Random Thoughts On San Diego Real Estate Investment Market

Yesterday got away from me, so I’ll talk a bit about what I’ve been thinkin’ lately about my local market, San Diego County. Before I start, I sure wish somebody had warned me about how all the women involved in wedding planning go totally nutball crazy — and that it only gets worse as the date approaches. Each week I seem to lose more hours saluting intense looking ladies as I march off to do their bidding.

Anywho, I’ve been toolin’ up for my imminent return to the San Diego investment property market. Ya might wanna get that look of horror off yer face, cuz I still refuse to be a part of any Brown and Brown client investing long term in San Diego — ain’t gonna happen. What will be happening is the orderly migration of local investment property equities to regions better suited to achieving the investor’s original Plan — to retire well.

For the record, this goes for pretty much all of the west coast, especially places in California like Palo Alto. Get your equity to friendlier regions.

To that end, we’ll be selling local income properties, the majority of which will be turned into tax deferred exchanges. The net proceeds will end up in property(s) yielding more cash flow, more tax shelter, and a far more realistic chance for appreciation at some point. They’ll end up with new or near new real estate instead of the typical San Diego stuff, which is just as likely as not to be older than their owners. Heck, much of the inventory here was built before I was born, in 1951.

Repair and maintenance costs will go way down for them. The floor plans won’t look like something from an I Love Lucy rerun. The quality of tenants will improve, sometimes impressively. In short, by exchanging their San Diego equity(s) to an atmosphere much more conducive to the attainment of a magnificently abundant retirement, they’ll be hopping off the investment treadmill to nowhere.

So, To Review

Increased Cash Flow

Increased Tax Shelter

Elimination of Functional Obsolescence

Probable Increase in Tenant Quality

Much Easier to Sell When the Time Comes

Far More Likely to Benefit From Future Appreciation

Those remaining in San Diego will see a continuation of what they’ve endured since the summer/fall of 2005 — either a drop in value, or, more likely, several years of no movement whatsoever. This will result in the following:

1. You’ll have three options for regaining your previously lost equity — slim, fat, or none.

2. Even it the market eventually grants a slight increase in values, it’ll take a decade, probably longer, (probably not in our lifetimes) to regain that lost equity.

3. Think about the demand for your residential income property now. Ask yourself: Why will that demand increase when in a decade my 50 year old property will be 60? If it’s functionally obsolescent now, it’s gonna be a candidate for the Smithsonian in 10 years. Who’ll wanna rent it from me? For what price?

4. Think your operating expenses are high now? Wait ’till it’s time to retire. Hope you’re handy.

5. Why on earth would you purposefully design your retirement around cash flow from properties guaranteed to have ever rising expenses/repairs, shrinking tenant demand, falling tenant quality, and little or probably NO tax shelter? Why indeed.

Your San Diego real estate investments are the mules workin’ the fields to ensure a bountiful harvest at retirement. Those who insist on ignoring the obvious, that their capital will continue to wilt on the San Diego vine, are destined to see their capital starve for the foreseeable future. They’ll learn what the farmer learned long ago.

BawldGuy Axiom: ‘Bout the time the farmer got the ol’ mare to work without eatin’? She died.

If you’ve owned San Diego residential income property long enough to have enough equity left to make it worth your while to Get Outa Dodge, we should definitely chat. You’ll be more than pleasantly surprised at what’s possible.

Gimme a call at 619 889-7100. If you miss me, I’ll get back to you quickly. Have a good one.

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