I wouldn’t buy anything to “break-even”. Why would you buy an investment to “break-even” and “hope” for appreciation with all the work and risk it takes to own rental property? Even if it does appreciate, to “realize” that appreciation and sell you pay a ton of taxes and costs anyway leaving you with 60 cents on the dollar of that appreciation. Yes you could 1031X and defer taxes, but that often happens at market peaks and you buy into another inflated property and you are forced to rush (I have heard of more horror stories of investors doing 1031X vs. just selling and paying the tax and depreciation recapture.) If you put 20% down & get a loan shoot for making $300+ per month TRUE positive cash flow after mortgage+taxes+insurance+vacancy+repairs+credit loss, etc…
I agree with sdrealtor & kingside that small condos in good locations with low hoas look good. Condo prices have fallen further than SFR’s so the numbers can be better AND the locations are much better.
The SFR’s tend to not pencil that well in SD County and you have to buy a major fixer “disaster” in a rougher “C” neighborhood (like the flippers do) to get a below market deal. Those are 50-90 year old houses that require a lot of fix are likely a lot of maintenance over the years. What might work is if you found a SFR with a variance with an extra in-law unit to juice the cash flow numbers. SFR’s also makes your cash investment higher because you have 20% down + another big chunk of change to fix it up. The condos many times need almost no fix work & they are less expensive so the 20% down is less. So your out of pocket is less. There are plenty of condos that are finance-able.
For units you have to go into rougher areas to make the numbers work, “C” neighborhoods. The numbers for units don’t work well even B neighborhoods in SD, certainly not A neighborhoods. Most of the units will be very old maintenance intense properties too. And you have to pay the water bill (vs. tenant pays it SFR and hoa pays it in a condo). It’s one thing to own a SFR in a rough neighborhood b/c SFR will always get a better tenant even in a rougher hood. But you have to make sure you have the stomach for managing units in rougher areas. There could be lots of turnover and credit loss.
SFR’s in Inland Empire CA, Phoenix, Vegas do pencil well and properties are much newer. Just have to be real picky in neighborhoods. And the worry is can you keep them rented?
I would definitely manage a property myself if it is a SFR and only in Escondido and I lived in Encinitas. It is not that hard. And you save so much on cash flow over the years. I manage myself a SFR rental I own in another state and it’s not that big of a deal. I have probably saved $10,000+ in property management costs over the last 7 or so years. The main thing you need is a couple of really good local handymen you can call if something breaks. Do the tenant screening and leasing all yourself. There’s no fertilizer like a farmers shadow:)
