So you already have a rental property, so you should fully understand all the tax implications, misc costs, and hassles.
I would not trade potential future losses in Washington for potential future losses in San Diego, but it does seem to make sense to me for you to sell your current house in order to have some dry powder for your purchase down here sometime in 2009 or so.
By the way, where are you finding houses in San Diego for 12x annual rent? That’s about 8.3% gross return. Most places I am familiar with would be more like ~6% gross or at least 15x annual rent.
Seems to me that a place where one could find 12x annual rent would would likely be cheaper (on a monthly basis) to own than rent, with interest rates around 6%. A home priced at 12x annual rent might imply a 400K property that rents at 2777/month. PITI with 20% down would be about $2400 per month. Before taking into account tax savings that is considerably cheaper than renting.
If I could truly find something at 12x annual rent, I would consider buying it.
