All Forum Posts by: Dan H.

.@Hannah Hammond some areas are starting to restrict short term rentals via legislation.  Before you purchase try to determine that this is not going to occur in your area.  It has mostly been a north county San Diego coastal legislative action so far.  

The family has 2 units of short term rentals in Mission Beach.  Our property management has been sold a couple of times in the last few years.  I would have recommended the initial property management company but jury is still out on the current. 

I personally think that the desired short term rental areas in San Diego have high entry points and that they need to have solid appreciation to be competitive with other investment options.  Therefore I suggest purchasing in the area you like and would enjoy staying at yourself.  I thought the family's units qualified but no one in family uses them anymore (long story). 

Good luck

Every market is different but in my area of San Diego that unit would likely be purchase by an investor at $80k with $65k rehab for a $35k potential profit.  It would be by a smaller investor that could self finance.  They would hope to fix and flip fast.   

I agree with @Kevin Fox that 70% deals in San Diego are rare for any straight rehab.  To get 70% typically requires more extensive construction effort.  

Is there something that can be done to increase the return such as adding a BR?

I would not purchase this as a flip but other investors in San Diego likely would. 

Good luck

@Josh V. property value on single units is based on comps and not rent.  @Kevin Fox should be able to determine and accurate value. I just wanted to point out that rent values play a significant role in properties that sell 5 units or more but only play a role on SFR in how they affect the comps.

I assume you want to purchase the property because you want to continue to live there. Because if you are looking at it as a buy n hold rental @Sharyn Umaña-Angers comment is very valid. It is possible that area is a good area to live but not the best area to do REI. If you are looking at it as a buy n hold rental the purchase should be compared with expected returns in other nearby areas.

Good luck

@Gilbert Martinez

Thank you for your service. Do you like San Diego? If you do I would look into house hacking (search BP if you do not know the term) a duplex to 4-plex using the VA loan. You should be able to find something that would be cash positive or very close to it if all units were rented. Cash positive to me includes vacancy, maintenance, and cap expense. Cap expense is missed or under estimated by many first time investors (research it on BP).

Let's assume that you purchase a cash neutral place which for a first timer in San Diego would not be bad. You will be living in one of the units for what amounts to market rent. However part of each payment will be going to equity. So Cal has traditionally appreciated very well, So cal rents have traditionally appreciated well. But let's take a slightly pessimistic stance that rent and property value does not appreciate at all. You would be living in San Diego (a great place to live) at market rent while having equity gain from the payments that are significantly made by your other tenants. Most important you are learning about REI and property management.

Now assume rent and property appreciates like it traditionally has in San Diego. Soon that cash neutral property is cash positive. But due to being able to depreciate the structure you pay no taxes on this cash positive "income". The property appreciation increases your net worth and due to prop 13 your property taxes barely increase even if the property doubles in value. Taking the money out via a refinance or HELOC also results in no taxes until you sell the property. When you sell, purchase a property with at least equal value and never pay taxes from the property value gain.

Most important part, learn about REI the entire time. Your next purchase you can be the experienced expert that can find the great investment opportunities.

Good luck. 

I would not trust those investors as the ROI in So Cal and San Fran has been higher than anywhere else in the nation. This is a fact and can be looked up.

Having stated that the ROI in So Cal is great, if you are moving elsewhere I would not invest in So Cal. It is not because of So Cal ROI but because of difficulty of doing out of state REI.

I think you need to decide where you want to live and then invest smart locally.  

Good luck

I have never been a wholesaler but I have tried to find REI deals. Finding REI deals is not easy. Finding deals that allow you to sell to another investor at a deal (<70% ARV) is difficult. It will take time to learn the ropes, build the contacts, etc. I do not think it is easy route but there are people who have succeeded at wholesaling. Only you can decide if it is the best route for you but do not make the decission solely based off it being difficult at first. It is my belief that anyone starting in San Jose area at this time would find it challenging. You also are competing against seasoned wholesalers who already have nurtured various contacts and have a process in place. If you stick with it and succeed the newbies in the future will be competing with you and your established contacts and successful process.

Good luck.  

I do not flip (I buy n hold) but I am looking for price including repairs at 70% of ARV in my domain (2 to 4 units in Escondido area) but would possibly consider 80% of ARV in my domain but it should have less initial effort. So I guess my minimum would be a 20% profit with lower effort (more effort implies I desire more profit).

I have never been fortunate enough to use a wholesaler but same rules apply.  

In summary I desire 20% initial equity if not a lot of work and 30% initial equity if all the units need a total rehab.  

@Tom V.

I have never used a PM on long term rental.  The family uses one on a short term rental but that is very different.  

With respect to item 2...

Seeing I manage my own properties I have experience on collecting the application fee.  For every person who indicates they are going to submit an application I estimate only 1 of 3 does.  

If I tried to charge the application fee before showing the property I suspect I would get no one to come see the property.  I am surprised that there is any market that can collect application fee prior to showing the unit.   Maybe it is standard where you are located but here my units would sit vacant with that policy. 

Good luck

@Account Closed made me realize that I did not cover schools.  Most school districts have some good schools but some school districts are strong across the board.  Top 5 school districts are 1) Poway (there is no school district in the state that is bigger than Poway school district that ranks as high as Poway) 2) San Dieguito Union High, 3) Coronado, 4) San Marcos (I found this surprising), and 5) Carlsbad (as Paul indicated it has good schools).

Before I looked it up I had not realized San Marcos school district ranked so high.  It is a lower demographic (cheaper houses) than the other top 5 choices.   So it is likely the best school district with respect to the price of the home in San Diego.

As indicated earlier I live in Poway.  The elementary schools have more parent volunteers than they can typically use.  Middle school and high schools have strong booster organizations (including foundation)  that do various fund raising and strong PTAs.

Budget will be a primary factor in your location.  Beyond that there is a lot of personal choices that go into such a decission.  

If you like the urban culture then maybe downtown

If you like young party scenes then maybe PB and MB

If you like upper class then Rancho Santa Fey, La Jolla, Coronado

If you like liberal (think Berkeley) then OB, Hillcrest, north park   

If you like rural city in county feel with great community think Poway or Bonita

If you like casual upper class but not super upper class beach then Encinitas, Carlsbad, del Mar

I live in Poway and love it but I may retire to Encinitas by Moonlight Bay.

In summary you are the only one that can determine best area for you.  Fortunately San Diego has an area appropriate for virtually everyone; paying for it may be a different story.  Prices in most of these areas will be close to or in excess of $1m for average (compared to other part of the country) type homes (significantly higher for areas I listed as upper class).

Good luck