[ctr70]

I’m a big fan of SDSU hoops and I go to most home games. But the recent BYU loss was a reality check. It’s an ego check and back down to earth. They are not the 6th best team in the nation. What would their record be if they were playing in the Big East twice a week? Pitt? Louiville? UCONN? Syracuse? If they were in the Big East they may not even be in the top 25 right now.

They have only played one team currently in the top 25 and lost both times (BYU). And BYU didn’t just squeak by them, they beat them handily twice.

That said, it’s a magical year for them. But the true test will be in the NCAA tourney. Especially after their 1st NCAA game.

[ctr70]

I’m a big fan of SDSU hoops and I go to most home games. But the recent BYU loss was a reality check. It’s an ego check and back down to earth. They are not the 6th best team in the nation. What would their record be if they were playing in the Big East twice a week? Pitt? Louiville? UCONN? Syracuse? If they were in the Big East they may not even be in the top 25 right now.

They have only played one team currently in the top 25 and lost both times (BYU). And BYU didn’t just squeak by them, they beat them handily twice.

That said, it’s a magical year for them. But the true test will be in the NCAA tourney. Especially after their 1st NCAA game.

[ctr70]

How much does the City Heights house rent for conservatively? How much fix costs to make rent ready?

[ctr70]

How much does the City Heights house rent for conservatively? How much fix costs to make rent ready?

[ctr70]

How much does the City Heights house rent for conservatively? How much fix costs to make rent ready?

[ctr70]

How much does the City Heights house rent for conservatively? How much fix costs to make rent ready?

[ctr70]

How much does the City Heights house rent for conservatively? How much fix costs to make rent ready?

[ctr70]

Thanks everyone for great inputs.

-I have to ask Bearishgurl, have you ever owned a condo? There certainty are some risks with HOA’s, but I personally think many the condo fears are somewhat overblown and imagined. I know many complexs that have never had special assessments in their 30+ year history. And it’s not like you never have a major repair on a SFR over the life of the property. And with condos you don’t have to worry about roofs, exterior painting, exterior repairs or landscaping. I always get a kick about SFR homeowners that complain about the cost of the HOA dues, yet forget they have to pay a $100/mo water bill and $75+/mo home insurance bill that you don’t have owning a condo. Of course with a rental SFR the tenant pays the water bill.

-condos you do not have to worry about the landscaping or exterior painting. The HOA also polices the area and makes sure no one is breaking the rules.

-I would like to see some examples of listed SFR’s or recent solds in 91910 in terms of purchase price, fix costs and rental comps to look at the return on those as rentals. If you are in the market daily, you’ll see that many of the better REO deals need significant work to get rent ready. I would say you would be VERY lucky to find a screamin deal on a SFR in SD that only needed $2k-$8k fix.

-You do not necessarily need an out of area property manager. I have managed a rental house out of state for 7 years w/out a manager. I have 2 handymen on the ground I call when anything breaks, they do paint/carpet when tenants move out and help show the property when vacant. I have never had a missed rent payment and not even 1 full month vacancy in 7 years. I can advertise the house myself on Craigslist, email rental apps to tenant, run credit, get paystubs, all without being there. And this is an OUT of state property. With a property 1.5hrs away in say Riverside County, I would find local handyman, do the same with tenant screening, but I could even drive up at least just when the property turned over and supervise paint/carpet.

-I know Bob Bruss, I took a night a class he taught on real estate law a San Mateo City College and have read dozens of his newsletters. You can NOT do what he did in the Bay Area anymore. He bought in the 1970’s and 1980’s when the numbers somewhat made sense in the Bay Area. Now if you tried to buy any SFR’s in the Bay Area you would have a terrible cash-on-cash return, major negative cash flow and a big “hope” on that the “magical” California appreciation would return to double your value in 5 years. I think if he were still alive today he would be telling people who live in San Francisco and San Jose to drive out to Sacramento to buy rentals.

-You can’t live off appreciation or pay your living expenses off appreciation. You can’t eat with appreciation. You CAN live off positive cash flow and pay living expenses off cash flow. Positive cash flow can make you financially free. So I think a good mix would be maybe to have your primary residence SFR in San Diego as a hedge that we may see future appreciation, but then cash flow rentals in some area where it makes sense. Or cash flow condos in SD. SFR’s in San Diego just seem more like a bet for appreciation and not something that is going to put money in your bank account every month for a very, very long time. And to REALIZE the appreciation and convert to spendable cash, you have to refi or sell. When you sell a rental you lose HALF your equity in Realtor commission, depreciation recapture, capital gains taxes, state taxes, lost rents while the property is vacant being listed on the market, you generally have to fix it up to make it marketable, seller closing costs, etc… And 1031X can be very dicey b/c you have to quickly buy another property at possibly an inflated point in the market. Another reason the SFR as a primary residence vs. rental makes sense in SD b/c if you live in it for 2 out of the last 5 years you can sell with first $500k no cap gains if married. So you get to KEEP a lot of the equity:)

-But who knows, maybe if you looked long enough and went into bad enough neighborhoods you could find some SFR’s where the numbers are OK in SD. I just think this is very tough.

-Also 30% down on a $200k SFR is $60,000. Where 20% down in a $80k SFR is $16k. You do not have to put down near as large a chunk of money in the cheaper inland empire or central valley markets vs. SFR’s in SD. Allowing you to stay more liquid and get a better return on your cash.

[ctr70]

Thanks everyone for great inputs.

-I have to ask Bearishgurl, have you ever owned a condo? There certainty are some risks with HOA’s, but I personally think many the condo fears are somewhat overblown and imagined. I know many complexs that have never had special assessments in their 30+ year history. And it’s not like you never have a major repair on a SFR over the life of the property. And with condos you don’t have to worry about roofs, exterior painting, exterior repairs or landscaping. I always get a kick about SFR homeowners that complain about the cost of the HOA dues, yet forget they have to pay a $100/mo water bill and $75+/mo home insurance bill that you don’t have owning a condo. Of course with a rental SFR the tenant pays the water bill.

-condos you do not have to worry about the landscaping or exterior painting. The HOA also polices the area and makes sure no one is breaking the rules.

-I would like to see some examples of listed SFR’s or recent solds in 91910 in terms of purchase price, fix costs and rental comps to look at the return on those as rentals. If you are in the market daily, you’ll see that many of the better REO deals need significant work to get rent ready. I would say you would be VERY lucky to find a screamin deal on a SFR in SD that only needed $2k-$8k fix.

-You do not necessarily need an out of area property manager. I have managed a rental house out of state for 7 years w/out a manager. I have 2 handymen on the ground I call when anything breaks, they do paint/carpet when tenants move out and help show the property when vacant. I have never had a missed rent payment and not even 1 full month vacancy in 7 years. I can advertise the house myself on Craigslist, email rental apps to tenant, run credit, get paystubs, all without being there. And this is an OUT of state property. With a property 1.5hrs away in say Riverside County, I would find local handyman, do the same with tenant screening, but I could even drive up at least just when the property turned over and supervise paint/carpet.

-I know Bob Bruss, I took a night a class he taught on real estate law a San Mateo City College and have read dozens of his newsletters. You can NOT do what he did in the Bay Area anymore. He bought in the 1970’s and 1980’s when the numbers somewhat made sense in the Bay Area. Now if you tried to buy any SFR’s in the Bay Area you would have a terrible cash-on-cash return, major negative cash flow and a big “hope” on that the “magical” California appreciation would return to double your value in 5 years. I think if he were still alive today he would be telling people who live in San Francisco and San Jose to drive out to Sacramento to buy rentals.

-You can’t live off appreciation or pay your living expenses off appreciation. You can’t eat with appreciation. You CAN live off positive cash flow and pay living expenses off cash flow. Positive cash flow can make you financially free. So I think a good mix would be maybe to have your primary residence SFR in San Diego as a hedge that we may see future appreciation, but then cash flow rentals in some area where it makes sense. Or cash flow condos in SD. SFR’s in San Diego just seem more like a bet for appreciation and not something that is going to put money in your bank account every month for a very, very long time. And to REALIZE the appreciation and convert to spendable cash, you have to refi or sell. When you sell a rental you lose HALF your equity in Realtor commission, depreciation recapture, capital gains taxes, state taxes, lost rents while the property is vacant being listed on the market, you generally have to fix it up to make it marketable, seller closing costs, etc… And 1031X can be very dicey b/c you have to quickly buy another property at possibly an inflated point in the market. Another reason the SFR as a primary residence vs. rental makes sense in SD b/c if you live in it for 2 out of the last 5 years you can sell with first $500k no cap gains if married. So you get to KEEP a lot of the equity:)

-But who knows, maybe if you looked long enough and went into bad enough neighborhoods you could find some SFR’s where the numbers are OK in SD. I just think this is very tough.

-Also 30% down on a $200k SFR is $60,000. Where 20% down in a $80k SFR is $16k. You do not have to put down near as large a chunk of money in the cheaper inland empire or central valley markets vs. SFR’s in SD. Allowing you to stay more liquid and get a better return on your cash.

[ctr70]

Thanks everyone for great inputs.

-I have to ask Bearishgurl, have you ever owned a condo? There certainty are some risks with HOA’s, but I personally think many the condo fears are somewhat overblown and imagined. I know many complexs that have never had special assessments in their 30+ year history. And it’s not like you never have a major repair on a SFR over the life of the property. And with condos you don’t have to worry about roofs, exterior painting, exterior repairs or landscaping. I always get a kick about SFR homeowners that complain about the cost of the HOA dues, yet forget they have to pay a $100/mo water bill and $75+/mo home insurance bill that you don’t have owning a condo. Of course with a rental SFR the tenant pays the water bill.

-condos you do not have to worry about the landscaping or exterior painting. The HOA also polices the area and makes sure no one is breaking the rules.

-I would like to see some examples of listed SFR’s or recent solds in 91910 in terms of purchase price, fix costs and rental comps to look at the return on those as rentals. If you are in the market daily, you’ll see that many of the better REO deals need significant work to get rent ready. I would say you would be VERY lucky to find a screamin deal on a SFR in SD that only needed $2k-$8k fix.

-You do not necessarily need an out of area property manager. I have managed a rental house out of state for 7 years w/out a manager. I have 2 handymen on the ground I call when anything breaks, they do paint/carpet when tenants move out and help show the property when vacant. I have never had a missed rent payment and not even 1 full month vacancy in 7 years. I can advertise the house myself on Craigslist, email rental apps to tenant, run credit, get paystubs, all without being there. And this is an OUT of state property. With a property 1.5hrs away in say Riverside County, I would find local handyman, do the same with tenant screening, but I could even drive up at least just when the property turned over and supervise paint/carpet.

-I know Bob Bruss, I took a night a class he taught on real estate law a San Mateo City College and have read dozens of his newsletters. You can NOT do what he did in the Bay Area anymore. He bought in the 1970’s and 1980’s when the numbers somewhat made sense in the Bay Area. Now if you tried to buy any SFR’s in the Bay Area you would have a terrible cash-on-cash return, major negative cash flow and a big “hope” on that the “magical” California appreciation would return to double your value in 5 years. I think if he were still alive today he would be telling people who live in San Francisco and San Jose to drive out to Sacramento to buy rentals.

-You can’t live off appreciation or pay your living expenses off appreciation. You can’t eat with appreciation. You CAN live off positive cash flow and pay living expenses off cash flow. Positive cash flow can make you financially free. So I think a good mix would be maybe to have your primary residence SFR in San Diego as a hedge that we may see future appreciation, but then cash flow rentals in some area where it makes sense. Or cash flow condos in SD. SFR’s in San Diego just seem more like a bet for appreciation and not something that is going to put money in your bank account every month for a very, very long time. And to REALIZE the appreciation and convert to spendable cash, you have to refi or sell. When you sell a rental you lose HALF your equity in Realtor commission, depreciation recapture, capital gains taxes, state taxes, lost rents while the property is vacant being listed on the market, you generally have to fix it up to make it marketable, seller closing costs, etc… And 1031X can be very dicey b/c you have to quickly buy another property at possibly an inflated point in the market. Another reason the SFR as a primary residence vs. rental makes sense in SD b/c if you live in it for 2 out of the last 5 years you can sell with first $500k no cap gains if married. So you get to KEEP a lot of the equity:)

-But who knows, maybe if you looked long enough and went into bad enough neighborhoods you could find some SFR’s where the numbers are OK in SD. I just think this is very tough.

-Also 30% down on a $200k SFR is $60,000. Where 20% down in a $80k SFR is $16k. You do not have to put down near as large a chunk of money in the cheaper inland empire or central valley markets vs. SFR’s in SD. Allowing you to stay more liquid and get a better return on your cash.

[ctr70]

Thanks everyone for great inputs.

-I have to ask Bearishgurl, have you ever owned a condo? There certainty are some risks with HOA’s, but I personally think many the condo fears are somewhat overblown and imagined. I know many complexs that have never had special assessments in their 30+ year history. And it’s not like you never have a major repair on a SFR over the life of the property. And with condos you don’t have to worry about roofs, exterior painting, exterior repairs or landscaping. I always get a kick about SFR homeowners that complain about the cost of the HOA dues, yet forget they have to pay a $100/mo water bill and $75+/mo home insurance bill that you don’t have owning a condo. Of course with a rental SFR the tenant pays the water bill.

-condos you do not have to worry about the landscaping or exterior painting. The HOA also polices the area and makes sure no one is breaking the rules.

-I would like to see some examples of listed SFR’s or recent solds in 91910 in terms of purchase price, fix costs and rental comps to look at the return on those as rentals. If you are in the market daily, you’ll see that many of the better REO deals need significant work to get rent ready. I would say you would be VERY lucky to find a screamin deal on a SFR in SD that only needed $2k-$8k fix.

-You do not necessarily need an out of area property manager. I have managed a rental house out of state for 7 years w/out a manager. I have 2 handymen on the ground I call when anything breaks, they do paint/carpet when tenants move out and help show the property when vacant. I have never had a missed rent payment and not even 1 full month vacancy in 7 years. I can advertise the house myself on Craigslist, email rental apps to tenant, run credit, get paystubs, all without being there. And this is an OUT of state property. With a property 1.5hrs away in say Riverside County, I would find local handyman, do the same with tenant screening, but I could even drive up at least just when the property turned over and supervise paint/carpet.

-I know Bob Bruss, I took a night a class he taught on real estate law a San Mateo City College and have read dozens of his newsletters. You can NOT do what he did in the Bay Area anymore. He bought in the 1970’s and 1980’s when the numbers somewhat made sense in the Bay Area. Now if you tried to buy any SFR’s in the Bay Area you would have a terrible cash-on-cash return, major negative cash flow and a big “hope” on that the “magical” California appreciation would return to double your value in 5 years. I think if he were still alive today he would be telling people who live in San Francisco and San Jose to drive out to Sacramento to buy rentals.

-You can’t live off appreciation or pay your living expenses off appreciation. You can’t eat with appreciation. You CAN live off positive cash flow and pay living expenses off cash flow. Positive cash flow can make you financially free. So I think a good mix would be maybe to have your primary residence SFR in San Diego as a hedge that we may see future appreciation, but then cash flow rentals in some area where it makes sense. Or cash flow condos in SD. SFR’s in San Diego just seem more like a bet for appreciation and not something that is going to put money in your bank account every month for a very, very long time. And to REALIZE the appreciation and convert to spendable cash, you have to refi or sell. When you sell a rental you lose HALF your equity in Realtor commission, depreciation recapture, capital gains taxes, state taxes, lost rents while the property is vacant being listed on the market, you generally have to fix it up to make it marketable, seller closing costs, etc… And 1031X can be very dicey b/c you have to quickly buy another property at possibly an inflated point in the market. Another reason the SFR as a primary residence vs. rental makes sense in SD b/c if you live in it for 2 out of the last 5 years you can sell with first $500k no cap gains if married. So you get to KEEP a lot of the equity:)

-But who knows, maybe if you looked long enough and went into bad enough neighborhoods you could find some SFR’s where the numbers are OK in SD. I just think this is very tough.

-Also 30% down on a $200k SFR is $60,000. Where 20% down in a $80k SFR is $16k. You do not have to put down near as large a chunk of money in the cheaper inland empire or central valley markets vs. SFR’s in SD. Allowing you to stay more liquid and get a better return on your cash.

[ctr70]

Thanks everyone for great inputs.

-I have to ask Bearishgurl, have you ever owned a condo? There certainty are some risks with HOA’s, but I personally think many the condo fears are somewhat overblown and imagined. I know many complexs that have never had special assessments in their 30+ year history. And it’s not like you never have a major repair on a SFR over the life of the property. And with condos you don’t have to worry about roofs, exterior painting, exterior repairs or landscaping. I always get a kick about SFR homeowners that complain about the cost of the HOA dues, yet forget they have to pay a $100/mo water bill and $75+/mo home insurance bill that you don’t have owning a condo. Of course with a rental SFR the tenant pays the water bill.

-condos you do not have to worry about the landscaping or exterior painting. The HOA also polices the area and makes sure no one is breaking the rules.

-I would like to see some examples of listed SFR’s or recent solds in 91910 in terms of purchase price, fix costs and rental comps to look at the return on those as rentals. If you are in the market daily, you’ll see that many of the better REO deals need significant work to get rent ready. I would say you would be VERY lucky to find a screamin deal on a SFR in SD that only needed $2k-$8k fix.

-You do not necessarily need an out of area property manager. I have managed a rental house out of state for 7 years w/out a manager. I have 2 handymen on the ground I call when anything breaks, they do paint/carpet when tenants move out and help show the property when vacant. I have never had a missed rent payment and not even 1 full month vacancy in 7 years. I can advertise the house myself on Craigslist, email rental apps to tenant, run credit, get paystubs, all without being there. And this is an OUT of state property. With a property 1.5hrs away in say Riverside County, I would find local handyman, do the same with tenant screening, but I could even drive up at least just when the property turned over and supervise paint/carpet.

-I know Bob Bruss, I took a night a class he taught on real estate law a San Mateo City College and have read dozens of his newsletters. You can NOT do what he did in the Bay Area anymore. He bought in the 1970’s and 1980’s when the numbers somewhat made sense in the Bay Area. Now if you tried to buy any SFR’s in the Bay Area you would have a terrible cash-on-cash return, major negative cash flow and a big “hope” on that the “magical” California appreciation would return to double your value in 5 years. I think if he were still alive today he would be telling people who live in San Francisco and San Jose to drive out to Sacramento to buy rentals.

-You can’t live off appreciation or pay your living expenses off appreciation. You can’t eat with appreciation. You CAN live off positive cash flow and pay living expenses off cash flow. Positive cash flow can make you financially free. So I think a good mix would be maybe to have your primary residence SFR in San Diego as a hedge that we may see future appreciation, but then cash flow rentals in some area where it makes sense. Or cash flow condos in SD. SFR’s in San Diego just seem more like a bet for appreciation and not something that is going to put money in your bank account every month for a very, very long time. And to REALIZE the appreciation and convert to spendable cash, you have to refi or sell. When you sell a rental you lose HALF your equity in Realtor commission, depreciation recapture, capital gains taxes, state taxes, lost rents while the property is vacant being listed on the market, you generally have to fix it up to make it marketable, seller closing costs, etc… And 1031X can be very dicey b/c you have to quickly buy another property at possibly an inflated point in the market. Another reason the SFR as a primary residence vs. rental makes sense in SD b/c if you live in it for 2 out of the last 5 years you can sell with first $500k no cap gains if married. So you get to KEEP a lot of the equity:)

-But who knows, maybe if you looked long enough and went into bad enough neighborhoods you could find some SFR’s where the numbers are OK in SD. I just think this is very tough.

-Also 30% down on a $200k SFR is $60,000. Where 20% down in a $80k SFR is $16k. You do not have to put down near as large a chunk of money in the cheaper inland empire or central valley markets vs. SFR’s in SD. Allowing you to stay more liquid and get a better return on your cash.

[ctr70]

The numbers are not great on SFR rentals even in the entry level low cost areas. I think a good rule of thumb with buy and hold rentals is a 1% rent-to-price ratio. Meaning if you buy a $200,000 house, it should get $2,000 in rent. Or if you buy a $100,000 house you should get $1,000 in rent. You can’t hit that 1% ratio in San Diego County. So what you are doing is buying on the hope of appreciation. Your cap rate is not going to be great. 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.

I am in the market for rental property similar to the poster, so I have been thinking a lot about this. One thing about condos is you can get them in better locations than houses. You can get condos right now in very good neighborhoods & locations where you can get very close to the 1% rent to price ratio b/c prices are more depressed on condos b/c the financing on them is so bad right now. SFR’s that would even close to work as rentals are in not nearly as desirable locations. A big unknown with condos is the financing. If the owner occupancy dips below 50% they can become really hard to finance. Sometimes only cash buyers being able to be the next buyer in the complex. That is a negative snowball creating more units as rentals and lowering prices.

I personally think the numbers are very good for SFR’s in some of the further out towns in Riverside and San Bernardino County. Some of the most experienced investors I know that have been doing it 15-30 years are buying rental houses out there for $80k, fixing them up and getting $1,200 in rent. Those are much better numbers than you see in SD County. In this case you are not buying on the “hope” of appreciation, your buying something that has a true positive cash flow of $300+ a month from day 1. And you can apply that to the principle and get them paid off in 10 yrs. But then you have to deal with getting to know those neighborhoods and being an out of area property manager. Which is a challenge. But I have managed a out of state rental for 7 yrs and it hasn’t been that bad. I know of one guy who has bought like 30 rental houses in Palmdale/Lancaster for around $40k-$60k and gets $1,200 in rent mostly to section 8. He bought 100 of those little rental houses in the mid 90’s during the last downturn, sold at the peak in 2005 and made like $10 million. Now he is doing it again!

I’m not so sure buying on the hope of big appreciation down the road in 5-15 yrs is a great bet. There are far more headwinds against real estate this go around than coming out of the 90’s slump. We won’t have the tailwind of easy lending to push prices up. So I am leaning to go more for cash flow right now vs. a break-even house in San Diego. b/c my goal is more to get 10-12 houses paid off so I have a very healthy monthly income to live off and not have to work. If you have a negative cash flow or break-even property in San Diego, it may not produce much cash flow for you to live on for decades.

Anyway, I’ve rambled on long enough. Just my random opinions. Very interesting topic of where and what is the best property to buy for investment right now. Would love to hear more opinions.

[ctr70]

The numbers are not great on SFR rentals even in the entry level low cost areas. I think a good rule of thumb with buy and hold rentals is a 1% rent-to-price ratio. Meaning if you buy a $200,000 house, it should get $2,000 in rent. Or if you buy a $100,000 house you should get $1,000 in rent. You can’t hit that 1% ratio in San Diego County. So what you are doing is buying on the hope of appreciation. Your cap rate is not going to be great. 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.

I am in the market for rental property similar to the poster, so I have been thinking a lot about this. One thing about condos is you can get them in better locations than houses. You can get condos right now in very good neighborhoods & locations where you can get very close to the 1% rent to price ratio b/c prices are more depressed on condos b/c the financing on them is so bad right now. SFR’s that would even close to work as rentals are in not nearly as desirable locations. A big unknown with condos is the financing. If the owner occupancy dips below 50% they can become really hard to finance. Sometimes only cash buyers being able to be the next buyer in the complex. That is a negative snowball creating more units as rentals and lowering prices.

I personally think the numbers are very good for SFR’s in some of the further out towns in Riverside and San Bernardino County. Some of the most experienced investors I know that have been doing it 15-30 years are buying rental houses out there for $80k, fixing them up and getting $1,200 in rent. Those are much better numbers than you see in SD County. In this case you are not buying on the “hope” of appreciation, your buying something that has a true positive cash flow of $300+ a month from day 1. And you can apply that to the principle and get them paid off in 10 yrs. But then you have to deal with getting to know those neighborhoods and being an out of area property manager. Which is a challenge. But I have managed a out of state rental for 7 yrs and it hasn’t been that bad. I know of one guy who has bought like 30 rental houses in Palmdale/Lancaster for around $40k-$60k and gets $1,200 in rent mostly to section 8. He bought 100 of those little rental houses in the mid 90’s during the last downturn, sold at the peak in 2005 and made like $10 million. Now he is doing it again!

I’m not so sure buying on the hope of big appreciation down the road in 5-15 yrs is a great bet. There are far more headwinds against real estate this go around than coming out of the 90’s slump. We won’t have the tailwind of easy lending to push prices up. So I am leaning to go more for cash flow right now vs. a break-even house in San Diego. b/c my goal is more to get 10-12 houses paid off so I have a very healthy monthly income to live off and not have to work. If you have a negative cash flow or break-even property in San Diego, it may not produce much cash flow for you to live on for decades.

Anyway, I’ve rambled on long enough. Just my random opinions. Very interesting topic of where and what is the best property to buy for investment right now. Would love to hear more opinions.

[ctr70]

The numbers are not great on SFR rentals even in the entry level low cost areas. I think a good rule of thumb with buy and hold rentals is a 1% rent-to-price ratio. Meaning if you buy a $200,000 house, it should get $2,000 in rent. Or if you buy a $100,000 house you should get $1,000 in rent. You can’t hit that 1% ratio in San Diego County. So what you are doing is buying on the hope of appreciation. Your cap rate is not going to be great. 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.

I am in the market for rental property similar to the poster, so I have been thinking a lot about this. One thing about condos is you can get them in better locations than houses. You can get condos right now in very good neighborhoods & locations where you can get very close to the 1% rent to price ratio b/c prices are more depressed on condos b/c the financing on them is so bad right now. SFR’s that would even close to work as rentals are in not nearly as desirable locations. A big unknown with condos is the financing. If the owner occupancy dips below 50% they can become really hard to finance. Sometimes only cash buyers being able to be the next buyer in the complex. That is a negative snowball creating more units as rentals and lowering prices.

I personally think the numbers are very good for SFR’s in some of the further out towns in Riverside and San Bernardino County. Some of the most experienced investors I know that have been doing it 15-30 years are buying rental houses out there for $80k, fixing them up and getting $1,200 in rent. Those are much better numbers than you see in SD County. In this case you are not buying on the “hope” of appreciation, your buying something that has a true positive cash flow of $300+ a month from day 1. And you can apply that to the principle and get them paid off in 10 yrs. But then you have to deal with getting to know those neighborhoods and being an out of area property manager. Which is a challenge. But I have managed a out of state rental for 7 yrs and it hasn’t been that bad. I know of one guy who has bought like 30 rental houses in Palmdale/Lancaster for around $40k-$60k and gets $1,200 in rent mostly to section 8. He bought 100 of those little rental houses in the mid 90’s during the last downturn, sold at the peak in 2005 and made like $10 million. Now he is doing it again!

I’m not so sure buying on the hope of big appreciation down the road in 5-15 yrs is a great bet. There are far more headwinds against real estate this go around than coming out of the 90’s slump. We won’t have the tailwind of easy lending to push prices up. So I am leaning to go more for cash flow right now vs. a break-even house in San Diego. b/c my goal is more to get 10-12 houses paid off so I have a very healthy monthly income to live off and not have to work. If you have a negative cash flow or break-even property in San Diego, it may not produce much cash flow for you to live on for decades.

Anyway, I’ve rambled on long enough. Just my random opinions. Very interesting topic of where and what is the best property to buy for investment right now. Would love to hear more opinions.

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