Oh, to be a landlord in OB

[EconProf]

A teaching buddy of mine bought 4 tiny rentals on a 50 x 140 lot in Ocean Beach forty years ago. They are tiny 2-Br bungalows, perhaps ninety years old, about a half-block to the sand. He paid about 200k for them.
Now he collects over $2000/month rents per unit and gets forty calls within 24 hours whenever he runs a Craigslist ad (which he yanks within one day). All are desperate to rent and beg him to accept them, just to be near the OB sand. He has turned down doctors, professionals of all kinds, etc. His last vacancy was filled by someone with a dog who flatly offered him $150 over the asking rent.
This proves the old adage: location, location. To that I would add: timing, timing.

[Coronita]

I think more appropriately, the title should be “Oh, to have bought real estate 40 years ago” 🙂

I am jealous. We have a family friend in her 80ies and they bought a tiny beach house in Del Mar for under $100k about the same number of years ago…. What a killing.

[FlyerInHi]

Makes perfect sense. My friend does the same in Florida with vacation rentals.
The returns are higher there because houses are cheaper and renters still want the beach.

If I owned those houses, I’d remodel to the max sf allowed. Turn them into little architectural gems and charge primo dollars as vacation rentals.

Oh, if I were your friend, I would not accept any pets. They are filthy and cause damage. Not sure the condition of those houses, but if they are superior to the surrounding competition, he can afford to be very picky.

[FlyerInHi]

To be fair 40 years ago, San Diego was a backwater. $8000 per month equates to roughly a $2 million investment in San Diego today.

40 years ago you could have bought desert land in Las Vegas, houses in NYC or DC during White flight, or even land as China was opening up (if you had the local connections) Hindsight is 20/20.

Another point worth bringing up is that with housing, most homeowners don’t invest. They buy then move up several times, riding the wave of appreciation.

[flyer]

Our family has invested in RE around San Diego for years, as did most of our friends, but, as FIH said, I don’t think any of us had any idea it would turn out so well.

[sjk]

Perfect ! Real estate inzone dancing on this board,the top is in,no doubt about it!!

[gzz]

My grandparents paid about $35,000 for a house in suburban Detroit in the early 1960’s. It is now worth … about $40,000. If only they had moved to San Francisco and spent $35,000 there!

During the 90’s boom it probably got up to about $150,000, and at one point in 2010 similar places were selling for $15,000 when there were several foreclosures per block.

[bearishgurl]

[quote=gzz]My grandparents paid about $35,000 for a house in suburban Detroit in the early 1960’s. It is now worth … about $40,000. If only they had moved to San Francisco and spent $35,000 there! . . . [/quote]

In SF in the 1960’s, a flat valued at $1M+ today cost between $56K and $95K depending on the District it was situated in. A SF “flat” is 1/2 to one whole floor of a 2-4 floor building, NOT a whole house! And since most of the buildings there were completely rebuilt right after the 1906 earthquake and fire, they were 50-60 years old in the 1960’s meaning most of them needed repairs upon purchase.

Your grandparents very likely could have not afforded to buy a place in SF back then, gzz.

[EconProf]

Interestingly, being a landlord in such a popular location has its own set of problems, as my friend describes them:
1. Rents are escalating so fast in his area that he hopes some of his tenants will move.
2. He does raise rents occasionally, but gets enormous pushback from tenants, even though he raises them to somewhat below what a new tenant would pay. So he always gives rent comps when he raises rents, and they still hate him for it. One even sued him, claiming retaliation.
3. For landlord Piggs who are envious of having easy-to-rent units, it is actually no fun to get 40 phone calls after running a Craigslist ad for one day.
How, exactly, does one chose? He has learned to be very picky about income, job stability, education level, age (no young party-types), and students (they don’t stay).

[FlyerInHi]

Your friend is so nice.

Sounds like his location is perfect for vacation rentals. The sharing economy is upon us. Take advantage of it. It’s more work and he need to find a good cleaning person. But the returns are worth it.

[EconProf]

He’s tried vacation rentals one summer, and it was a big hassle. Lots of vacancy down time, clean up expenses, etc. And he lives 20 miles away. Airbnb is ok if you are close and on top of things, and ready to monitor everything.

[gzz]

If he’s getting 40 calls in one day, he should be charging more. I only left my e-mail, and got three serious inquiries the first day I ran my ad: a young professional, PLNU students, and some hippies.

They all seem fine to me. I don’t know much about PLNU other than it is very christian, expensive, and full of surfers. Sounds OK to me.

When I rented a cottage on an OB beach block, I did a walk by/window peak of the unit, realized it was extremely underpriced, and then immediately went to the property manager with a completed application, a cashier’s check for two months’ rent (which was not required) plus the security deposit, my last pay stub, and a printout of my credit report.

My rent was never raised so after a few years it got to the point that my cottage with two parking spaces and a small yard was $300/mo less than 1-bedrooms with no parking further from the beach on the same street.

[gzz]

My summer rental experience has been profitable, but it really is a big PITA to have the place completely clean every week. With taxes, credit card fees, etc plus a maid and vacancies, I can’t imagine doing it year round when rates drop. I think my maid is hosing me a bit too but she knows I am charging a lot and can’t find someone else I trust on short notice. She’s probably getting $25-30 an hour v. the $18-20 she’s been getting for years to clean my house.

I will finish up the summer to help pay for all the renovations and furniture, but it probably isn’t worth the hassle to make an extra $2500 a month after expenses.

Part of the problem is that I feel that if you’re paying $250-$400 a night, you should be getting a really good experience so that means extra efforts to make the landscaping nice, the toaster and oven clean, stock the fridge with water, half n half, etc.

I also get strange questions by people who contact me on VRBO. Like: is it close to LegoLand? Google Maps has been around for 15 years now and you have the address online of the house!

Playing e-mail tag with four people for every one who actually books is also no fun.

I might do this again next summer if I rent to the PLNU students and they move out, but that will be the last time if it does happen.

[gzz]

FlyerInHi, I appreciate the advice you gave me a couple months ago before I started the vacation rental.

Do you have a day job? That’s my downfall, the money is fairly good but summer is slow and I am not getting the extra relaxing free time I did in prior years.

[FlyerInHi]

I have a dayjob but it’s flexible.
Thankfully, I have a retired guy who takes care of things for me, vacation rental wise.
It’s hard to find the right cleaning person who is detail oriented (makes sure the towels and lines are sparkling clean and stain free, make up the beds properly, etc…)

I’m always on the move, mostly because I have to be back in San Diego periodically. So relaxing time? What’s that? My attention span is so short that I don’t ever sit down to watch a movie. Instead I’m searching online for things to buy, improvements to make, etc..

I don’t recommended hands-on real estate investing for people who have family and kids and want a lot of relaxing time.

But if you have teenage kids, you could have them help you and train them to become mini Trumps, haha…

[Author]

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