Should You Re-Evaluate Your San Diego Real Estate Investments?

I am one of the few, if only, local real estate prognosticators that isn’t predicting a market fall. I don’t think we are in a bubble, and I think inventory is tight enough that by the time we get to St. Patrick’s Day, we could be talking about the surging real estate market.

That said, I am still working with some of my own investors to sell investment property here and move the money via a 1031 Exchange to other areas. The appreciation we have seen in both rents and prices over the past few years makes me think that the values for rental property may not have much more room to move. Plus, by any measurement (cap rate, cash-on-cash return, ROI), San Diego isn’t a good place to maximize your rental income. Here’s an example of a change we are making for an existing client:

Ed owns a property in Pacific Beach worth about $700,000 that he paid $450,000 for several years ago. The rents are about $3,100/ month and after all expenses, he was netting about $400/month. Since he purchased it for $450,000, he was depreciating another $10,000/year on his taxes, which saves about $3,500/year.

He’s taking the money to one of the new locations I’ve identified, and he will purchase a three-plex and a four-plex for about the same total cost. His rent will be between $7,000 and $8,000 total and his costs will be about the same (HOA goes away, property taxes go up). So, his net income will rise about 10 times to over $4,000/month. As a bonus, he will be depreciating about $17,000/year for a tax savings of about $6,000.

In other words, he goes from making a total of $8,300/year to making about $54,000/year, which for him allows his wife to stay home and raise their daughter.

So, although San Diego is a great place to live, it makes sense to look at your investments and see if property in another location will pay off better.

Scott Voak, the top selling agent since 2008 (data from SANDICOR MLS as of 12/31/2015). Email him to subscribe to his weekly real estate newsletter – Monday Morning Coffee.


voak_logo_newScott Voak, MBA – Broker
Managing Partner, Inland Corrido
CAL BRE #01153157
10815 Rancho Bernardo Rd #390
16710 Bernardo Center Dr.
(888) 311-6311 |