San Diego Multifamily

[Josh Buchan]

Looking for advice regarding multifamily investments in San Diego.  I am currently selling 3 condos in SD that I want to roll into a multifamily unit in the $2 million price point.  What are the pros and cons on 2-4 unit vs 5+ commercial?  Looks like I could acquire 2 4plexes or one large commercial unit.

A little about me.  I work up in Alaska for about half the year,  my wife is a loan officer for a bank down here.  Her family has a pretty heavy real estate background.  We have owned the 3 rentals for over 10 years and are tired of the dismal appreciation.  We are ready to get into something a little more lucrative and exciting.  Cash flowing is important as will as having a stable investment.  

Thanks in advance

[Andrew Johnson]

@Dan H. Maybe @Josh Buchan means "over 10 years" as in 12 years?  If you bought close to the peak and got hammered on the downturn then I could see how you bled a ton of cash and the appreciation (even back over 2006 highs) wouldn't have erased the cash-flow losses.  I could see how someone could (especially with condo fees) get back to break-even and just "want out" after the ride.  

But here's what I would say for whatever my little opinion is worth.  I believe in "dirt" long-term in San Diego.  If I was buying here I'd probably buy SFRs.  I'd take it on the chin when it came to monthly cash-flow and be really happy I did in about 15-20 years (regardless of the cycle).  So while I invest in apartments, I don't invest in them here locally.  

Where I invest I can nudge rents up to "force  appreciation" even if the value of the dirt is stagnant.  I know rents have risen in San Diego but they haven't (from what I've seen) kept pace with appreciation.  So as much as you'd want to nudge rents up on a commercial multifamily you probably can't nudge them at a rate higher than the appreciation of the dirt.

Then again, cards on the table, I'm not in real estate because I wanted something a little more "exciting".  I like boring and predictable.  The bank also likes that I can boring, and predictably, pay the mortgage each month :-)