Buying an investment property is a huge decision, especially in the challenging San Diego housing market. As a full-time exclusive buyer’s agent for many years, I’ve helped many new San Diego real estate investors learn the ropes AND experienced investors grow their real estate portfolios.
I also have my own investment properties in San Diego, and when I advise an investor client I draw from those experiences to help and counsel them.
When it comes to residential real estate investments, there are several different strategies to choose from. The best strategy for YOU will be based on your price range and your long-term plans.
3 Investment Strategies for Buying San Diego Residential Real Estate
Strategy 1: Flip a House.
This is the most difficult, time-intensive, capital-intensive, and riskiest option. You would start by looking for a house that nobody else wants to buy - a house at a great price, but in very bad condition. This can be like finding a needle in a haystack!
You would then go through the home, hire contractors to fix everything, remodel the bathrooms and the kitchen, put in all new flooring, etc. to make sure it is move-in ready when it goes back on the market.
Ideally, you would then sell it and make a good profit. If you are new to flipping houses, you will also be in competition with other savvy investors who have been doing this for years... They will be your competition.
If you go with this strategy, there are several ways to do it, but at the end of the day, you will be a landlord.
The first option is to make the property a San Diego vacation rental, rented out on a weekly basis in the summer and on a monthly basis in the winter. Vacation rentals typically only do well consistently when they are very close to the beach/sand/ocean. One perk of owning a vacation rental is that you can use the home yourself when it’s empty (although your goal is to keep it rented year-round).
The second option is to make the property a long-term rental. This is much easier to deal with than a vacation rental, as you don’t have the constant turnover of renters. You also don’t have to be close to the ocean to have a successful long-term rental. Basically any home or condo will work as a long-term rental, as long as the price and the rental rates make financial sense for you. Sometimes you can even purchase a home with a tenant already living there.
The third option is diversifying your real estate investment with a multi-unit rental (a 2-4 unit property). The idea here is that even if one of your tenants moves out, you still have other renters bringing in money while you fill the vacancy. You can even live in one unit yourself and rent out the others.
Two Options for Managing Your San Diego Rental Property
In the “buy and hold” strategy, there are a couple of options for managing your rental property.
(A) You can hire a property management company to help find and manage tenants. They will likely take 6-15 percent of your rental income (depending on who you hire and what you have them do for you). I am familiar with many of the different property management companies in San Diego and can help point you in the right direction.
(B) You can save money and manage the rental yourself. This is something that I have a lot of hands-on experience with, as I manage my own rentals.
The ultimate goal with the “buy and hold” strategy is to make a 5 percent or greater annual return on your investment (ideally after all of your expenses). As an added bonus, you will hopefully see the property value increase over the long term. And if you have a mortgage on the home, your tenants will help pay off that mortgage for you.
Strategy 3: Buy Land, Larger Multi-Unit Properties (more than 4 units), or Other Commercial Real Estate Offerings
You can purchase raw land or developed land and build a home, apartment complex, office building, shopping center, etc. Or you can purchase some other sort of real estate other than residential properties. All of these fall in the realm of commercial real estate. While I cannot personally help you with these types of investments (purchasing 1-4 units residential real estate is my specialty), I am happy to refer you to people who can!.
Call or email me today to learn more about Globella's residential real estate investment purchasing services and how I can help you on your journey of buying your first (or next) investment property!