Condo BRRRR, San Diego

[Jack Landry]

Hi all,

I am exploring entry strategies into an expensive market, San Diego, CA, for my first deal. My original hope was to BRRRR a single-family home, but with my current cash reserves, it seems as if a condo will be more affordable for me to get started (less money down and lower rehab cost). That being said, I would attempt to BRRRR a condo, with a 3.5-5% FHA loan, house-hack for 2 years so that I have the freedom to sell and avoid short term capital gains tax if desired, or hold and 1031 down the road.

Originally, I was not keen on the idea of a condo, due to:

1) HOA complexities and fees

2) the challenge of achieving cash flow that breaks even or nets positive (my expectation at this point is that I would not be breaking even)

    - I am not ecstatic about this idea because I feel like I could be saving that additional capital for a next investment.

However, I see it as an equity building + appreciation play, where in the worst case situation (say a market downturn), I could rent the condo out, given it is in an area where rent demand will be stable, and then choose to sell/exchange when the market has recovered.

I know investing out of state is an option, but specifically here I am trying to answer the question, how can I invest in San Diego?  This is the best approach I have found for myself thus far in this market.

What do people think about this strategy as an entry point? 

What are your concerns with a condo (+ BRRRR) and challenges/roadblocks that could arise?

What do you think about potentially not breaking even, re cash flow, on this deal?

Thanks in advance!

Jack