San Diego or Phoenix?

[Bud Dwyer]

I'm about to sell my condo in downtown San Diego and should end up with around $130k after costs.  I plan on doing a 1031 exchange to buy more investment propertie(s).

I was planning on buying about 3 triplexes or quads in Phoenix for the cash flow. I really wasn't concerned about appreciation as most of the buildings are so cheap here ( sub $200k). I was planning on putting $42,500 down on each one, then saving the NOI and buying more in perpetuity.

Now I'm looking at all the short sale SFH, and full price duplexes in San Diego. They all seem to be around $425-500k (I would put the entire $130k down on one property). The reason that puts a monkey wrench in my original plan is I am much more familiar with the San Diego market, as I grew up there. Also the appreciation would be far higher than it would be in Phoenix. However if I was lucky I would be able to make around $12k a year NOI, while in Phoenix the number would be closer to $18k I'm guessing.

My short term goal is to eliminate any reason to work overtime at my job, while my long term goal is to do REI full time.

Thanks for any advice.

[Anthony Gayden]

@Bud Dwyer I should mention that I am a bit biased toward Phoenix since I live in Arizona and already invest there, but there are some other positives. Arizona is a very landlord friendly state compared to California. The taxes in AZ are dirt cheap, and I am saying that as a person from Kansas. The dry warm weather means that there will be a lot less maintenance issues than in a more wet environment.

Some of the downsides include much less appreciation, and very little actual multi-family housing stock is available, especially at a reasonable price. In fact, that is the reason why I am looking in Tucson for my next purchase rather than Phoenix, even though I believe Phoenix is a much better market.