All Forum Posts by: Twana Rasoul

I like the garage conversions for ADUs since you can typically complete a 1-bed, 1-bath conversion for around $90K–$110K. I recently completed one on a multifamily property and found it to be a cost-effective approach.

That said, there are a couple of additional factors to consider beyond the code differences between a garage conversion and new construction:

1. Coastal Overlay Zones – If your property is in a coastal overlay, building a ground-up ADU may require Coastal Commission review, which can add time and complexity to the process. A garage conversion, however, may not be subject to the same level of scrutiny.
2. Parking Considerations – Parking is becoming increasingly valuable, especially with the rise of high-density micro-units that often lack designated parking. Converting a garage means sacrificing covered parking, which could impact property value or tenant appeal in certain areas.

@Ken M. 

It’s understandable why so many investors focus on cash flow when evaluating real estate. After all, platforms like BiggerPockets were started by investors targeting Midwest and Southern markets, where properties are much cheaper, and cash flow is often the primary focus. However, cash flow is just one of several factors to consider during an evaluation.

San Diego, for example, is often overlooked, but it’s actually one of the best long-term cash-flowing markets in the U.S. Why? Because rents here tend to outpace inflation over time. Fun fact: cash flow is taxable, while equity appreciation is not. There are multiple ways to utilize equity without paying taxes, such as cash-out refinances, HELOCs, and 1031 exchanges, making appreciation a powerful wealth-building tool.

Many people lump all of California into one bucket, but it’s a massive state with many distinct markets. I can only speak to San Diego, but here, we have some of the lowest vacancy and eviction rates in the country. While tenant laws are tougher, the tenant pool is generally much higher quality. In contrast, when I owned properties in the Midwest, evictions were easy, but the tenant pool often made frequent evictions unavoidable.

That said, San Diego is a high-barrier-to-entry market and isn’t for everyone. It requires a solid understanding of real estate finance and long-term strategy

@Ken M.

It’s understandable why so many investors focus on cash flow when evaluating real estate. After all, platforms like BiggerPockets were started by investors targeting Midwest and Southern markets, where properties are much cheaper, and cash flow is often the primary focus. However, cash flow is just one of several factors to consider during an evaluation.

San Diego, for example, is often overlooked, but it’s actually one of the best long-term cash-flowing markets in the U.S. Why? Because rents here tend to outpace inflation over time. Fun fact: cash flow is taxable, while equity appreciation is not. There are multiple ways to utilize equity without paying taxes, such as cash-out refinances, HELOCs, and 1031 exchanges, making appreciation a powerful wealth-building tool.

Many people lump all of California into one bucket, but it’s a massive state with many distinct markets. I can only speak to San Diego, but here, we have some of the lowest vacancy and eviction rates in the country. While tenant laws are tougher, the tenant pool is generally much higher quality. In contrast, when I owned properties in the Midwest, evictions were easy, but the tenant pool often made frequent evictions unavoidable.

That said, San Diego is a high-barrier-to-entry market and isn’t for everyone. It requires a solid understanding of real estate finance and long-term strategy. 

I transitioned from investing in Midwest real estate to focusing on properties in San Diego, CA, about four years ago. As a local investor, I always recommend starting where you live—it gives you a better grasp of the market and makes management easier.

From a purely numbers perspective, investing in a high-cost coastal market like San Diego has allowed me to grow my wealth far more quickly than I ever could in the Midwest. While cash flow is important (and still achievable here), asset appreciation is what truly accelerates wealth-building.

Think of it like the stock market: billionaires don’t get rich from dividends (similar to cash flow); they grow their wealth through the appreciation of their holdings (similar to property value increases). High-demand, high-growth areas like San Diego naturally amplify this effect.

On top of that, managing fewer high-value properties here—like a 4-unit in San Diego—has been much simpler and more efficient than managing 10–20 properties in lower-cost markets with higher capex and slower rent and value appreciation.

Many beginner investors, however, lack a firm grasp of basic real estate finance. They often fail to calculate properly and realize that investing in a high-cost area can generate far more wealth over time than purchasing in a lower-cost market.

Interestingly, I know quite a few people who invest locally in San Diego California and publicly complain about the state’s politics. Yet, they continue to buy real estate here—and for a good reason. 

@Ryan Rubel There are certainly quite a few restrictions in those two areas, in Carlsbad you have to be within the coastal Zone...I have a multifamily in Carlsbad Village a block outside of the coastal zone so I'm unable to operate it as an STR unfortunately.

In Oceanside, New non-hosted STRs are prohibited outside of the Coastal Zone as of February 10, 2024.

Most HOA's do not allow rentals less than 30 days so that is likely not an option unless you find a couple of places on the water that allow it but usually tough to find below $1M. You can consider the medium term route as a possbility as well so you can still occupy it for a few weeks a year.

Might be worth considering in areas closer to central san diego for more options especially if you want to be around $1M range.

Sounds like there are more than just 2 options.  Would need to know a bit more before giving a specific direction but it is usually best to hang on to your property and not sell whether you expand on it or rent it out and purchase a bigger property.  

I generally try not to sell my properties unless I have to sell in order to have enough proceeds to purchase a bigger and better property (and usually more units). I just completed a 1031 exchange where I sold a home in east county in an hoa to do a 1031 exchange and purchase a multlifamily in South Park of San Diego which has room to add 4 more units.

Nothing will pencil, value add opportunities are needed to make this happen in San Diego whether through renovations, additions, ADUs, etc.

 I operate several mid term rentals and I'm still a big fan.  With that price range you are looking in I'd explore doing just 5% down conventional for a mutlifamily rather than 20% if you want to be able to save your funds to be able to purchase again sooner.

 If you are doing a 1031 exchange, you are exchanging one investment property for another investment property so you technically would not able to use it whenever you want because it would not be an investment property then and you may get hit with the capital gains.  

@Anita Z. It would be worth looking at the numbers to see what makes sense. I'd want to purchase a duplex atleast instead of a single family home as your numbers would look a little better. You'd need about 250-300k for a down payment for a starter duplex which may work better for you since you can utilize one side as a long term rental and the second side as an STR which you can use as you please but remember if you do a 1031 exchange you'd be limited on how much you can actually use that property to still be considered an investment and not a second home.