[quote=ctr70] . . . Also to get a decent deal on a SFR you often have to buy a fixer that needs $20k to make rent ready. But I still think it may not be bad to buy a SFR in a entry level area of SD. I also think Vista and Oceanside are good. . . . Would love to hear more opinions.[/quote]
Nice post, ctr70. However, if Wujohn is considering SFR’s in Chula Vista, I want to correct any misconceptions here.
First of all, In the 91910 (Hilltop area) that I suggested (above), I don’t see spending $20K as necessary to rehab 90% of these properties for rental. Potential tenants don’t expect granite and high-end appls in the kitchen. I see spending $2K to $8K and “elbow grease,” depending on the property. If I were to invest, I would invest in local SFR’s, (=<5 mins drive) in areas I am highly familiar with.
In addition, the (91910) Hilltop area is not a “starter” area. These low-cost non-updated listings on often larger-than-standard lots are situated among prestigious Mills Act properties on Chula Vista’s Historical Register, sprawling ranches, executive-type homes and SD Country Club as well as in an entirely walkable-to-everything community. It is not uncommon at all to see a residential property on a 1/2 AC – 1 AC lot within a 3-minute walk from any or all of these lower-priced SFR listings in the CV Hilltop area. Several estates on 2-4 AC lots and currently worth $1.5M – $2.5M+ have these $200K SFR listings very close by. In addition, the density is low in this area. Potential SFR tenants in Chula Vista are often looking for a place as close to particular relatives as possible. They usually grew up in the immediate area and often would be willing to perform some gardening chores or other maintenance for a small discount. Overall, they’re not the type of tenants to complain that granite has not been installed. Often they have pets and need a fenced backyard.
With condos, the individual owner loses control over the following:
-potential HOA dues hikes
-potential special assessments
-a neighbors flood or fire affecting their unit
-lenders redlining the complex to potential buyers
-potential complaints/citations from the HOA about their tenants, their children or pets
-mismanagement by the HOA of upkeep and funds
-HOA decision to litigate
All of the above are aggravating factors and/or affect the future value of your condo rental investment (as a member of the HOA).
Owning rentals can be intermittently labor-intensive and you don’t want to pay 10% monthly to an out-of-area property mgr, plus pay them for whatever materials they buy (perhaps not as cheap as you could have gotten them) and whoever they hire to work on the property or whoever they hire to evict, if you can help it. You want to make all these decisions and do it yourself, for maximum potential profits/cash flow. Owning non-local rentals can cut deep into your cash flow.
For a great many years, I subscribed to Attorney Robert Bruss’ “Real Estate Law Newsletter.” Hailing from and residing in the SF Bay area (San Mateo Co), he advocated investors purchasing well-located 2-4 bdrm houses in areas they were highly familiar with. He owned many rental SFR’s himself from the 70’s forward and frequently sold them to his tenants on lease-option contracts. During their tenancy, he made all kinds of deals with his “handy” tenants to perform maintenance and repairs and most of his tenants stayed several years or more in his properties. He advocated cash flow over future appreciation and often fixed up a newly-purchased property for rent and immediately entered into an up to three-year lease–option contract with a tenant at “today’s” prices, putting the tenant’s monthly “option money” in trust for a future downpayment. He also advised his followers NOT to invest in property encumbered by HOA’s, due to loss of control and HOA’s expenses cutting into investment owners’ cash flow for operations.
Bruss is now deceased, but here are some links on him.
I’ve met him a couple of times when obtaining RE continuing education credits here in SD County (this was before “online courses,” lol). He was charismatic, witty and a fantastic lecturer. He always made a lot of sense. “Stick with what/where you know,” or “Get to know an area intimately before investing in it,” and “Buy the worst house on the block,” were his mottos. Loved his lectures on the mechanics of Lease Options and “Owner-Carry Back” terms.
Piggs, we need to start embracing the Bruss model of “out-of-the-box” thinking again, IMHO, as I see the future availability of RE financing falling off a cliff for the average Joe Sixpack.
So, Wujohn, if you don’t mind my asking, where IS your old (or new) “stomping ground?” Is it in SD County and do you currently reside in SD County? Are there areas within SD County that you are already intimately familiar with? If not, time to take some walks and familiarize yourself :=]
