BP San Diego! Can I pick your brain?

Question

Hi everyone. This is my very first post on BP! I have been following the podcast and reading the forums actively for about a year now. Thank you all so much for what you have contributed. This is an amazing resource.
Here goes. My wife and I are beginning our journey to become homeowners and investors in one of the most expensive markets in America. We love San Diego and have no plans to leave any time soon. We are have worked hard to save funds for a down payment. We have paid off all debt and both have credit scores in the high 700s. We are preapproved for $450K single family and or $600K multi family. I am aware that this doesn't give us a ton of buying power.

However, our realtor is mainly showing us condos that look like they have been hastily and cheaply renovated for a quick flip. If our buying power keeps us in the condo territory for now I would prefer something that I can add value to. Ideally we want to be in a duplex or house hack that we can rent out and hold until our child, (who will likely live semi independently), could move into in the future.

So BP if you are further down the road in your investing career how might you advise someone in my position?  Thanks again to all who contribute to this community.

Kenneth Donaghy · Answer

@Daniel Moreno I meet a lot of people on locally via BP, some wanting to purchase the ideal property in the idea neighborhood within their not so ideal budget. San Diego is a fine balance of 1) what's in your budget. 2) based on your budget what are your desired areas within your desired lifestyle. 3) What are you willing to compromise to balance your budget with your desires. If you have yet to do so, sit down with your wife and write down your top 5 "must-haves," top 5 "would be nice to haves," and your top 5 "absolutely nots." Perhaps this property is a stepping stone to the next. I see many like minded people selling a property they bought 1.5-2 years ago to use the equity to purchase a new property more aligned with their new current desires. If you listen to the podcasts, you here David and Brandon mention the first one is not the home-run, take the base hit and get on base. Take what you learn and apply it to the next. I can tell with my househacking clients who i met on BP view things this way especially when they are talking about their next purchase before they close on their first one. It's a marathon not a sprint. Create a 3 year, a 5 year vision, and have fun making moves. Cheers!

Dan H. · Answer

It starts by communicating your desires to your agent.  If you want a home that needs some TLC, communicate that to the agent.  if you only want SFH, communicate that to your agent.  If you want a duplex communicate that to the agent.

Prices vary significantly by location.  Realize that a MLS listing in that price range is not going to be available in all San Diego markets.  You may need to limit the market to working class areas.   It would help your agent to know what areas you are interested in.  The agent should be able to quickly let you know if you have unreasonable expectations.  For example, if you are hoping to find a SFH in North Park in that price range then you likely will not find one.  However, if you are looking to find a SFH in El Cajon that needs some TLC in that price range that should be possible.

Basically you need to narrow things down on what you are looking for and provide that information to the agent.  The agent should be able to send you listings that meet what you are looking for.  The agent also should help set reasonable expectations.

The agent needs correct input to do their job.  If you have provided the correct input and the agent is not doing the job, it could be time to look for a different agent.

Good luck

Alec Reano · Answer

Hey @Daniel Moreno,

@Dan Heuschele @Twana Rasoul & @Kenneth Donaghy make some great points. Unfortunately, with the way the market is looking right now, it is pretty tough to find great SFH at that price point. I have had clients who have submitted multiple offers on various homes only to get outbid, and have been searching for months. This doesn't mean it not possible, but will take some time, elbow grease and the right agent to get your offer accepted. San Diego Is a real hot market right now due to the low inventory and high demand.

If I was in your shoes I would first try to narrow down your search criteria and identify boundaries for each. For example, Are you comfortable with living in a condo, if not what is your go-no-go criteria for purchasing your first time home [i.e., location, property type, neighborhood etc]? Furthermore, does this type of home serve your needs and help you accomplish your goals as an investor? If you are committed to a certain area within San Diego, and a specific property type, I would look around your market and see if there is a way to find a property that meets your expectations if not you may have to adjust your search criteria.

Once you identify this criteria and are confident in the type of property , location , etc. I would communicate with your agent and tell him your goals, see if he can give you some council in how to accomplish them, and if possible ask to speak to his lender and see if your current financial situation is something that can accommodate the type of financing you need for those goals. Furthermore, if so what does your lender need from you to help you achieve those goals.

San Diego market is pretty hot and although it may not be the most ideal market for serious homebuyers right now I think there still is plenty of opportunity for first time investors, even if you have to adjust your location / property type to help you achieve your goals as a first time investor. Properties in San Diego are appreciating like crazy, along with the cost of living and rent, so even if you have to adjust your criteria  it may be just the thing you need to get your feet wet.

Best of luck on you journey.

Cheers

Maxwell Ventura · Answer

@Daniel Moreno

The market is moving very quickly my friend. It wasn't long ago (maybe less than a year) when I was telling people a duplex w/ a decent unit mix (Other than two 1/1s) started around 600K. Now, it's more like $700k. There is definitely a price of waiting.

Not only that, IDK if you've been submitting offers yet w/ your realtor but that is an art in itself to just get your offer accepted. There is a lot that goes into submitting a strong offer other than just price. Not only that, relationships matter.

SD has recently been named the most competitive market in the country.

My advise, make your goals clear to your realtor, but you also may have to double check your own expectations.

Hope this helps

Daniel Moreno · Answer

@Dan Heuschele @Kenneth Donaghy @Twana Rasoul  Thank you gents for taking the time to offer your advice.  I agree with the baseball and marathon metaphors.  I am definitely not swinging for the fences my first trip to the plate.  Nor am I in a race to acquire as many doors as fast as I can.  As one who is just starting out it is easy to feel like I am missing out on an opportunity or potentially making a mistake that could end up being a setback.  Yet it is all part of the process and I agree with you all that it is best to get very focused on our current strengths, have a vision for what the future can look like and most importantly get started.  I'll keep you all updated.  Peace.

Katrina Razavi · Answer

@Daniel Moreno +1 on all the points made above. From an investing POV, my 2 cents is to look into a duplex you can "house hack" vs. a single condo. Duplexes hv a bit more optionality i.e. 2 units vs. 1, you don't throw money at an HOA every month that isn't tax deductible, and you can rent out 1 or rent out both. To folks' earlier points, get specific on your criteria, if you wanna be a bit more comfortable and hv some more space and amenities, then perhaps a condo makes more sense. I'm strictly speaking from an investing POV so you have to decide what tradeoffs you're willing to make now in order to get where you want to be later.

Twana Rasoul · Answer

@Daniel Moreno Both @Dan Heuschele and @Kenneth Donaghy make great points.  The most important being, "...getting base hits, not home runs"...which will be the difference between you getting started on your journey or never getting started at all.  The most important and most difficult part of the "marathon" that Ken mentioned is not getting across the finish line but crossing the starting line.

Best of luck!

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