Off Market STR Opportunity in San Diego

[Mackenzie Black]

Mission Hills Neighborhood (on Albatross) active Short Term Rental (STR)

- Asking $1.85M 

- Gross ~20K - $30K per month; Jan ‘23 to current: $256,000

- 85% annual occupancy rate 

- ‌‌‌‌‌‌Average nightly rate $774, up to $1700 

- Utilities average $4900 per year (gas, electricity, water, trash, sewer) 

- Internet averages $112 per month through cox 

- Current property taxes ~$13,000 per year
Seller is willing to sell home fully furnished and ready to go for the right price (~1.9M). Here’s a link to the listing: https://www.airbnb.com/rooms/682505065448399539?viralityEntryPoint=1&unique_share_id=47C39BCB-51A2-4AA1-A307-713A2E122FB3&slcid=937f1238add042458d231604bf82cee4&s=76&feature=share&adults=1&channel=native&slug=WBm6CbQu&source_impression_id=p3_1721171203_P3x_jDuyI8BKccwn

[Andrew Steffens]

Jan 23 - Current @ $256k is a little over $14k average.  $14k avg annualized is $168k which equals about a 8.8% Gross Yield which means cash on cash will likely be 1-4% depending on a few other factors.  If you are looking for the best return I do not think this is it, as I just sold a $2.25M fully turnkey house that will bring in $350k+ per year in FL.  If you are looking just in SoCal maybe this is good, unfortunately I do not have experience in that market.

[Tanner Pile]

@Mackenzie Black

What are the STR laws in San Diego and surrounding areas?

[Dan H.]

Quote from @Tanner Pile:

@Mackenzie Black

What are the STR laws in San Diego and surrounding areas?

San Diego city is on a quota.  The city is broken into 2 categories 1) mission beach (MB) 2) rest of the city of San Diego.  These permits do not transfer with sale.  

Mission beach hit its quota at the lottery and there were many who did not get a permit and were wait listed.  Then a bunch of people got caught cheating on the lottery and people were taken off the waitlist.  

the rest of San Diego has not hit quota.  

I consider the sentiment in the city to be anti STR.  I think in the moderate term there will be further STR limits/restrictions.  

Other San Diego cities vary in their rules.  Some have distance limitations.  The sentiment varies. 

San Diego county has no regulations and sentiment seems neutral.  I do not expect limits in the near term unless they come from the state.  

the state seems a bit anti STR.  there was recent proposal for a STR tax on top of current occupancy taxes.  This tax only applied to STRs, hotels were not to pay same tax.  To get additional support, the money was to be used to address homelessness.  The law was anti STR and would give hotels a big advantage.  Using the funding to fight homelessness was just a disguise.  

 going full service PM at beach area is 25%.  You can pay less for a co-host (15%) or pay less for PM (as low as 18%) that is deficient in some way (no owners portal or no maintenance staff and has to contract out all repairs for example). 

my view is be leery of STRs in San Diego city.  In the county you likely are going to be fine for quite a few years.  

Good luck

[Dan H.]

Quote from @Andrew Steffens:

Jan 23 - Current @ $256k is a little over $14k average.  $14k avg annualized is $168k which equals about a 8.8% Gross Yield which means cash on cash will likely be 1-4% depending on a few other factors.  If you are looking for the best return I do not think this is it, as I just sold a $2.25M fully turnkey house that will bring in $350k+ per year in FL.  If you are looking just in SoCal maybe this is good, unfortunately I do not have experience in that market.

 Not to pile on, but listing current property tax (~$13k) when asking price places property tax at ~$20k I find intentionally mid leading.  

[Mackenzie Black]

Quote from @Dan H.:

Quote from @Andrew Steffens:

Jan 23 - Current @ $256k is a little over $14k average.  $14k avg annualized is $168k which equals about a 8.8% Gross Yield which means cash on cash will likely be 1-4% depending on a few other factors.  If you are looking for the best return I do not think this is it, as I just sold a $2.25M fully turnkey house that will bring in $350k+ per year in FL.  If you are looking just in SoCal maybe this is good, unfortunately I do not have experience in that market.

 Not to pile on, but listing current property tax (~$13k) when asking price places property tax at ~$20k I find intentionally mid leading.  

 Thank you so much for the analysis! & you're correct, the taxes will increase upon sale. The $13K is what the seller is currently pay PY.