Should I buy a second unit in my condo building?

Question

I currently own a 1b/1ba unit in a 4 unit condo. There are two units downstairs and two upstairs. I love everything about where I live ( Ocean Beach, San Diego, 1/2 block from the water, the size of my unit, walking distance to everything I need) but I am the only owner occupied unit in my building. Two of the other units have tenants who are less than ideal. I have talked to their landlords multiple times and some things have improved but I'm still stressed out every day (noise, parties, junk in shared spaces) and it's caused me to second guess myself even buying this property in the first place. The other unit above my is empty most of the year which is really nice since the owner doesn't live on site and doesn't rent it out. So, my biggest issue are the tenants next door. The walls are thinnnn and I hear everything.

I had this idea the other night to just buy it! If I owned the unit next door I could screen the tenants/my new next-door neighbors and my problems would be solved. It wouldn't be hard to rent, its 2b/1ba just steps off the beach in a great little beach town with restaurants, shops, and bars all in walking distance. But I'm wondering, what are the downfalls of owning 2 of the 4 units in a condo? Also, Im not even sure if the owner is looking to sell. I would have to make a pretty high offer and then I'm not even sure if it would be worth the money. Maybe I should just rent or sell my unit and buy or rent somewhere else?

ANY advice at all is much appreciated. Thank you!

-Amy

Maxwell Ventura · Answer

@Amy Sacco

It sounds like you really enjoy your unit, as well as OB. Would that be correct? I live about 5 miles east bordering Balboa Park. OB is certainly continuing to become a nicer place to live.

Maybe you have to ask yourself what's more important: The best financial investment decision or your quality of life? Some combination in between? What are the short term rental rules of the HOA? None? 30 days? 6 months? I'm sure you won't have any trouble cash flowing a STR in OB, and you said you're very comfortable w/ your current payment of $1700.

Occupancy isn't an issue here. I think as long as you have a good screening process in place, you'll be happy with your decision.

The other option is just using your current unit as a STR and finding a place somewhere else. If that's the case, is there anywhere else you'd rather be right now than your current unit in OB?

Hope this helps ~

Twana Rasoul · Answer

@Amy Sacco I'd probably move out of that unit and rent it out and purchase another property instead of property next door unless you get a heck of a deal buying it.  You can think about buying a 2-4 unit building similar to the one you are living in except for you would own all the units.  There was a 4 unit in the OB area somewhat recently and all units were 2/1 and it was around $1.5M or $1.6M which sounds like a bit of a better deal than paying the approximately $600k for a single 2/1...You can live in a property like this and choose the other 3 tenants that would live in your building.  Just a thought...

Theresa Harris · Answer

How much could you get for rent?  If the numbers make sense, then try to buy it.  Offer market value or slightly less as the seller won't have to use a realtor and will save on commission.

Nicholas L. · Answer

@Amy Sacco what are your long term investment goals?  If you buy this unit using conventional financing, you will have a ton of cash tied up in it + the unit you live in.  There's nothing inherently wrong with that if it's what you want, it's just that that cash can't be used to do anything else.

You said "Maybe I should just rent or sell my unit and buy or rent somewhere else?"  Does this mean you're open to moving?  If so, only within CA or anywhere?

Kenneth Donaghy · Answer

@Amy Sacco I think your answer is in the last question you asked. OB will be OB. Buying the place next door, will be a greater expense, with new challenges, are you ready for that? Or do you just want better neighbors? Learn from the experience, take the knowledge to help create a better situation moving forward. There are many options doing so, what do you really want? Commit to it, plan, and figure out how.

Dan H. · Answer

It likely would be cheaper to address the noise issue than to purchase the neighboring unit.  I would start by getting some idea of the cost and expected result of sound insulation.

Good luck

Mark Frattini · Answer

Hi @Amy Sacco,

Welcome to Bigger Pockets!

I would only consider buying that unit if you were planning on investing in a property anyway. If the numbers make sense and the owner is willing to sell, it could be an opportunity to get started. However this may not solve the thin wall and noise issues. Even if you do a great job screening your tenants the noise may not go away. Also what happens if the unit above you is sold or gets a long term tenant placed and now you may have noise above you. Have you considered renting out the unit you currently live in and finding something else for yourself in the same area? When investing I'm a big advocate of diversification and spreading out the risk. Owning two units in the same complex seems risky. Just something to think about.

Let me know if there is anything I can do for you.

Amy Sacco · Answer

Nicholas-

You are absolutely correct. Let me give some more information. I bought my unit in 2019 for $465,000. I put $250,000 down with an interest rate of 3.5%. My current loan is for $210,00 and I'm in the process of refinancing for a 2.8% interest rate. My monthly payment including the $240 HOA will be around $1700 which is very comfortable for me.

The unit next door that I'm contemplating buying was bought in 2007 for $430,000. Comps for a 2b/1ba that close to the beach are around $600,000. I really do want to stay where I'm at and buying this nextdoor unit would allow me to truly be at ease living here since the unit nextdoor is who I have the most issues with. Is this a viable option? I'd be tying up more of my money but owning properties in San Diego so close to the beach will always go up in value. This area is also 25% owner occupied, the rest are renters. So I know I wouldn't have trouble renting it.

I hope this info helps!

Nicholas L. · Answer

@Amy Sacco you haven't provided enough information on purchase price and expenses to help you with the numbers, but with that said, buying a unit to solve a neighbor / lifestyle problem is probably not a good idea.  Feel free to post more information about the price you might have to pay and what it might rent for, how much equity you have in your place, whether you'd be willing to move to a different metro area or state, etc. if you want to.