Buying an investment property is a huge decision, especially in the challenging San Diego housing market. As an exclusive buyer’s agent, I’ve helped many new San Diego real estate investors get their feet wet, and I’ve helped experienced investors grow their real estate portfolios. Here are some of the most important things to know when buying an investment property in San Diego.
When it comes to real estate investments, there are many different strategies to choose from. The best strategy for you will be based on your price range and your long-term plans.
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 a lot of savvy investors who have been doing this for years - they will be your competition.
Strategy 2: Buy and Hold. 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 use the property as 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 of course your goal is to keep it rented year-round).
The second option is to turn the property into 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. !
In the “buy and hold” strategy, there are also a couple of different options for managing your property. You can hire a property management company to help find and manage tenants, but they will likely take 6-15 percent of your profits. You can also save the money and manage the rental on your own. 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.
Strategy 3: Land or larger multi-unit properties (more than 4 units). While I cannot personally help you with these types of investments, I am happy to refer you to people who can!.
If you think that real estate investment is a good option for you, step one is to figure out your price range and decide which of these strategies best fits your long-term plans and goals. Step two is calling me to discuss my real estate investment servicesand how Globella Buyers Realty can help you find your first (or next) investment property!
Exclusive Buyer Agentsdo not list homes for sale and never represent sellers. They have no "inventory" to try to sell you. They can represent you in purchasing any home. They are specialists at representing buyers only on the buyers' side of the transaction. Exclusive Buyer Agents work to get buyers the best price and terms when they buy a home.
If you have excellent credit and plan to buy a home or condo in San Diego County within 90 days, contact Justin Gramm to hire an agent on your side of the transaction. More about Justin Gramm on Google+. Call Justin at (858) 437-2662 or E-mail.