San Diego Income Property Improving — It’s Still No Texas Though

Seems the topic of the month for local and outa town real estate investors has been what kinda San Diego income property should they be buying, and what’s my opinion? I think the phrase I’ve used most in the last couple weeks as been ‘B-List Property’. Having lived here since 1967, it pains me to tell someone my own hometown isn’t on my A-List of favorite places for clients’ investment capital.

I mean seriously, you think I prefer traveling all over searchin’ for superior regions? Hardly, it’s a giant pain, at least logistically speaking. I love the real estate part, but the details can make ya crazy. I’d much rather do what I did so enthusiastically from 1976 through 2003, which was be happy as a bug in a rug in San Diego, the nation’s closest thing to Paradise I know. Life was almost infinitely simpler — Duh.

Imagine what it’s like to co-ordinate research on new areas around the country, starting from ground zero every time. Then remember we much prefer to rely on our own research, even if it’s to verify or, as in some cases, shoot down what others want us to believe. One thing leads to another, and before you know it, yer knee deep in data, doing comparative analysis on sample properties, rent surveys, and you can no doubt guess the rest. It’s incredibly time consuming, but critical to success in the narrowest most literal definition of the word.

Boots-on-the-ground research can’t be compromised. You either do it or you don’t — and ‘don’t’ ain’t an option where I come from. Data obtained first hand from the street is as good as it gets, so when it’s doable, that’s what we do — and it’s always doable.

Here’s why San Diego is far behind the Texas properties we’ve been recommending to so many of our clients.

1. New design in TX vs either current functional obsolescence or its inevitability in San Diego. You don’t cure FO by throwing a few bucks at it. ‘Nuff said.

2. A young property in SD is 20-30 years old. Most of the product we’re finding in TX is new or near new. The most obvious impact? Operating expenses. Older props suck up rental income like a new Dyson — and it only worsens over time.

3. Price/Rent ratios aren’t comparable for the most part. With inflated operating expenses coupled with higher prices for the same income, SD again fails to even come close in keeping up with TX. Are there some anomalies? Yeah, but typically they’re entry level props, meaning multiple offers are just as likely as not. That’s not the worst part — those bidding against you are most certainly gonna be owner-occupiers who look at value far differently than investors do.

4. If you find an excellent condition 40 year old SD income property, ask yourself a question: Out of every 10 investors lookin’ for property in 5-10 years when you may be ready to sell/exchange, how many will be jazzed about acquiring a 45-50 year old piece of property that’s priced significantly higher than when you bought it at 40 years old? Imagine how easy it’ll be in 5 years for investors to buy anywhere in the country they choose. You really think they’ll opt for a property built before they were born? Yeah, sure they will.

5. The cost of living in SD is far higher than TX — not to mention TX doesn’t sport a state income tax — while CA is either the highest in the land, or close to it. A 2 bedroom rental in SD runs $1,100-1,350 monthly for mainstream stuff. That gets you a 3 bedroom with a 2-car garage in TX. Ready to cry Uncle! yet?

I love San Diego. I raised my kids here and can’t seriously imagine living anywhere else. But we’re not talkin’ about where to live, we’re talkin’ about serious real estate investing, based upon credible analysis. To the extent objectivity is sacrificed on the altar of subjective and/or wishful thinking, your Purposeful Plan for retirement will be the victim. Take a step back and see what’s clearly visible.

San Diego is a B-List area when it comes to real estate investment — it’s the way it is.

Have questions? Give me a call any time at 619 889-7100 or click on the Contact BawldGuy button up top. Have a good one.

Related posts:

1. San Diego Income Property Owners: Have Your Cake and Eat It Too
2. San Diego Income Property Owners — Ready To Play? Put Me In Coach!
3. San Diego Real Estate Investors — How’s That Income Property Workin’ For Ya So Far?
4. Do You Own High Priced Income Property In San Diego? It’s Time To Let Go and Get Outa Dodge
5. How Silly Is San Diego’s Income Property Market? You Decide