Mortgages are higher than rent in my city. Do I move?

[Amanda Black]

I am trying to break into real estate investing with my first purchase. I live in San Diego, California, and buying something to rent it out doesn't seem like a cash positive or even break even option. 

If I live in it a couple years, will this eventually change?

Or to make money, do I move to a city where this isn't the case?

Thank you so much for any advice!

[Dan H.]

Quote from @Amanda Black:

I am trying to break into real estate investing with my first purchase. I live in San Diego, California, and buying something to rent it out doesn't seem like a cash positive or even break even option. 

If I live in it a couple years, will this eventually change?

Or to make money, do I move to a city where this isn't the case?

Thank you so much for any advice!

I see replies with a lot of misinformation but I think without a rate decline and associated refi, it will take more than a couple years for a local MLS purchase to have positive cash flow.

Is positive cash flow necessary for your investment? I have not purchased since Dec 2021 because the numbers did not seem to meet my buy criteria (as well as I bought $4m of San Diego RE that month). however, with 20/20 hind site, I would have done great buying a year ago. In virtually every list of YOY appreciation, San Diego is at or near the top (a month or 2 ago it was top on the NAR list). This means I would have done outstanding purchasing a year ago.

None of us have a crystal ball but here are some historical facts:

- case Shiller ranks San Diego #3 for this century for total residential RE return

- we are near top of nation on YOY appreciation and rent growth

- CA leads the nation in percentage of SFR owned by investors

- neighborhoodscout has San Diego 10/10 for national appreciation for every duration they list. 
- San Diego vacancy rate is near national low

- San diego is more geographically constrained than virtually all re markets.  Mexico to the south, Pacific Ocean to west, Camp Pendleton/OC to north, east quickly gets harsh. 
- San Diego has little infill left for development. 
- San Diego has near best climate in US.  
- San Diego has one of the lowest eviction rates in the country  

- San Diego has one of the lowest delinquent rent rates in the country.

I do believe it is likely it will take more than 2 years to have positive cash flow.  When it comes to holding times for buying versus renting I typically believe for a hold less than 5 years you are better off renting (but the last decade RE was crazy and holds of less than 5 years were profitable), holds from 5 to 10 years could go either way, and holds of greater than 10 years or longer and San Diego has and likely will provide better return than virtually all other RE markets.  

OOS RE has increased risks and historically worse returns than San Diego for long holds.

good luck