All Forum Posts by: Dan H.

I like Escondido more than San Marcos or Vista.  Have you been to Cruising Grand?  If not look it up.   Talk about packed there literally is no parking and people come from all over.  I recommend any San Diegan to go to Cruising Grand at least once.  It reminds me a little bit of Highland Ave of the 1970s but more organized and controlled.  Too bad National City did not leverage cruising Highland Ave like Escondido.  It was perceived as only a problem without forward thinkers considering how it could benefit the city.

There are at least half a dozen upscale apartment complexes from started to recently completed.   The old part of the city always had a nice vibe with cared for homes with character.  I do admit that as you go to more away from old Escondido the quality of the neighborhoods vary significantly.  There are new nice homes just a few blocks from old run down homes.

 Then I add one to my list: see a doctor.  Take care of the depression and yourself before trying to invest in RE.  RE often involves work, stress, long hours before it provides the dividends for the sacrifices.  It is virtually certain there will be hard and stressful times.  On my recent vacation my partner called me early when only a few of the things had gone wrong.  She was in near tears with no depression issues.  There were the RE items I listed in the earlier post but in addition a pet had gotten some fast growing tumors and would need to be euthanized.  It was unfortunate that so many things went bad all at once when I was on vacation but given enough time there will be real tough periods.  You need to be mentally able to deal with those periods. 

Take care of yourself first then think about RE investing.  

Good luck

Here is some advice:

Read Rich Dad Poor Dad

As @David Faulkner and Rich Dad Poor Dad indicate knowledge is important.  What you get paid to learn what can make you successful is less valuable than the knowledge gained.  Especially if RE turns into a passion.  What is the best job?  It is the job you enjoy the most not necessarily the one that pays the most.   What is the second best job?  The one that prepares you for the best job.

Research House hacking.  I suspect if you ask the top 100 most successful BP users their recommendation for a young investor that House Hacking would be the #1 response. 

Avoid Out of State (OOS) REI. It is not so much that you cannot be successful with OOS REI (but I think it is harder than the proponents admit) but that it does not provide the learning opportunities of self managed local investing. It relates to the value of knowledge and the best/quickest way to get this knowledge. Also my family's attempts at OOS have not been nearly as successful as our San Diego investments (the family is down to a single OOS unit and the only reason it has not been sold is the same tenant has been in the unit for at least 8 years).

Because you are an introvert consider Toast Masters or other ways to improve in that area.  Rich Dad Poor Dad indicates that selling is a key skill in huge success.  Note when you purchase RE you are selling your offer.  When you sell in RE you are selling your RE.  Dealing with people and being able to sell are very important for high level success (I do not consider myself High level successful but I do believe this and do believe it is an area that I could improve at).

Network.  In San Diego there are numerous RE Meetup groups.  I have not attended most of them.  There is one that is put on about monthly by some San Diego BP users (@Justin R., @Kevin Fox, etc.) that I do enjoy as it is typically at a work in progress site.  I like the network opportunity as well as the learning opportunity.  Networking is another area that I believe I could improve at.

Realize that REI takes work and has risk. I went on vacation recently and my partner was having to deal with the units. An AC broke, a tenant argument occurred that resulted in 2 calls to the police and us letting a tenant terminate their lease early due to Homophobic neighbors, a mainline plumbing backup that resulted in having to replace some of the carpet in the unit, and a water heater giving out. I was gone only 2.5 weeks.

Note none of my advice benefits me in any way unlike some of the people pushing OOS investing that are in fact turnkey sales people.  My advice is all stuff that I believe could benefit the OP.  I suspect all except for possibly the avoid OOS is not controversial (there are OOS advocates, some who have been very successful, but I do not believe it is the place to start).

Good luck

As others have indicated San Diego is a tough cash flow market which implies that for good returns you are relying on property and rent appreciation.  

All indicators indicate that rent appreciation is very likely.   There is a shortage of homes, units are renting fast and the rent appreciation is still catching up with the property appreciation.  

As for property appreciation it is tough to time the market (similar to trying to time the stock market).  I look at long-term appreciation and San Diego has long term appreciation that exceeds inflation and most other locales going back more than 50 years.  In addition the supply is constrained both geographically and by onerous regulations on additional building.  So unlike most of the previous posters I believe long term that San Diego will continue to appreciate faster than inflation and most other locales.  

I am still looking for duplex to quad units to purchase in north inland San Diego because I believe it will continue to produce good ROI.

 We own duplex to quad but all units are at least 2 BR and we do not see that type of markup versus the condos/apartments rent.  I would guess our markup is a max of ~$200 over the condo/apartment rent.  So I suspect your $1900 estimate is high unless you are seeing apartment/condo 1/1 rent at close to $1700.  

I posted my approximate inquiries versus applicantions for my San Diego units to provide you some in sight as to the number of inquiries you can expect per application.  About 50% of our applications do not pass our screening even though our ads list most of our qualifications (we do not list minimum credit score because we accept co-signers).  

In almost all of our units we charge for water used.   It is based on a percentage that we set in an attempt to be fair.  For example we have a duplex that has a 2/1 unit with virtually no waterable yard and a unit 4/2 with a modest size yard.  The water bill is split 40/60.  Adding water district supplied meters is expensive.  Reading other meters is expensive.  For an alternate approach look for a posting by @Justin R. on charging for water. To summarize the post from memory he charges a fixed fee for water monthly but once a year (or upon checkout) trues up the amount based on actual use.  This is similar to how sdg&e handles solar on the fixed rate plan.  It is a very fair approach but requires installing water meters and reading them once a year.  My approach is not as fair but likely less effort as the spreadsheet to determine water bill is already created.  We simply enter the bill amount and the spreadsheet tells us what each tenant owes.  We charge last month' water with this month's rent; so we are always collecting for the previous month's bill. 

By having tenant's responsible for water they are ideally less wasteful of the water which in San Diego is a precious resource. 

Good luck

I do market research by looking at rental postings (Craigslist, Zillow, Trulia, Hot Pads) to determine market rent.  If the average 1/1 condo is going for $1400/month I will be surprised if you can get $2100 (or even real close to $2100).  

Here is my rough estimate of numbers that I see on my postings: about 20% of the people that express interest actually come to see the property.   Our units are nice so maybe 75% indicate they will turn in an application but maybe 20% actually do.  It is best to get the application and fee when they are still at the property.  If they leave with an application indicating they will fill it out later I would guess maybe 10% actually submit the application. 

Using these numbers we need 50 people to express interest to get 2 applications when rent is set at market.  Note lowering the rent below market rent increases the odds of getting applications.  Similar if you are asking above market rent it will be challenging to get any applications.  Furthermore the people who would apply for a unit with above market rents may have issues renting and cannot rent units set at market (such as evictions) and could be undesirable tenants. 

It is a pain to screen a tenant to determine that they do not meet the criteria for renting the unit.  It takes a little time, costs a little money (paid by the potential tenant) and holds up the process a couple of days.  Best to be clear on minimum qualifications (no evictions,  no felonies, income y times rent, etc.). 

Good luck

@Sean C. I recommend everyone start self managed local. I realize the cash flow is difficult in San Diego but what you need to learn is best done local and by managing the unit yourself. My family has 16 units in San Diego and only 2 STR are not self managed (we also still own one out of state unit that is not self managed).

Going out of state can be tempting but there are a lot of potential gotchas.  My family tried out of state and our gotchas were quite unexpected and one could think we got unlucky but I believe most luck (in both directions) can be controlled with proper knowledge. 

So educate yourself but sitting on the sidelines will not get you started.   

If I were starting out I would start house hacking a detached duplex somewhere that you are willing to live. 

Good luck

We have a SFR house in Linda Vista but we call it Claremont. It is 1.5 blocks North of Mesa College. Linda Vista has some not so good parts to the area which is one reason we call our location Claremont even though it is 92111 zip code. The west end and the North end of Linda Vista are nicer than some other parts. Also units overlooking Tecolote Canyon can be nicer.

Our unit is our worst performing property but has not taken much effort (just a couple tenant turn overs since 2003). This is somewhat due to it being our only SFR in our rental inventory but also because it used to be our home and therefore was purchased to be a good home and not a good rental property (versus the other rental units were purchased to be good rental properties).

I suspect you could find duplex to quad that would cash flow upon purchase in Linda Vista with realistic Cap Expense estimates but the cash flow would not be like OOS. 

If you are not living in San Diego I am not sure why you would choose to invest in San Diego with owning properties already in the Bay area.  You have likely appreciating assets there.  San Diego is similar; low cash flow but an appreciation locale.  If the market crashes I suspect both areas will react in similar manner which may not be as critical in the better cash flow locales.

I think a San Diego condo is not likely to cash flow with long term rental (short term rental would be different but risky w HOA) even if purchased at a slight discount.

For rent comparison in addition to CL there is Zillow, Trulia, and Hotpads.  For posting rentals use Zillow rental manager (formerly Postlets).  It posts on Trulia, Zillow, and Hot Pads.  It also produces an HTML for posting on CL but I do not use that feature (I create my own CL ad from scratch).  

If you set rent to current market filling a unit typically takes slightly about a month to get tenant paying.  They typically need to provide 1 month notice.  If you set rent below market you can get tenant's to pay in a week.  

Rental laws typically are the state laws.  There is no rent control in any community that I am aware of and definitely none where my rentals are.  Evictions can be slow and a pain.  

Good luck

 I understand what you are indicating but I indicated they are related but I did not mean that they match exactly.   There is definitely a lag on the rent appreciation compared to property value when property has been appreciating the way San Diego RE has for the last 5 years.  So what this indicates is that San Diego rents are likely to increase in the near term even if property appreciation stagnates.

I like your LED conversion (I am an anal conservationist but mellow on virtually all else) but our RE is one to 4 units so we do not have the same opportunity to increase our net worth but have different advantages.  Help the environment and increase your net worth $1K for each 5 minutes is great.

I agree San Diego appreciation has come in spurts but for the long-term it historically has gone up faster than inflation and faster than virtually all other locales.  My family and I have been through quite a few depreciation cycles but being in it for the long term means that the depreciation cycles are simply opportunities to purchase at a discount.  I find trying to time the RE market is like trying to time the stock market (not easy).  So we have purchased at highs (1992 and 2003: both depreciated nearly 20% after purchase before recovering and appreciating far past purchase price) and lows (1998 (by far our best purchase: over $100K/year in rent), 2012 (distant 2nd best purchase), 2013, 2014) but because we hold long term every purchase has been profitable. 

Good luck