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


 

[Greg Scott]

So, you have no cash flow and are banking on the fact that there might be appreciation.   What drives appreciation?  Nothing, absolutely nothing that you control. 

True investing is about finding or creating value.  Speculation is basically gambling that you chose correctly. Did you pick red or black? 

If you are dead-set on buying a SD condo, find one you can buy well below market value, so you capture some equity upon purchase and are not just gambling the market bails you out.