 09:16

Hi @Ali K.

Let me address a few of the negative points. Since you already own property and have a investment portfolio this should make sense.

- high interest rate - most believe these higher rates are temporary and will come back down after inflation is under control. You have still have MANY options that I would consider low risk and would give you low rates today or in the near future. 

- high price to rent ratio in San Diego- Since this is your primary I wouldn't be too concerned. Also, rents in San Diego will continue to increase should you need to rent it out in the future. 

- giving up cash flowing assets - This would be a way to diversify and move into a more appreciating market. 

- unnecessary transactions costs - Do you have to sell in order to buy? You could save on the selling transaction side if you could hold your properties in Minneapolis.

I would need more info to give you the best information on neighborhoods. Details like kids, commute, parks, transit needs etc. would be helpful to get you more dialed in. Without knowing any of this info check into the neighborhoods around Balboa Park. This area is very close to downtown.

If you're interested I put together a list of resources on the different cities and neighborhoods in San Diego that I give to anyone who is looking into moving here. 

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Matt May
  • Real Estate Agent
  • San Diego, CA
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Matt May
  • Real Estate Agent
  • San Diego, CA
Replied Oct 7 2022, 10:03

Hi Ali, 

Congrats on your current portfolio of properties in MN. Thank you for posting such a great question. I love the input people have provided so far. 

Here is my opinion. As a rule of thumb, I would not sell an investment property to purchase a primary residence. One idea you might consider instead of renting would be (and someone else may have mentioned this, idk) sell a MN investment property and purchase a duplex in San Diego that allows you to live in one unit and rent the other. That way you are both trading one investment property for another and providing for yourself a temporary primary residence. 

You mentioned you have a primary residence in MN. Why not sell that and buy a primary residence in San Diego? 

Otherwise renting in SD for a year or two is really not a bad option in your case. 

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Ali K.
  • Rental Property Investor
  • Minneapolis, MN
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Ali K.
  • Rental Property Investor
  • Minneapolis, MN
Replied Oct 7 2022, 17:21

@Dan Heuschele

Thank you for your reply and excellent information! One point I’d like to clarify is that I’m not aiming for cash flow in a San Diego property and the goal is to buy it for primary residence for the time being. The point of the question is whether I’d be better off buying my primary in SD and work/hope for appreciation or rent there and keep the cash flowing investments in Minneapolis.

The neighborhood information is wonderful. I do like your suggestions on Encinitas and Poway that were not in my radar so far.

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Ali K.
  • Rental Property Investor
  • Minneapolis, MN
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Ali K.
  • Rental Property Investor
  • Minneapolis, MN
Replied Oct 7 2022, 17:26

@Twana Rasoul

Thank you for your reply and the great points about equity and tax implications. I bought my rentals in the last 2 years or so and their equity is descent but not great. I was thinking if buying in San Diego is a good option would it be better to do it now by selling my rentals or wait for a couple more years and rent until then.

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Ali K.
  • Rental Property Investor
  • Minneapolis, MN
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Ali K.
  • Rental Property Investor
  • Minneapolis, MN
Replied Oct 7 2022, 17:33

@Mark Frattini

Thank you for your reply and great information! I’d agree with you on most of the points if not all. Regarding the price to rent ratio in San Diego, my point was that I could rent with less monthly payments than mortgage, and invest my money in Minneapolis. Having rentals in SD is not my priority at this time.

I do think neighborhoods around balboa park are good options in terms of city vibes and próximo to downtown. I don’t know about investment potential there though. Any thoughts?

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Ali K.
  • Rental Property Investor
  • Minneapolis, MN
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Ali K.
  • Rental Property Investor
  • Minneapolis, MN
Replied Oct 7 2022, 17:35

@Mark Frattini

Forgot to say that I would love to have your list of neighborhoods if you could send it to me! Thanks again!

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Dan Heuschele
  • Investor
  • Poway, CA
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Dan Heuschele
  • Investor
  • Poway, CA
Replied Oct 7 2022, 19:12
Quote from @Ali K.:

@Dan Heuschele

Thank you for your reply and excellent information! One point I’d like to clarify is that I’m not aiming for cash flow in a San Diego property and the goal is to buy it for primary residence for the time being. The point of the question is whether I’d be better off buying my primary in SD and work/hope for appreciation or rent there and keep the cash flowing investments in Minneapolis.

The neighborhood information is wonderful. I do like your suggestions on Encinitas and Poway that were not in my radar so far.


 The fact that it would have negative cash flow if rented implies that it is initially cheaper to rent than to buy.  However, many of the expenses of owning of fixed while rent historically increases.  This implies the longer you live there, the more likely it is that owning was a better financial decision than buying.  If you are going to own the home less than 5 years, it is likely that renting is the better financial decision. Similar if you are going to own more than 10 years, it is likely owning will be the better financial decision.  For owning 5 to 10 years is where the financial uncertainty resides.  In recent times you would have been better financially to own.  However, the last few months have been the first price decline in San Diego RE in a decade.  It could be that a purchase today may take close to 10 years to be the financially better decision.  People have opinions, but no one knows.

Good luck

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Twana Rasoul
  • Real Estate Agent
  • San Diego, CA
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Twana Rasoul
  • Real Estate Agent
  • San Diego, CA
Replied Oct 7 2022, 20:05

@Ali K. There's no way to time the market and if you are going to be a long term investor in San Diego it is always better to do sooner than later generally speaking.  I know there's quite a few people waiting on the sidelines for something to happen (something negative) but those people are purely guessing.  I'm personally in the market myself to purchase another property, hopefully before the end of the year....higher rates are temporary but gives an opportunity for me and buyers to negotiate a lower price plus concessions.  Buyers have a decent amount of leverage in the market right now so it creates opportunity especially since many have moved to the sidelines.

Incorporating medium term rental into my strategy along with price reduction and concessions can help close the negative cashflow gap a bit.

Just had a client here in San Diego purchase a multifamily/duplex both 1 bed / 1 bath units in South Park that was listed at $1M, for $930,000 with his VA loan and seller paid all his closing costs. my client rents one side as a medium term furnished rental for $3,750/month and lives in the second unit for $2,500/month. Once he moves out in a year he will be covering his entire mortgage plus have an extra $1,200 remaining "cashflow" to go towards some of his expenses.

  • Real Estate Agent California (#02026495)

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Ali K.
  • Rental Property Investor
  • Minneapolis, MN
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Ali K.
  • Rental Property Investor
  • Minneapolis, MN
Replied Oct 7 2022, 20:43

@Matt May

Thank you for your reply and the suggestions! I do think buying a duplex would be great but a few considerations: 1) multi family properties in San Diego are very expensive, 2) they need more money down that require me to sell more properties in Minneapolis, 3) their monthly mortgage payment is higher, perhaps beyond affordability, and 4) rent from the second unit May not make up for the higher PITI. I'm not opposed to it though and I would welcome more info on where in SD there are more MF properties that are worth considering.

I like your idea about selling my primary in Minneapolis. I was thinking of having it as a rental but maybe I should reconsider it for 1) its cash flow would be positive but not significant and 2) I could take advantage of capital gain tax benefits before turning it into a rental. Do you have more thought to share on this?

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Kenny Kuramoto
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Kenny Kuramoto
Replied Oct 7 2022, 21:34
Quote from @Ali K.:

@Matt May

Thank you for your reply and the suggestions! I do think buying a duplex would be great but a few considerations: 1) multi family properties in San Diego are very expensive, 2) they need more money down that require me to sell more properties in Minneapolis, 3) their monthly mortgage payment is higher, perhaps beyond affordability, and 4) rent from the second unit May not make up for the higher PITI. I'm not opposed to it though and I would welcome more info on where in SD there are more MF properties that are worth considering.

I like your idea about selling my primary in Minneapolis. I was thinking of having it as a rental but maybe I should reconsider it for 1) its cash flow would be positive but not significant and 2) I could take advantage of capital gain tax benefits before turning it into a rental. Do you have more thought to share on this?

 There are a couple multi that have 3 bed 1 bath duplex for 900k i think. can house hack if you want... another one for the same price thats a flip that has a 1 bed 1 bath adu. I forget the price but its there. PM for address and I can look it up. I live in SD so i always have alerts even though I don't buy here only my primary is here. :)

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Peter Mckernan
  • Residential Real Estate Agent
  • Irvine, CA
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Peter Mckernan
  • Residential Real Estate Agent
  • Irvine, CA
Replied Oct 9 2022, 11:06
Quote from @Ali K.:

 If your willing to not have cashflow, but buy as a primary and hold it for appreciation for a bit it would be great to grow your net worth and build money in the form of appreciation to move that to more properties! 

  • Real Estate Agent Ca (#01968986)

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Jordan Graham
  • Real Estate Agent
  • San Diego, CA
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Jordan Graham
  • Real Estate Agent
  • San Diego, CA
Replied Oct 10 2022, 15:51

Like others said, it depends on how long you intend to live here. San Diego is a very desirable city that has very little land left for development unless you go east, which creates a promising future for investors and owners.

That being said, I think it's important to diversify in to multiple markets over the long term. You are also moving here at a very ideal time and think that it's a great opportunity to pick up some great deals. I work with many flippers and we are negotiating crazy price reductions already and I think the next year will continue in this direction. I say get your cash ready to scoop up some discounted properties!

If considering the multi-family route, I like North Park/ Normal Heights. They are not in the Class A quality, but North Park is one of the most desirable parts of town.

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Ali K.
  • Rental Property Investor
  • Minneapolis, MN
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Ali K.
  • Rental Property Investor
  • Minneapolis, MN
Replied Oct 13 2022, 19:54

@Jordan Graham

Thank you for sharing the information! I am excited about this window of opportunity but I’m not sure how long it’ll last. One could see this continuing through the next year or as long as rates are higher, or who knows perhaps the market will catch up in the next spring-summer season and the opportunity will be gone.

I’ve been looking at North Park as an option. Although we like a more urban vibe to live in, I see two issues with the area 1) safety (it’s relative but please correct me if I’m wrong) and 2) smaller lots. I see some properties with 0.5-4 acres in Poway that can be bought with 1-2M, the same price as a smaller house with 5000 sqf lot in North Park. Am I looking at it the right way, that the land in the suburbs would provide opportunities down the road?

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Jordan Graham
  • Real Estate Agent
  • San Diego, CA
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Jordan Graham
  • Real Estate Agent
  • San Diego, CA
Replied Oct 20 2022, 14:54

I agree, no one knows how long this will last but I think it's safe to say it will continue through the rest of the year and the beginning of 2023... depending on what the Fed does.

North Park used to be pretty sketchy 10-20 years ago but it has undergone a major facelift and it is very desirable to a lot of people now. If you go a little bit farther east (past the 805) it becomes less desirable pretty quickly.

What would be your reason for bigger lots? Are you looking to build something like an ADU or do you just like the idea of more space for you and your family? Poway is beautiful and more family oriented but is definitely not urban at all.

I think Mission Hills/ Banker Hill sounds like a perfect fit for you and what you're looking for based on safety and still getting the urban vibe.

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Ali K.
  • Rental Property Investor
  • Minneapolis, MN
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Ali K.
  • Rental Property Investor
  • Minneapolis, MN
Replied Nov 3 2022, 20:58

@Jordan Graham

Thanks for the additional information! My idea of a bigger lot is for more opportunities down the road (ADU or future development).

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Eliott Elias#3 All Forums Contributor
  • Investor
  • Austin, TX
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Eliott Elias#3 All Forums Contributor
  • Investor
  • Austin, TX
Replied Nov 3 2022, 21:23

Buy, now is the time. The ball is in your court, you can make offers that were acceptable 2 years ago