All Forum Posts by: Dan H.

I have invested in San Diego real estate for quite a few years and my family even longer. I have purchased near market highs and near market lows. Each purchase, except for the home I live in (purchased in 2004), has had a good to great ROI. In addition, when the market crashed the rents in my areas barely moved.

My point is that I do not pretend to know the current cycle or the short-term ROI from San Diego buy and hold. However, history tells me that the long term ROI for San Diego properties will be very tough to beat. A SFR that I purchased in 1992 near the height of the market that initially had over 10% depreciation has had a very good ROI. Look at the history. What is the appreciation of a San Diego home purchased 50 years ago? In 1969 my parents purchased a starter home for $19.5K that today is worth over $500K. Appreciation for a purchase 40 years ago? In 1977 my parents purchased a move up home for $72K that is worth over $700K today. 25 years ago? In 1992 I purchased a starter home for $167K that today is worth over $500K. 20 years ago? In circa 1998 (not sure of exact year) my parents purchased a duplex for $360K that is worth over $1M today.

5 years ago?  In 2010, I purchased a duplex for $303K that is worth almost $600K today.  Some of these purchases initially had some short-term depreciation.

History tells me that if I purchase a San Diego property today that in the long-term it is very likely to appreciate regardless of the cycle and any short-term depreciation.  Therefore I do not try to time the market as much as find properties that provide an opportunity for instant equity (either via rehab, rent increases, or below market price) that at least comes close to cash flowing.  If there were a property in my area of expertise that I could have 10% near term equity gain I would purchase it and not worry if the market depreciates greater than my near term gain in the short-term.   The caveat is that an investor must be able to hold through a depreciating cycle (i.e. do not over leverage such that you will need to sell at or near the market low).

So the prices seem high, but I am still looking for good REIs in my area of expertise and expect in the long term any REI purchase that I do today will have a good ROI.

@DeMarrius Payne

I take a different stand than any of the posters above because you want to house hack. My view is that any San Diego buy and hold REI investment will have good returns in the long haul. Some areas may appreciate a little more than others but that is gravy.

So my suggestion is you pick the community that matches you best and look for a detached multiplex there.  I do not house hack and my rentals are mostly in Escondido.  Escondido is very working class but I live in Poway.  Poway has great schools, is upper middle class (for SoCal, likely upper class if judged nationally), has quite a bit of dedicated open space, and has a great community.  Poway is near the top of my list but there are others that are also at the top such as Leucadia (you get more land and open space in Poway but Leucadia you get the beach and another great community - both have good schools).

My point is I would let your interests and values determine some areas that you would be happy living. Then I would target detached duplex to Quad REI in those areas (more than 4 units typically requires financing that cannot leverage owner occupied).

As for how good a market San Diego is as a REI locale for buy and hold... The numbers indicate from 4 years to 50 years there are few places in the US that have had a better ROI on buy and hold than San Diego. The way I look at it that is a lot of history that shows the market will appreciate in the long term. You have to be sure that you can weather any short-term depreciation but in the long term it is a great investment locale. The San Diego buy and hold ROI has been far better than those cheap turn-key out of state REI properties whether purchased 3 or 4 years ago or properties purchased 50 years ago and virtually every duration in between. Is there any reason to think a property purchased today would not have a better ROI in 10 years than a cheap out of state turn-key? Not if history is any indicator.

Good luck

This is simply not accurate. It does not matter if you use 3 years or 50 years (or any amount of time in between), So Cal has had a higher REI return than virtually anywhere in the US and definitely higher than any place you are buying for under $200K. It is a simple math exercise. Literally a buy and hold investor in San Diego would have made some key mistakes (such as not financing the unit) to not have doubled their investment on a buy and hold purchase from 4 years ago. Going back 6 to 8 years the returns obviously are greater. My first investment property was bought in 1992, near a market high, and it has returned far greater than 8% compound annual on my initial investment which was 100% pulled out in 2000. I have only one property that has not had my initial investment pulled out.

If you want initial cash flow, So Cal may not be the place to invest but its measured returns have surpassed virtually everywhere else in the US (so claiming somewhere with sub $200K properties has had higher returns than So Cal is not based on facts). This of course does not mean that SoCal REI will continue to appreciate in the short-term, but history shows it is very likely to continue to appreciate in the long term.

Two of my properties have been purchased at near market highs (in 1992 and 2003) and the one from 1992 has a great ROI and the one from 2003 has a OK ROI. My point being that you do not have to time the So Cal market to have a good ROI as much as you need to be able to hold through any depreciation cycle (so do not over leverage).

I'm not an expert on El Cajon but I believe that category of neighborhood (blue collar) provides best opportunity for positive cash flow in San Diego.  I see similarities with my area of expertise (Escondifo area).   

In San Diego area cap expense is high; I use $300/month on rental size (2 or 3 BR) detached units so be sure to use a realistic cap expense in your profit calculations. Any appreciation above the typical San Diego appreciation would be icing on the cake. 

Good luck  

@Ryan Giblin I would wait until you finalize on a long term work locale and then house hack in that location with a detached duplex through quad and refer to yourself as the property manager.  

I would not worry if your chosen locale is Boston or LA as @Ken Badziak is incorrect about places like Cleveland beating places like LA. Southern Cal has been one of the best Buy n Hold REI in the US for return on almost any duration (5 years, 10 years, 20 years, 30 years). You or Ken can research this to confirm. There is little reason to think otherwise for the future.

So my suggestion is you save some money while working at the 3 locations and then decide where you want to settle down. With a couple years of experience in your work field you will be a hot commodity and likely could find work where ever you want to live (for me it is San Diego). With the money you have saved, buy a detached duplex through quad with owner occupied financing. You will learn a lot about property management while having the best finance, living in your chosen locale, and likely building equity and possibly having good cash flow. If you decide that you do not like property management you can either hire a property manager, refinancing or selling to pull out equity to use to live good life or better, especially if you like property management, to put into another buy n hold REI.

Good luck. 

@Marco G. my tenants are happy to have AC and therefore do not complain about the appearance.  I have used them in 4 rentals (4/2, 3/1, 2/1, 2/1).  The biggest issue is that tenants do not clean the filters as often as they should which can result in a more extensive and costly cleaning being necessary. 

Overall I would choose this option where there is not existing ducting.  So your use with radiant heating would qualify as a situation that if I were to add AC I would first look at the Mini Splits.

Another gotcha is make sure your electrical can handle the expected load.  In all 4 of my installs the electrical needed to be upgraded which increased the cost to add the Mini Split HVAC systems (one cost for the system and an additional cost to upgrade the electrical). 

Good luck

@Connor Martin there is an on site meetup that occurs about every month in San Diego that is run by a few San Diegans on bigger pockets. They are free, mostly flips (I do buy n hold), casual, good opportunity to meet other investors if you choose, and the one I attended I learned a little and I purchase my first REI in 1992 and my family purchased initial REI in 1970s. I have not seen a recent meetup announcement but @Justin R. is one of the people who put has been part of organizing it in the past. I suspect attending a few of these events would be worth your time (and if not the one I attended had free donuts :=) ).  

Multiplex over sfr.  

I specialize in Escondido (working class with many Hispanics) duplex through quad and they typically have positive cash flow when priced correct compared to sold comps even at 15% down.  

We rehab upon initial tenant turn over for minimal turn over effort.   We use almost indestructible composite flooring.  We remove acoustic ceiling.  We go with granite counter tops as the prefab granite is very reasonable.

Good luck

@Andrew Harker your primary purchase criteria is my area of expertise.  I have seen every competitively price duplex to quad in Escondido over the last 5 years.  I have one piece of advice: make sure to use closed/sold prices in your comps and not listings of unsold properties.   There are many duplex to quads on market in Escondido significantly above sold comps.  In fact there are 0 duplex to quads on market today that have a asking price appropriate for the sold comps.  Anyone who wants to debate this with me can bring it on as I have seen almost all of the sold duplex to quad properties.  In general, the asking price is not even close to the comps.  So be patient but move fast when a correctly priced unit hits the market. Last one that sold had offers by the second day.  

Good luck

 I would consult with a attorney familiar with the RE laws in Louisianna but in my opinion the title company is also culpable and unlike the buyer or seller should be professionals and know their responsibility.  In addition, they are the only party that having a suit against is probable to reduce probability of this occurring again as the seller and buyer are both unlikely to use a wholesaler again especially if they are of the belief they were deceived. 

Good luck.