Will we ever see a boom in San Diego real estate like the one we had from 1999-2005? Probably not. If you read The Bawld Guy (San Diego investments broker Jeff Brown), you'll see that the fundamentals for owning San Diego real estate, as an investment, just don't make sense when compared to other emerging cities:
Once we fight our way through this correction, and prices once again begin their upward climb, the number of investors interested in pouring more than a couple hundred grand down the drain, so they can lose money, will shrink. Ya think? And remember, we’re talking about one itty bitty duplex here, not some impressive multi-story apartment building. A duplex.
What should you do?
You should take whatever net equity you have, and put it on a bus headed outa town. There are places where you can find homes, and 2-4 unit properties at prices much more attractive. Most of my San Diego clients who’ve already escaped to a lower priced growth area, have found out what it’s like to have nice investment problems. For example, imagine getting a refund on a big Nordstrom purchase then heading over to the Dollar Store to spend it all. It can be exhausting.
I have the luxury of knowing Jeff Brown. He's gutsy and good. He's not afraid to call it as he sees it in San Diego. If you read into his articles about investing in San Diego (he has a whole category) , you'll see that he thinks there may be an upward "pop" followed by a long-term decline in investment properties in Southern California. Traders or short-term flippers, able to withstand negative cash-flow, may actually profit off the short-term rise in duplexes when the market recovers. If you're one of those investors, go for it. The problem is that even Jeff can be wrong when it comes to predicting short-term opportunities; that's why he doesn't pound the table to buy San Diego duplexes- the risk may be too great.
So, how can anyone make money in San Diego real estate ? Age-restricted communities are the only property subset where I see a supply and demand imbalance, favoring the investor, in the future. Jeff Dowler, a REMAX broker in Encinitas, highlights the Ocean Hills community in Oceanside:
If you are considering Southern California (the San Diego area), I would encourage you to think about Ocean Hills Country Club in Oceanside. This is a beautiful, gated 55+ community of about 1633 mediterranean-style homes on 427 acres, with a private 18-hole executive golf course, large clubhouse (27,000 SF), and a wealth of activities and amenities. There is shuttle service to the nearby communities, round-the-clock security, and maintenance and recreation personnel.
If you look at the Active Adult Living website, you'll find that while there are a number of age-restricted communities available to San Diegans but the numbers are small compared to the potential buying pool in 2015. In a nutshell, as Baby Boomers age, they will snap up these homes faster than a pre-teen girl buys Hannah Montana albums. There are three compelling reasons to consider age-restricted communities as an an investment:
1- The pricing is substantially below the county median price of $480,000. Many of these offerings are in the high 200s and most are below $500,000.
2- The buyers are coming and they're just what we want: well-heeled, willing to pay the "San Diego weather premium", and growing exponentially in numbers.
3- The properties have a better than average chance of providing positive cash-flow for the investor willing to plunk down 20% and hold for 10 years. Many retirees will opt for a 6-9 month "seasonal lease" and will be willing to pay a premium for that convenience.
So what are the challenges? Restrictions. Age-restricted communities are heavily biased towards owner occupancy ( READ: no investors). It will be difficult to find a community that allows an investor to buy and lease his investment. Details, details, details...right? Wrong. Homeowner associations, staffed by retirees, are even more vigilant of the rules. "Sliding one by the goalie" would be virtually impossible in a hawkish community.
How does one take advantage of this impending boom? Find a community that allows for investment properties, then tell every one about it. First in wins in a trend like this one.
