2-4 units in Central San Diego

[Twana Rasoul]

How many are actually actively purchasing or selling their 2-4+ unit properties in Central San Diego?

[Rob Brown]

@Stephan CAP rates are lower in San Diego than in Las Vegas. Investors accept the lower cap rates because they project higher rental rate increases and corresponding higher appreciation. Example: I cancelled a 15 unit deal in PB for 2.25m in 2006 because at that time the property brought in around 16k in gross rents and was going to barely break even with 1m down. Today the rents are @ 2400-2600 / door on that property and the value is around 5m. What will the value be in 2029? Hard to say, but we know San Diego is a supply constrained market with strong population and employment growth prospects in a great weather climate (with long term climate migration something to be considered) where it is VERY hard to build new apartment units and those that do get built are top of market Class A units so buying C and making them B+ in A areas is a proven model in SD. It is very hard to get good cap rates though in A areas. If I had bought a deal in Las Vegas in 2006, 1996, 1986 even though the entry CAP rate was much higher the IRR at sale 20+ years later is lower. That is something I don't see mentioned much on Bigger Pockets forums. I bought a lot of real estate for long term hold in Las Vegas 2010-2013. I love Las Vegas (my home town!) don't get me wrong, I plan to retire there (no state income tax, low cost of housing, all my friends and family there)! That being said, I think my coastal 92109 assets will outperform my Las Vegas assets over a 20 year hold as long as global warming or rent control / prop 13 repeal don't get in the way. The biggest headwinds against long term hold of units in SD are the prospect of rent control, prop 13 repeal (prop taxes no longer fixed with max 2% annual increases), etc. For Las Vegas the boom bust cycle will continue with long term rental rate increases and capital appreciation in core locations and around suburban hubs.