I think real estate is a good addition to a diversified portfolio. Given the situation you described it would absolutely make sense to keep on the course of letting this depreciation cycle run through the motions prior to purchase. I do agree that downtown will show some good investment potential once the bottom (or at least once we get close the bottom) is reached. For the higher end units downtown the only downside is HOA fees. Discovery for instance charges close to 600 a month for HOA. Definitely non trivial.
Do you have to wait for a positive cash flow situation? Well again, even in a diversified portfolio I think you want either an appreciating asset or an income generating asset. Buying anything right now in San Diego would neither produce income or be an appreciating asset. Sticking the money in a CD would at least dribble you out a little bit of income.
With that said, I would hold off until one of the two criteria is met. There are also more sophisticated ways to invest regarding real estate, REITs and consortiums and such that will return income. Again, I am not professing to know much about them, nor am I a financial professional advocating them. Ray Lucia advocates non tradeable REITs as one of his buckets…
Anyways to be honest, if it were me, I would keep the cash liquid and hang on a few more years and then purchase the property. Again, even if it doesn’t cash flow it has much better appreciation potential.
