All Forum Posts by: Dan H.

@Anand S. I live in Poway, am an engineer, and invest local. I can make great a logical case for investing local (actually you could simply look for many of my past posts). I do admit your entry point finance wise would be a significant challenge but there are virtually zero markets that have a better ROI than San Diego for buy and hold purchasers. You were able to experience this on your initial Poway purchase that is now a rental. My claim is easy to verify as you can look up the appreciation on San Diego real Estate for a wide range of years and compare the appreciation to other markets and compare just the appreciation to what could be expected in cash flow in a better cash flow locale. Add in the cash flow and San Diego becomes even a better choice. Note a San Diego property that barely cash flows today is likely to be cash flowing by about $50 to $100/month more for each year of ownership.

I do not do flips but I have been to local investor Meetups on places that are being flipped and include some creative ideas t increase profit margin.  There is a group on BP that has nearly monthly Meetup in San Diego that you can learn quite a bit.  Every one of these that I have been to has been a flip (I understand they have had some that have not been flips but i did not attend those) and I have learned something at each one and I would have learned more if I was flipper.  There is no selling, just information exchange and donuts/coffee.  The following people are associated with it:

G. @Parker Cox.

I think you can learn something from attending some of these Meetups whether you choose to invest locally or go out of area.

Good luck.

@Justin R. was recently flipping a large mobile home I believe in Linda Vista.  Never heard final results to know how it worked out.  It was projected to have a good return.  

I see some great list prices on mobile homes so lower entry point. 

Good luck. 

The only way they lost is if they sold as virtually all Coastal So Cal markets are above their pre 2007-2008  high.  If they sold they were likely over leveraged as in the area where I have my rentals and the area my family has their rentals (certainly not all Coastal So Cal areas) there was no rent decrease during that RE depreciation cycle.  People moved in with parents or took on additional roommates lowering the demand but there were so many empty bank owned units that the supply was also down.  Net effect is our rents were flat during that time.

So I tell anyone investing in coastal So Cal that historically the values will rise (always have) but that in the short-term there are cycles (periods were properties depreciate).  I warn that they must have the means and fortitude to ride out the down cycles otherwise they can sell low and lose money.

I have purchased a couple times at near market high times (1992 and 2003) that had the properties initially lose value (the 2003 purchase at its low was down more than $100K).  Both properties are above purchase prices and the 1992 purchased property is up close to $400K on a $167K property. 

So if you buy and hold long term in Coastal So Cal (i.e. did not sell when the markets have depreciated) it has historically been virtually impossible to lose money (if you try real hard you may be able to find an area where you could have owned 10 years and lost money but you would have to try pretty hard to find that area and that 10 time span).  Verifiable fact.  Try and find any 10 year or longer window of time and a Coastal So Cal where you could have lost money on buy n hold assuming that it was at least neutral on the cash flow.

@Anthony Ciulla I do not know how much effort you want to spend on looking at what can be done but our modest unit is 732 Jamaica Court in Mission Beach.  The unit directly across the court (the sidewalk is the court, the streets are the allies) - I do not know the address but maybe 731 or 733 Jamaica Court, was built less than 10 years ago.  They have an upper deck that is partitioned such that both units have some upper deck.  The upper deck has hot tubs (one for each unit).  It shows a fairly recent, fairly high end upgrade of a duplex that was fully to code when built and a great way to use the upper level while staying within height limits.  It is basically a high end entertainment deck.

my family has a San Diego beach duplex.  I would be leery of grand fathered in.  I suspect the extra units were not completed because the permits could not be obtained due to some limitation (parking, height, number of units).   So do you homework in this area. Ideally purchase the plans with the property. The unit across from ours did this when owners got divorced after having plans approved for much larger duplex - replacing smaller duplex.  They completed the approved plans but the new plans had more on-site parking than the property originally had. 

Also you do not indicate if you were planning long-term renters or vacation rental.  The family duplex is 1.5 blocks from the ocean in mission Beach.  We have tried both short- term vacation rental and a high breed of short-term vacation rental in summer and rent to students rest of year.  We typically do slightly better with the high breed.  To be real successful with short-term rental (have it at high occupancy rate) you need to be closer to the water than our units.  

Good luck

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).

Good luck

most standard lease agreements have a clause against sublets/sub lease but the more working class the area the easier it is to find rentals with minimal stipulations.  However, I suspect your roommates will not be thrilled at subsidizing your rent if the only thing you are providing is the person who found the unit and signed the lease. It is different if you are the owner as you have the risk, maintenance, cap expenses, etc.  

so I would be leery of your current plan working as you hope.  

 I think you are on the right path as long as you are prepared to be able to handle a down cycle.  I am confident of the long term San Diego RE appreciation (property and rent appreciation).

One thing to consider on whether to keep your existing house as your investment property. The pro is you have the prop 13 protection. However, you need to analyze the prop 13 savings against other potential rental properties advantages. My worst performing REI is the unit that used to be my home. This is the case even with a prop 13 value that is less than 50% of actual value. So prop 13 is saving me ~$2500/year versus someone who purchased the property today as an investment. Even with the $2500/year "savings" the property was not initially purchased to be a buy and hold rental but was purchased to be my home. Different neighborhoods are better for buy and hold than where my house is. The other potential REI may have a smaller yard to care for (a majority of tenants do not desire big yards in San Diego). So the house I used to live in has been a fine investment but my other San Diego RE investments have been better. My point is that you need to analyze whether keeping you current home as your buy n hold rental is a better option than selling it (and paying selling commission) and purchasing a RE property that is chose as a good buy n hold rental property.

Good luck

 All of my tenants get a lead disclosure form whether I know of lead or not.   So far no tenant has backed out of renting a unit due to receiving the lead disclosure because my units are in better shape than virtually all of the competition so the only way they are likely to get less lead exposure is by renting units that are after the use of lead paint.

This way they are informed and I have covered my responsibility.  So far it has not been an issue.

I have not seen rules on asbestos disclosure but I should probably start doing the same for asbestos disclosure.  If I automatically indicate there may be some asbestos even if I am unaware of any asbestos then they can choose to rent elsewhere (which is always an option because I lease on a month to month so tenants can leave with a months notice if they are not happy).

I have not found California to be landlord hostile but maybe I have little to compare with as my family and I have only had rentals in CA and Alabama.

Are you looking at listing prices or sold prices?  Duplexes to quads are largely purchased by investors.  There is a huge discrepancy between list prices and sold prices on duplexes to quads.  When I give newbies advice on duplex to quad purchase I typically have 2 items: 1) make sure you use sold prices for comps.  Do not look at listing prices as a comp.  In my area I am unsure if any property has closed for as high a price as you list as your cheapest (i.e. virtually everything sold has been less than $500K).  Granted there are some listed as high as the $900K range but they are not selling.  2) make sure to include cap expense in cash flow calculation.  Some newbies think a property cash flows if the rent is greater than the mortgage payment especially if they have property tax and insurance in the mortgage payment.  In reality there is vacancy, maintenance, and, the big one, cap expense.

Also there are creative ways to, in effect, purchase a duplex at not much higher than SFR (purchase a SFR but make it, in effect, a duplex).

Do not get discouraged.  A protégé of mine recently purchased a detached duplex with 3 1-car garages with the units being a 3/1 and a 2/1 at $427K.  The unit was not in bad shape (structurally sound needing no immediate work) but also had not been rehabbed.  It was in perfect shape for an investor.

Also I would not expect that the other tenants will cover the entire mortgage at least when initially purchased,  Their rent may supplement your rent such that you are paying below market rent.  However a couple years down the road with rent appreciation it could result in having the other tenants paying all of your rent but this will not be the case upon initial purchase.

Good luck