Originally posted by @Dan H.:
Originally posted by @Adam Christopher Zaleski:
Originally posted by @Dan H.:
Originally posted by @Adam Christopher Zaleski:
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I also think the 2% rule is for multi-family units. The 1% rule is for single family homes. These are still good rules of thumb. They don't really work in San Diego because overall San Diego is not a good rental market for landlords.
San Diego financed buy n hold has historically been very good measured by ROI. It has had historically better ROI than any of the better cash flow locals. This it true for any duration from a couple years to 50+ years. This is a verifiable fact. Your statement would be correct if instead of stating "not a good market for landlords" to "does not have good initial cash flow".
Any duration from a couple years to 50+ years? This is a verifiable fact?
What about someone who bought in 2006 and sold in 2009?
Someone who bought in Denver in 2006 and sold in 2009 would have done much better than someone who bought in San Diego during the same time.
I guess you are correct that I was not clear but I was going back from the current time.
Of course you are correct that there have been cycles along the way that in those cycles there have been times that San Diego would not beat cash flowing places but going from the current time back 3 years to 50 years San Diego ROI on financed buy n hold would beat any of the great cash flow locales in the US.
Your reply also reminds me of another item. The only people to have, in recent times, lost money on financed San Diego buy n hold are those that have sold on a down cycle. Because rents in San Diego did not depreciate noticeably in at least the last two down cycles the only people who had to sell were those over leveraged.
I understand that San Diego can make-up for lack of cash flow with appreciation. However, don't forget that cash from cash flow is often used to fund additional deals. Equity based on appreciation tends to sit in the home. You can only access the cash if you re-fi or sell, both of which are going to cost money. A re-fi would most likely result in being cash flow negative. When a rental truly cash flows, the money goes directly to my bank account to fund additional deals.
I have a single family home in Fort Myers, FL that is currently a rental. I bought it for 95K in January 2012 and put 16K of repairs into it. It was my primary home from 2012 to 2015 and now it's been a rental since August 1st, 2015. The total mortgage, taxes and insurance is $665. I am 3K away from getting rid of the $42 monthly PMI. After this, my total mortgages, taxes and insurance will be $623. It's currently worth about 225K.
The current rent is $1700. Market based rent back in 2012 was probably $1300-$1400, but it was my primary house. During 2015, the rent was $1600. I have had about $1100 repairs over the past 16 months and 0% vacancy.
I am saving my monthly $800 (after repairs and cap ex) of cash flow for another house. At the end of 6 years, I will have purchased another rental with the cash flow. At the end of 10 years, I will have purchased 2 additional houses with the cash flow.
How does a rental in San Diego beat this cash flowing rental?
