Since that day in the latter half of 2003 when it finally dawned on me I was beatin’ a dead horse, said deceased equine being San Diego’s investment real estate market, I’ve been advising folks to, ‘Get Outa Dodge’! Though I still believe there are several markets which should out perform San Diego, the numbers have recently reached the point at which I can no longer make fun of those currently acquiring income property here. Smallish income properties here are now, in some locations, at the point where they’re beginning to compare, if not favorably, at least not poorly with other regions around the country.
Clear as mud? Let me say it more plainly.
I’m now reversing myself when it comes to buying San Diego investment real estate — though certainly I don’t want you to take it as a blanket endorsement. It’s not — not even close. Still, my analysis of more than a few examples, none of which are severely discounted short sales or bank owned, now demonstrate they’re legitimate candidates for local investors.
I’ve always preached ya hafta follow the data wherever it leads. It’s now leading me to at least look at certain kinds of properties in limited locations in San Diego. This is a good day for me. I’ve never enjoyed having to tell folks their local properties just weren’t competing. Am I saying they’re competing now? No, and there’s the rub. There’s a difference between analysis showing conclusively a certain area has now entered the ‘acceptable’ range for investors. It’s quite another to say they match up with the areas I’ve been writing about here.
I’m not gonna get into the details tonight, but will shortly. Where are some of these properties you ask? Some are in the Oceanside area. Some are in the South Bay. To do justice to San Diego County in general, I’ll need to analyze about 10 areas. That’ll take some time. But I’ll be back with the results — whatever they are.
I called it as I saw it back in ’03, and I’m doin’ the same today.
My five plus years of advising against buying income property in San Diego appear to be over. I couldn’t be more excited. I’ll still be moving property and investors all over the country. That won’t change in my lifetime, or at least while I’m still able to fog a mirror. It’s all about what the analysis/data tells me. And it’s telling me I get to come home.
I’m a happy camper. I mean I’m really jazzed about this.
If you’re ready to walk your talk, especially if you’re here in San Diego, get a hold of me and let’s get the ball rollin’. If you own some losers, we might have a way for you to turn those lemons into lemonade. Meanwhile, back at the ranch, let’s talk! Have a good one.
Jeff – Good information – I guess my timing is exquisite!
– I will look for additional posts. We are also beginning to see possible break even cash flows on single family homes on the San Francisco Peninsula with 25% to 30% down in some of the lower-priced areas.
Arn
If slumlord is your chosen vocation, there are now cash-flowing properties in the Bay Area.
http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2009/01/22/MNBG15EFC6.DTL
Arn — I’m with ‘AI’. Whether break even or cash flow, if it’s much less than half down, and in the Bay Area, it’s gotta be a pretty scary location.
My middle initial is ‘S’ but it isn’t for Slumlord.
Do you see this in commercial real estate in San Diego as well?
Chris — I consciously and aggressively ignore most of the office/retail real estate market. Dealing with them is like, well, I can’t say what I was gonna say here.
I expect though that SD will follow the rest of the country with mounting ripples of commercial real estate troubles.
Frankly, the bottom line reason I’ve stayed away from office/retail investments is because in bad times the investor can pay his TENANTS a dime a foot to stay, and they still couldn’t afford to keep the doors open. Meanwhile their employees are going out for new jobs so they can continue paying the rent on my residential income units.
It’s just another school of thought.
Thanks for coming, Chris. Would love to see you here regularly.
Chris — Couldn’t agree with you more. That said, I’ve helped literally dozens of local investors escape what had become ‘slums’ in spite of their efforts to provide clean, well maintained units.
As I’m sure you’re well aware, there are locations in every city where great intentions followed by actions have little or no positive impact. Though I’ve personally gone into situations where a true slumlord has been and successfully turned it around, I’ve also seen as many cases where pounding sand would’ve been just as effective.
Jeff and AI
You will note in my original comment that I specified in “lower-priced” neighborhoods one can break-even. These are areas with large numbers of foreclosures and REOs. Many would consider these neighborhoods “rough”. I would not go as far as describing them as “slums”. I am not suggesting investors buy in these areas rather just making a point of comparision to San Diego and other areas. As per my previous conversations with the BawldGuy I am very interested to learn in which SD areas one can find reasonable investments. Depending on what is found I will probably prefer to invest in SD. One final comment about the word “slumlord”. An investor who provides clean neat safe housing where heating plumbing electrical all are in good working condition in a low-income area is NOT a SLUMLORD. A slumlord is one who provides dirty unsafe housing at a ridiculous rent. Many rentals in these low income neighborhoods are Section 8 rentals. The County HUD representative inspects all properties before agreeing to a Section 8 lease.
So in my opinion, it is not the income level of the tenant or the mediam income level of the neighorhood that determines whether the investor is a slumlord or not rather I submit the determining factor is how the investor maintains his property.
Bawld Guy makes a good point – if one invests in a depressed or distressed area, your investment may only pay off if the entire area improves which of course is outside the control of the individual investor.
It is a topic worthy of discussion – at the current time – is it better to invest in let’s say “B” areas where you can buy at say 65 cents on the dollar or let’s day “D” areas where maybe you can buy on 35 cents on the dollar? I do not pretend to be smart enough to know as the wisdom of either decision will only be discovered 10 years from now.
Many of my clients and I are wrestling with that question right now so I am always open to input.
For a variety of reasons that I have discussed with the BawldGuy I am very interested in SD small income properties that make financial sense. I await the BawldGuy’s next post on this matter.
Let’s keep the thread going!
Arn
Thanks Arn — that’s one post idea I don’t hafta think of.