Should we buy a condo / multi-family investment property for one family member to live in with this August 2018 market?

Submitted by SanDiegan on August 12, 2018 - 1:21pm
We Should Buy.
33% (2 votes)
We Should Wait.
33% (2 votes)
Forget About San Diego prices are tool high!
17% (1 vote)
It depends on ...
17% (1 vote)
Total votes: 6
Submitted by SanDiegan on August 12, 2018 - 1:55pm.

Little background on this. I've been in and out of San Diego for years now. I'm tired of renting and I can't afford to buy. My father started thinking real estate investments a few years ago, but now maybe it is a few years too late.

We've been looking for a duplex / multifamily home in the Heights areas in which I could live in one of them and we could rent out the other, or a fixer upper I could slowly poor my money into over the years. But, prices seems soo high right now. It's crazy. We've made 3 offers, one accepted but there were foundation issues, then the interest rate went up!

With multi-family, I was thinking of doing AirBnB as I've done similar when I lived in Mission Beach and loved it. With the new rules I think I could still do it as long as I lived in the house. But the prices may be to high for him to do a multifamily now that interest rates went up, now he is thinking to do just a condo which would eliminate my ability to be a host and make extra money that way, or to live in the garage if I lost a job which I do often.

It's so frustrating. I've watched the cycles myself my whole life and regretted every time I didn't have the stability in my marketing career to buy, though I've had the income
when working. It was off after the rates when up a couple weeks ago, but then the local credit union in SLO county gave him 4.25% so it's back on. Now he just need to find out how much. With roommates and a humble contribution from me it would pay for itself.

But, the question is, now at 72 with 850 credit score as opposed to my 692 score my father is willing to help buy a 4th home in the trust... or is it a few years too late to be a smart move? The house affordability index tells me it's too late, but the monthly index tells me it is still not a terrible time.But the big question is, is it now a bad time? I'd love to hear opinions. Thanks.

Submitted by The-Shoveler on August 12, 2018 - 1:47pm.

(need a "it depends" button)

There are some condos/homes for sale that will still cash flow with 4% loan and 10-15% down.

Submitted by SanDiegan on August 12, 2018 - 1:52pm.

The-Shoveler wrote:
(need a 'it depends' button)

Done!

Submitted by barnaby33 on August 13, 2018 - 7:46am.

Your question is one of the core reasons for the existence of this site. There is of course a wealth of info if you are willing to dig. There may be a few options that *might* work, but in the main it doesn't seem like a good time to buy. So unless you've got a haystack and stumble upon a needle it might be better to put the effort into getting your career, "remotable." That way you can rent, anywhere.
Josh

Submitted by gzz on August 14, 2018 - 11:38am.

An investment property doesn't need to be cash flow positive to be a great investment.

From the AirBNB standpoint, the biggest exception to the AirBNB ban is on a two-unit property with the owner in one and renting the other. That makes a duplex or two-house lot look very attractive.

I have spent years slowly renovating my house, it was rewarding and I learned a lot.

Not sure what you mean by "Heights" but I think City Heights is going to be one of the best performing parts of San Diego as gentrification has marched east along University Ave. If that is what you mean, I say go for it.

Submitted by saiine on August 14, 2018 - 2:21pm.

I have been looking into investing in multi-family for a few months now, solely for cash flow.

I have not been able to find ANYTHING in San Diego that will cash flow on day one (even with 30% down). Given this is my first real investment property, I am also trying to limit my risk because I know I will make mistakes and learn. Therefore, I don't want to tie up too much capital. For these reasons, and many others, I am opting to search out of state.

Something that really helped me was this AMA on reddit: https://www.reddit.com/r/realestateinves...

He has several other posts, as well as a podcast interview he did which is full of great information on things to consider.

Lastly, he also has this app called dealcheck (dealcheck.io) which I highly recommend. It got me thinking about realistic expectations with regards to cash flow.

Good Luck!

Submitted by saiine on August 14, 2018 - 2:23pm.

I haven't been down to CH in years, but had to pass through the other day. Man, what a dump (still).

I hear what you're saying though, as I remember how North Park used to be. It's still not a place I would want to live (I did for years), but it certainly has improved the last two decades. It's not far fetched to think CH is next.

gzz wrote:
An investment property doesn't need to be cash flow positive to be a great investment.

From the AirBNB standpoint, the biggest exception to the AirBNB ban is on a two-unit property with the owner in one and renting the other. That makes a duplex or two-house lot look very attractive.

I have spent years slowly renovating my house, it was rewarding and I learned a lot.

Not sure what you mean by "Heights" but I think City Heights is going to be one of the best performing parts of San Diego as gentrification has marched east along University Ave. If that is what you mean, I say go for it.

Submitted by SanDiegan on August 14, 2018 - 2:46pm.

Looking in Normal Heights 1st, University Heights 2nd, and yes City Heights last but likely that is a no.

My current work is totally remote, which is why I want to also do AirBnB or have it as an option. I am not in San Diego right now, but my job is. If I want the good marketing jobs, I need to be in San Diego or another big city. SD is the best for me because it's like a giant SLO county away from SLO.

I need to be someplace where there is lots of new opportunity. SLO County is just too small in the job market and my business connections for new work are all in SD.

Submitted by FlyerInHi on August 14, 2018 - 3:06pm.

If I were the Mayor, I would push to allow tall buildings in city heights before it gentrifies and nimbyism builds. Build tall buildings with stores below. Once that heppens it will gentrify at multiple the density of North Park or Hillcrest which will not density much because of nimbyism. More density means more revenue for the city.

Some new developments near SDSU are awesome.

Submitted by FlyerInHi on August 14, 2018 - 3:11pm.

I had to look up SLO. 270k population. So tiny.

https://en.m.wikipedia.org/wiki/San_Luis...

How about the College area? You can rent out a room for $1200/mo
That’s how much these people charge in 4/2 apartments.
http://prismaatsdsu.com/

Submitted by Myriad on August 14, 2018 - 4:54pm.

FlyerInHi wrote:
Build tall buildings with stores below. Once that heppens it will gentrify at multiple the density of North Park or Hillcrest which will not density much because of nimbyism. More density means more revenue for the city.

Hopefully with transit options, because dense housing, not enough parking, and no transit makes for an amazing combination. But perfect for the next trader joe's location.
The current city council seems intent on increasing density and adding more homes without improving infrastructure.

Submitted by SanDiegan on August 14, 2018 - 8:11pm.

Myriad wrote:
The current city council seems intent on increasing density and adding more homes without improving infrastructure.

Personally, I think that is great and one of the reason I love parts of SD. Make people get out of their cars and create great downtown areas. I'd love to not need a car.

Back to topic... This is interesting.

https://www.youtube.com/watch?v=EpFObHDjPoM
https://www.thenorrisgroup.com/wp-conten...
https://www.youtube.com/watch?v=HAw984vmFTQ
https://www.youtube.com/user/TheNorrisGr...

Submitted by gzz on August 15, 2018 - 10:26am.

Normal and Uni Heights would be fine places to buy as your residence, but City Heights will make you more money.

As for cashflow, my 20% down condo buy from Dec 2015 cash flowed by 10% over mort/tax/hoa/ins the first month it rented, but it required months of renovation. It would be more like 15% if I raised the rent to market.

Overall return matters more than cash flow though. Even a mere 3% a year appreciation can produce monster returns compared to long term bonds.

Cash flow positive is an arbitrary measure that doesn't include principal payments that reduces the investor's liability on the place, eventually to zero.

Imagine someone in SF in 2013 worried about cash flow on a Victorian. They would have missed out on gigantic returns, 500% range on their down payment.

Submitted by FlyerInHi on August 15, 2018 - 11:30am.

gzz wrote:
Normal and Uni Heights would be fine places to buy as your residence, but City Heights will make you more money.

Yes I concur on City Hights.

cash flow negative is fine if you have wherewithal. But in our economy, you have so many “investors” who don’t have much wherewithal of more than 3 months. So an economic downturn with job loses creates a cascading effect of forecloses and price declines.

Submitted by FlyerInHi on September 13, 2018 - 1:27pm.

Have you looked at anything lately?
What kind of purchase/rent numbers did you come up with?